Q1 Identify the three key indicators of ordinary income ?
Q2 Is ordinary income defined in either ITAA? Why, or why not ?
Q3 “All individuals and companies need to pay tax on every receipt of money received throughout the income year. If you receive any amount of money you need to pay tax.”
Q4 Identify the 6 major revenue producing activities and associated concepts from relevant case law ?
Q5 Which of the following are assessable as ordinary income under s6-5 ITAA97, and why?
1. Wages and tips received from part-time employment
2. Employer’s present of two tickets to Monster world worth $300
3. Employer’s present of two non transferable tickets to Monster world worth $300
4. Gift of $400 conditional on mowing neighbour’s lawn for three months
5. An unfranked dividend
6. Weekly compensation payments to a self-employed person from an income protection insurance policy ?
Q6 What is the essence of the decision in the Myer Emporium Case?
Q7 Explain the importance of taxpayer intention when entering a transaction and the decision in FCT v Myer Emporium ?
Q8 Cleavon likes to collect coins. Over the past 15 years he has collected a large and varied collection. Cleavon decides it is time to have his collection valued for insurance purposes and is stunned to find it is valued at $1.5m primarily due to one coin worth $850 000 he picked up for $5 at an auction 15 months ago according to his immaculate records. He decides to sell this coin through an online auction to the highest bidder.
Question 1 Are the proceeds of this activity ordinary income under s6-5?
Question 2 Assume Cleavon saw the coin and knew it was rare and valuable and bought it with the intention of selling it within 6 months to a collector. • Is the amount received assessable income under s6-5? • What do you see as the critical differences between the two scenarios?
Q9 Explain the derivation of ordinary income ?
Q10 A company provides extremely demanding combat based fitness classes. It charges for its minimum course of ten lessons in advance. Due to the extreme nature of the course the company knows there is high dropout rate. The company has a policy of refunding the amounts for unused classes whenever a request is lodged in the necessary “Quitter” envelope. As at 30 June 2014, the company had received fees totalling $100,000 for the year, of which fees received for lessons still to be provided amounted to $16,000. • In which year(s) should the fees be included in assessable income?
q1 Explain the connection between statutory income, assessable income and taxable income ?
q2 Is statutory income defined in either ITAA? Why, or why not?
q3 Discuss the following comment: The amount of money you receive will also always be the amount of statutory income you need to put in your tax return.
q4 Discuss the following comment : The concept of statutory income is irrelevant as every receipt is a form of ordinary income and will be included in assessable income.
q5 Calculate the franking credit associated with a franked dividend and correctly apply the relevant law
q6 Roberto is a resident for the full year and receives a cash dividend of $880 from The Hill Pty Limited, which was 95% franked. He also received a cash dividend of $1,000 from Broken Crown Pty Limited which was 75% franked. Roberto reinvested the dividend from Broken Crown Pty Limited through their dividend reinvestment plan. • In relation to these transactions, how much will Roberto include in his assessable income?
q7 Roberto is a resident for the full year and receives a cash dividend of $880 from The Hill Pty Limited, which was 95% franked. He also received a cash dividend of $1,000 from Broken Crown Pty Limited which was 75% franked. Roberto reinvested the dividend from Broken Crown Pty Limited through their dividend reinvestment plan. • In relation to these transactions, how much will Roberto include in his assessable income?
q8 Calculate the assessable amount associated with trading stock and apply the relevant law ?
Q10 Kezza runs a small business. Her opening balance of stock was $4,000. During the year there was sales income of $30,000 and purchases of $5,000. Trading stock valued at $500 was destroyed due to water damage. The closing balance of stock was $6,000 and reflects the reduction due to stock damage. • What is the taxable income from trading for the CIY?
Q11 Calculate the assessable amount associated with assessable balancing adjustments and apply the relevant law ?
Q12 Basil Pty Ltd sells a computer which has been used for income-producing purposes. The termination value of the computer is $1,500 and its cost was $2,500. At the time of sale, the computer’s adjustable value is $1000. What is the balancing adjustment amount in respect of the sale?
Q13 A non current asset was depreciated using the diminishing value method. It initially had a depreciation cost base of $45,000, it cost $2,500 to transport and install the item, it has an effective life of 4 years and was purchased on 1/7/15. It was sold on 1/4/17 for $27,500. Required State the relevant legislative provisions and calculate: • the depreciation expenses for each relevant year income year, and • any assessable or deductible balancing adjustment associated with this disposal.