(TFN withheld $4,900) 10,000 Income.

The following questions are based on the material in Chapter 1: Q1.1.9. (Comprehensive calculation for a prescribed person) Ron Veldhuis is aged 16 and is currently studying full-time at high school whilst living with his parents. During the 2016/17 tax year, Ron received the following amounts: $ Gross Wages from part-time job (PAYG tax withheld $800) 4,700 Gross Interest received on fund given by his parents (TFN withheld $4,900) 10,000 Income Distribution from Estate of Late Aunt 7,500 Income Distribution from Family Trust (tax paid by Trustee $1,500) 6,000 Unfranked Dividend from shares in QQQ Ltd (these were bought with funds from previous Family Trust distributions) 1,200 Required: (a) For the purposes of Div 6AA, how much excepted assessable income has Ron derived? (b) For the purposes of Div 6AA, how much eligible assessable income has Ron derived? (c) Calculate net tax payable by Ron for the 2016/17 tax year. The following questions are based on the material in Chapter 2: Q2.2.15 (Comprehensive, inter vivos trust) The Alberts Family Trust, an inter vivos trust, had the following beneficiaries: Candy (aged 45; entitled to 40% of trust income) Dandy (aged 30; bankrupt; entitled to 35% of trust income) Landy (aged 17; entitled to 20% of trust income) The remainder of each year’s income was to be retained or distributed at the Trustee’s discretion. During the 2016/17 tax year trust income was $195,000. A discretionary amount of $7,000 was paid to Landy (this amount was in addition to Landy’s entitlement under the Trust Deed). The trust also had losses of $15,000 in the 2015/16 tax year. These were to be met out of the trust income. Landy also received interest of $38,000 during the 2016/17 tax year from investments given to him by his parents. Landy is single and is not covered by private health insurance. Required: a. Complete the following table (covering all beneficiaries) nominating: • Name of the BENEFICIARY • Whether or not the beneficiary is PRESENTLY ENTITLED • Whether or not the beneficiary is under a LEGAL DISABILITY • WHO IS ASSESSED on each amount • Which sections of the Act apply to make the income assessable • The amount retained or distributed. Beneficiary Presently entitled? (Yes/No) Legal disability? (Yes/No) Who is assessed? (Beneficiary or Trustee) Section(s) Applicable Amount $ Candy Dandy Landy Balance Total $ b. Calculate tax payable by the trustee on behalf of Dandy, Landy and the balance of trust net income. Tax payable by Trustee on behalf of Dandy: Tax payable by Trustee on behalf of Landy: Tax payable by Trustee on balance of trust net income: c. Calculate tax payable by Landy (only). The following questions are based on the material in Chapter 3: Q3.3.3 (Allocation of Partnership Net Income) Sue, Prue, Lou and Emmet operate a transport company in the ratio 4:3:2:1. Their assessable income for the 2016/17 tax year amounted to $780,000 while they had $300,000 of deductions. Their partnership agreement states that all profits and losses are to be shared in the ratio 4:3:2:1 after adjusting for partner’s salaries, travel allowances and interest on capital. The following data was extracted from their financial records: Interest on Capital Sue $ 12,000 Prue 15,000 Lou 5,000 Emmet 3,000 Partner’s Salaries Sue 65,000 Prue 50,000 Emmet 20,000 Travel Allowances Sue 4,000 Emmet 6,000 Required: Based on the above information, complete the table calculating each partner’s share of partnership net income under the terms of the partnership agreement. Sue Prue Lou Emmet Total $ Interest on capital Partners’ salaries Travel allowances Share of Adjusted Net Income Total $   The following questions are based on the material in Chapter 4: Q4.4.21 (Reconciliation of taxable income) Trash Converters Limited, a small business entity, has prepared an income statement for 2016/17: $ $ GROSS PROFIT 1,624,000 Add: OTHER INCOME Unfranked Dividend 2,300 Fully Franked Dividends (company tax rate 30%) 7,700 Net Dividends from Spain – note 1 32,000 Gain on Sale of Shares – note 2 2,000 44,000 TOTAL OPERATING INCOME 1,668,000 EXPENSES Depreciation – note 3 34,000 Fringe Benefits Tax 48,000 Payroll Tax 46,900 Superannuation – note 4 75,000 PAYG Instalments Paid – note 5 92,000 Other Deductible Expenditure 965,000 1,260,900 NET PROFIT 407,100 Note 1 The dividends from Spain have had $8,000 of tax withheld. Note 2 Shares sold during the year were acquired in 1984 as an investment. Note 3 Decline in value deduction is calculated as $28,000. Note 4 Superannuation includes an amount of $30,000 paid to a director’s spouse. This $30,000 amount is deemed to be excessive. Note 5 All of the PAYG tax instalments relate to the current year. Required: a. Complete the table reconciling net profit with taxable income for the 2016/17 tax year. b. Calculate net tax payable by the company for the 2016/17 tax year. (For the purpose of this exercise, assume a 27.5% small business entity company income tax rate, as per chapter 4.3 of your textbook).   4 a. and 4 b. $ $ Net Profit per income statement $ Add: Franking Credits $ Foreign Tax – Spain $ Accounting Depreciation $ Superannuation $ PAYG instalments $ $ $ Less: Decline in Value $ Accounting Gain on Shares $ $ Taxable Income $ Tax on Taxable Income $ Less: Franking Tax Offset $ PAYG Instalments $ Foreign Income Tax Offset – tax paid $ $ Tax Payable $   Q5.4.27 (Franking Account) Rudimentary Pty Ltd, a corporate tax entity, has the following transactions for the 2016/17 tax year: Date Transaction $ 30/06/16 Balance Nil 15/10/16 PAYG Instalment Paid 14,000 15/12/16 2015/16 Tax Refund Received 9,500 12/03/17 Fully Franked Dividend Received 3,500 08/05/17 Fully Franked Dividend Paid 7,000 Note – the benchmark franking percentage is 100%. Required: Prepare the franking account for the 2016/17 tax year. Date Transaction Debit Credit Balance (state if DR or CR) 1/7/16 Opening Balance   The following questions are based on the material in Chapter 5: Q6.5.1 (Average Income) Ernie Wombat is a primary producer who commenced business in 2011/12. The following data relates to Ernie’s first 6 years of trading: Year Assessable Income Deductions 2011/12 $ 32,000 $ 15,000 2012/13 35,000 20,000 2013/14 31,000 39,000 2014/15 42,000 21,000 2015/16 45,000 22,000 2016/17 51,000 25,000 • All assessable income and deductions are from primary production. • The deductions do not include any amounts that may be deductible for losses of previous years. Required: a. Calculate Ernie’s taxable income for each tax year. b. Calculate Ernie’s average income for each tax year. Year Taxable Income Average Income Notes (if any) 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17   Q7.5.5. (Tax calculation under averaging) Rikki Teabridge had the following income during the 2016/17 tax year: Net Business Income from Primary Production $ 35,000 Gross Wages from part-time job at local supermarket $ 20,000 • Rikki’s average income was $20,000. • Rikki had no other assessable income or deductions. • PAYG tax of $2,000 was withheld from Rikki’s wages. • Rikki is covered by adequate private health insurance. Required: Complete the following statement showing Rikki’s tax payable for the 2016/17 tax year including any averaging adjustment. Notes/Workings (if any) Tax on Average Income Tax on $ $ Comparison of Tax Rate % Gross Averaging Amount Tax on $ @ ordinary rates $ Tax on $ @ comparison rates $ $ Averaging Component $ Averaging Adjustment Tax Offset $ Tax Payable Calculation Tax on $ $ Less Averaging Tax Offset $ Less Low Income Tax Offset $ Add Medicare Levy $ Less PAYG Withheld $ = Tax Payable $ Q8.5.9 (Trading account, average cost) Clyde Wishbone breeds and sells sheep. During the 2016/17 year records disclosed the following: Quantity Value ($) Sheep on Hand – 30 June 2016 8,200 47,900 Purchases 500 9,200 Natural Increase 2,900 Sales 4,300 92,400 Rations 100 Deaths 300 Clyde chooses to use the prescribed value for natural increase and average cost for rations and closing stock. Required: Prepare the average cost calculations and the trading account for the 2016/17 tax year. Average Cost Calculations Qty. of Sheep $ Opening Stock $ Purchases $ Natural Increase @ prescribed value $ Total $ Average Cost of one sheep $ Average Cost of Rations Qty Sheep for rations $ Average Cost of Closing Stock Qty Sheep at Closing Stock $ Sheep Trading Account Qty. $ Qty. $ Opening Stock Sales Purchases Rations Natural Increase Deaths Gross Profit Closing Stock Total Total The following questions are based on the material in Chapter 6: Q9.6.3. (Assessable contributions) The Spotless Superannuation Fund is a complying superannuation fund. The fund received the following contributions: July 2016 Contributions from contributing employer relating to 2015/16 $ 27,800 Sep 2016 Superannuation Guarantee Shortfall received from ATO 11,400 Oct 2016 Contributions from employer relating to Sept 2016 quarter 34,500 Jan 2017 Contributions from employer relating to Dec 2016 quarter 36,100 Apr 2017 Contributions from employer relating to March 2017 quarter 27,450 July 2017 Contributions from employer relating to June 2017 quarter 19,320 All of the above amounts related to members who have supplied their TFN. There was a further $8,340 of superannuation accrued and payable by the contributing employer in relation to 2016/17 but not yet received by the fund. Required: Calculate the fund’s assessable income from contributions for the 2016/17 tax year. Q10.6.5 (Assessable income, ordinary income) The Blowhard Superannuation Fund, a complying fund, received the following amounts during the 2016/17 tax year: Unfranked Dividends from listed companies $ 12,450 Franked Dividends from listed companies (Fully franked. Company Tax rate 30%) 20,300 Interest from cash management account 8,250 Proceeds from redemption of term deposits (includes principal of $50,000) 59,400 Interest from at-call deposit (net of $4,900 TFN tax withheld) 5,100 Interest from investments segregated to meet the payment of current income stream benefits 35,000 Required: Calculate the fund’s assessable income from investments for the 2016/17 tax year. The following questions are based on the material in Chapter 7: Q11.7.3 (Calculation of income attributable to members) Dockside Rowers Club disclosed the following data for the 2016/17 financial year: Days Open 361 Financial members 900 Average % of members in attendance daily 15% Total visitors for the year 4,200 Visitors accompanied by members 1,950 Net Trading Surplus for the year $ 200,000 Required: Calculate the proportion of the receipts that would be deemed to be from non-members.   The following questions are based on the material in Chapter 8: Q12.8.1 (Professional and other income of an artist) Sam Journeyman derives income as a professional beach dodge ball player. During the 2016/17 tax year, Sam received the following amounts: Tournament Prizemoney from dodge ball $ 85,000 Appearance fees from dodge ball tournaments 12,000 Cash sponsorship from Aussieboom 60,000 Jetski provided by Aussieboom as a benefit 8,000 Interest from bank account comprising savings from Prizemoney 3,700 Directors fees from Dodgeball Australia 14,500 Car provided by Dodgeball Australia as a benefit 7,200 Required: a. Calculate Sam’s taxable professional income for the 2016/17 tax year. Taxable Professional Income $ Total b. Calculate Sam’s other taxable income for the 2016/17 tax year. Other Taxable Income $ Total   The following questions are based on the material in Chapter 9: Q13.9.7 (False and misleading statements) Randy Michaels has a client, Shonky Pty Ltd. The directors of Shonky have asked Randy to lodge their company’s 2016/17 income tax return with the correct taxable income, but with a false address and contact details. They have also requested that Randy does not disclose the fact that the company has made payments to associated persons during the year. Required: What are the possible consequences for Randy if he agrees to do either of these things? The following questions are based on the material in Chapter 10: Q14.10.1 (Returns required for lodgement) The following information relates to transactions during the 2016/17 tax year: • Al Basic, an Australian resident aged 30, received a gross salary of $50,000 and had no other income or deductions. Al does not use the services of a Registered Tax Agent. • Brianna Minor, an Australian resident aged 15, received interest on an investment given to her by her parents amounting to $750. She had no other income or deductions and does not use the services of a Registered Tax Agent. • Drew Toomuch, an Australian resident aged 39, derived net business losses of $15,000. He has no other income or deductions and uses the services of a Registered Tax Agent. • Fritz Watson, an Australian resident aged 19, received gross wages of $11,100 ($500 PAYG tax withheld). Fritz did not have any other income or deductions and does not use the services of a Registered Tax agent. Required: For each taxpayer state whether or not they are required to lodge an income tax return for the 2016/17 tax year and if so, when the return must be lodged. Name Required to lodge? (Y/N) (include brief comment/notes to support your view) If Yes, due by date is Al Basic Brianna Minor Drew Toomuch Fritz Watson Q15.10.5 (Rulings and determinations) The following tax rulings were issued in relation to the application of tax legislation: a. A ruling is issued by the tax office relating to investment in a publicly available trust which aims to breed and sell Three-Legged Northern Mongolian Parrots. The prospectus claims that investors will be able to claim the cost of any units subscribed as an immediate tax deduction. In the ruling, the Commissioner has indicated that not only will there be no immediate deduction, but investors will be ineligible to claim any interest expenses in acquiring the units until the trust has commenced deriving sales. b. Joanne Royal has applied for and received a ruling relating to her ability to claim a net medical expenses tax offset for massage oils. The ruling stated that Joanne cannot include the oils in determining her tax offset. c. The Commissioner released a ruling that ‘frequent flyer’ bonuses received by employees as a result of employer expenditure are not subject to FBT. d. Frank phoned the ATO regarding a meal allowance received from his employer. In the course of the phone conversation, he provided full identification and was advised by a tax officer that the allowance is assessable income. Required: For each of these examples, indicate the type of ruling or decision that has been made by the Commissioner and the extent to which it is binding on the taxpayers involved. Taxpayer Type of Ruling [Oral, Public, Private, Product, Class, Tax Determination] Extent to which it is binding (provide your explanation/reasons) a. b. c. d. The following questions are based on the material in Chapter 11: Q16.11.1 (Due dates for payment) The following taxpayers are required to lodge income tax returns and each has a tax liability in respect of the 2016/17 tax year: a. Sophie Wilson, an individual resident, has lodged her 2016/17 income tax return on 15 September 2017. Based on the return, she will have tax payable of $2,000 She is not on the lodgement list of a registered tax agent. b. Payable Pty Ltd, a resident corporate entity, has lodged their 2016/17 income tax return on 10 August 2017. They were not on the lodgement list of a registered tax agent. Based on the return, Payable Pty Ltd will have $1,200 of tax payable. c. On 20 August 2017, Dianne Porterhouse received her 2016/17 assessment indicating that she had $4,000 payable on 22 November 2017. Dianne lodged an objection and on 15 November 2017 received an amended assessment showing that $2,900 was now payable. Required: For each of these taxpayers, specify the date due for payment of amounts owed to the tax office. Taxpayer Due Date for payment to ATO a. Sophie Wilson b. Payable Pty. Ltd. c. Dianne Porterhouse   The following questions are based on the material in Chapter 12: Q17.12.5 (Previous offences) Cheryl, a single resident taxpayer, is employed as an elite full-time soccer referee and claims that she plays video games for ‘practice in making decisions’. In her 2016/17 income tax return, Cheryl disclosed taxable income of $153,000 after claiming video game expenses of $1,500. Cheryl is also subject to the Medicare Levy Surcharge (Tier 3). Cheryl has been penalised previously following an audit of her 2013/14 income tax return. Required: Calculate the likely penalties that would be imposed on Cheryl if the resulting shortfall were uncovered during ATO audit activity. Cheryl Disclosed Taxable Income Amended Taxable Income Taxable Income $ $ Tax on income $ $ Medicare Levy 2% $ $ Medicare Levy Surcharge 1.5% $ $ Total $ $ Total shortfall of tax payable (= Amended Total less Disclosed Total) $ Penalties Calculation details Amount $ Base penalty amount $ Increase for previous offences $ Total Penalty $   The following questions are based on the material in Chapter 13: Q18.13.7 (Successful appeal) Stefan Hawkins has been successful with an appeal to the AAT against his 2016/17 income tax assessment. The basis for the challenge was $20,000 of deductions that were disallowed by the Commissioner. The AAT indicated that the entire amount should have been properly allowed as a deduction. The Commissioner has advised that he will not seek to have the AAT decision overturned. The amount that was challenged by Stefan comprised $8,000 of income tax, $2,000 of additional penalties, and $1,500 of general interest charge. Stefan had paid these amounts in full. Required: a. Which of the above amounts is the Commissioner obliged to refund to Stefan? b. Are there any other amounts that may be paid to Stefan as a result of the AAT decision? The following questions are based on the material in Chapter 14: Q19.14.9 (Tax planning, Superannuation co-contributions) Jim’s taxable total income is $37,000. In addition to this he received reportable fringe benefits of $3,500. Required: Calculate the maximum Superannuation co-contribution he can receive for the 2016/17 year. (Show your workings) The following questions are based on the material in Chapter 15: Q20.15.1 (Personal service income) Required: For each of the following, state whether the income described would be classed as Personal Services Income (include a brief explanation/reason for your decision): (a) Sally, a marketing consultant, provides consulting services to a soft drink company. (b) Greg owns a block of holiday apartments that he leases for holiday letting. (c) Rochelle is a music producer. She does not use her own studio, but employs a team of five engineers and producers who contract to produce complete projects for various artists. (d) Howard receives monthly payments from a produce co-operative for the right to use software that he has developed. The software records all classification, inventory and financial transactions. (e) Mal receives contract receipts to act as general manager of a lighting company. His contract is for eighteen months only. Mal is provided with an office, furniture and a computer for the duration of the contract. Taxpayer Is this Personal Services Income? (Yes/No) (provide your explanation/reason) a. Sally b. Greg c. Rochelle d. Howard e. Mal The following questions are based on the material in Chapter 16: Q21.16.3 (Definition of tax havens) Required: What are two key factors that the OECD identifies in considering whether a jurisdiction is a tax haven? The following questions are based on the material in Chapter 17: Q22.17.5 (Calculation of FBT liability, gross up values) Hook, Line and Plunger Coffee Shop provide their employees with the following fringe benefits during the 2016/17 FBT year. The employer is registered for GST and able to claim input tax credits. Description of Fringe Benefit Taxable Value Low interest loan $2,450 Payment of private telephone account 1,940 Use of a Volkswagen car (purchased January 2000) 3,380 Use of a Holden car (purchased March 2015) 9,415 Payment of private school fees (no GST) 10,825 The employer has not paid any FBT instalments during the year. Required: Calculate Fringe Benefits Tax payable by Hook, Line and Plunger Coffee Shop for the 2016/17 FBT year. Show separate calculations for any Type 1 and Type 2 fringe benefits. Type 1 (only) Fringe Benefits: Taxable Values of Fringe Benefits: (List by description) $ $ = Total Taxable Value (Type 1 only) $ Gross-Up Factor (Type 1 only) = Total Grossed-Up Value of Benefits (Type 1 only) $ @ FB Tax Rate % % = Total FB Tax Payable (Type 1 Benefits only) $   Type 2 (only) Fringe Benefits: Taxable Values of FB: (List by description) $ $ $ = Total Taxable Value (Type 2 only) $ Gross-Up Factor (Type 2 only) = Total Grossed-Up Value of Benefits (Type 2 only) $ @ FB Tax Rate % % = Total FB Tax Payable (Type 2 Benefits only) $ Total FB Tax Payable (Type 1 plus Type 2) $   The following questions are based on the material in Chapter 18: Q23.18.5 (Active asset reduction and retirement exemption) On 1 July 2016, Micah Wong, a resident taxpayer aged 58, sold his mortgage broking business for $2,675,000 and retired. The proceeds are entirely for goodwill and the cost base for this asset consists solely of second element costs on disposal of $35,000. Micah commenced business in 2007 and does not have any other current or prior year capital gains or losses. His business satisfies the requirements of Subdivision 152-C. Required: Yes / No? a. Does the 50% CGT discount apply? b. Does the Small Business Active Asset reduction apply? c. Does the Small Business Retirement Concession apply? d. Calculate Micah’s net capital gain for the 2016/17 tax year (use grid provided to show your workings): Calculation details (if any) $ Gain on Sales of business $ Net Capital Gain $   The following questions are based on the material in Chapter 19: Q24.19.7 (GST attribution transactions) Jack Ramjet owns a clothing store in Melbourne. The following transactions occurred in the September 2016 quarter: All applicable transactions include GST. Cash sales $ 65,000 Credit sales (accounts receivable customers) 120,000 Collections of accounts receivables 90,000 Cash purchases 50,000 Credit purchases to suppliers (accounts payable customers) 55,000 Payment of accounts payables 68,000 Wages paid to employees 24,000 Interest received 200 Interest paid 1,200 Required: Calculate the GST payable for the September quarter: (a) On a cash basis. (b) On an accrual basis. ( a ) Cash Basis GST Collected: Amount $ (incl. GST) GST $ Total GST Collected $ GST Paid: Amount $ (incl. GST) GST $ Total GST Paid $ Net GST (specify if Payable or Refundable) $ ( b ) Accrual Basis GST Collected: Amount $ (incl. GST) GST $ Total GST Collected $ GST Paid: Amount $ (incl. GST) GST $ Total GST Paid $ Net GST (specify if Payable or Refundable) $   The following question is based on the material in Chapter 20: Q25.20.1 (What is tax crime?) Required: Provide five (5) methods of “criminal attack” that are most commonly used by criminals to evade taxation obligations or fraudulently use the system to obtain an improper financial benefit. 5 Most common ‘criminal attack’ methods on the tax system: 1. 2. 3. 4. 5.