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BAP31 A T2 2020 Individual Assignment

BAP31

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29 views6 pages

BAP31 A T2 2020 Individual Assignment

BAP31

Uploaded by

Misha Ali
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Taxation Law & Practice1

BAP31 A

Assessment 3 (20%): Individual Assignment

Trimester 2, Year 2020

Student ID Number Student Name

Instructions:

▪ This is an individual assignment


o This assignment must be written using MS Word.
o Please type your full name and ID in the space provided
o Please ensure that your submission must be your own
original attempt.
o Marks will be deducted for cheating/plagiarism

▪ Student answers and submissions are required to be completed in THIS


answer booklet.
.
▪ Due date for this assignment is and of Week 11, 31 July 2020 at 11:55 pm:
o Late submissions will be subject to a 25%
reduction in marks obtained.
o Assignment to be uploaded on Moodle in the
assignment submission link.
o File to be saved and uploaded on Moodle with the
correct naming convention.
For examples – First Name_Last Name_Student
ID
Question 1 (10 marks)

Karen is an Australian resident. She is 50 years of age and born in Ireland. She has
decided to sell her Australian assets as she is retiring from her business as a retail
owner and going back to Ireland. Karen is selling the following assets:

1. She purchased a home in 1981 for $60, 000 which she used as her main residency.
Her home is now worth $100, 000.
2. She purchased a car in 2012 for $25, 000 which is now worth $ 50, 000.
3. Karen started a small retail business herself and now has found a buyer to take over
her business for $150,000. The sale price includes $70, 000 for all of the business
equipment, which cost $50, 000 and $90, 000 of goodwill.
4. Karen is also selling her furniture for $7, 000. No single item offered for sale cost more
than $2, 000.
5. There are also several paintings that she is selling for $35, 000. All of her paintings
were purchased in second hand shops and no single painting cost more than $500. The
one exception was a painting she purchased direct from an artist for $1,000. This
painting is being sold for $5, 000

Based on the above figures, you are required to deal with Capital Gain Tax. You must answer
the following questions:

1. What is the Capital gain about the family home?


2. Capital loss or gain incurred from the car.
3. The capital gain related to the business sale.
4. The capital gain after selling furniture.
5. The capital gain concerned with the selling of paintings.

Question 2 (5 marks)

Molly and Tim jointly purchased a property for $1,000,000. The investment property generated
net annual rental income of $20,000. Molly put in $300,000 and Tim put in $700,000.

Required: Determine the profit/loss allocated to Molly and Tim


Question 3 (5 marks)

Jack is a 50-year-old resident from Sydney who is single and employed as a legal
practitioner. During the 2018/19 income year, he earned salary of $130,000. He also owned
an investment property in Melbourne for which he derived rent of $10,000. Additionally, Jack
is a shareholder in a company from which he received franked dividend off $6000. He is also
a beneficiary of a family trust and was entitled to $15,000 of the income of the trust estate.
During the income year, Jack undertook a professional development course which costed
$800. He also works from home on a part-time basis for which $700 was the depreciation
value of the computer that he uses in his study at home for work related matters. He decided
to repair the fence of his investment property which costed him $6000 and in the previous
income year, he paid $500 to an accountant to prepare his tax return. He had a private
health insurance for the whole income year and does not have any outstanding help debt.
Calculate Jacks Income Tax Liability for the 2018/19 income year.

Taxpayers, who earn over $26,668/year, pay a Medicare Levy of 2% of their taxable income.

Australian income tax rates between 2018/19 (residents)


Income thresholds Rate Tax payable on this income

$0 – $18,200 0% Nil

$18,201 – $37,000 19% 19c for each $1 over $18,200

$37,001 – $90,000 32.5% $3,572 plus 32.5% of amounts over $37,000

$90,001 – $180,000 37% $20,797 plus 37% of amounts over $90,000

$180,001 and over 45% $54,097 plus 45% of amounts over $180,000

--------End of Assignment--------

Answer here -

Answer #1
1) According to Income Tax Assessment Act 1997 ( Section 802.35) , your main residence
(your home) is generally exempt from Capital Gain Tax. A person is entitled to exemption if he
has lived in it but not entitled for vacant block A car is a Capital Gain Asset under Division 108.
Capital Gain incurred by selling the car is $25,000.

2) As per IAAT gain on sale is determined by subtracting book’s value from consideration
received. So the Capital Gain on sale of retail business is $20,000 under (section 725- 365)

3)

4) Furniture is for personal use and it is outside the definition of Capital Asset. So as per
Income Tax Act there is no Capital Gain Tax on it under (section 108)

5) Holding a unique item such as painting falls under definition of Capital Asset. Gain resulting
from the sale of paintings shall be taxable. So the Capital Gain would be $4000.

Answer #2
Molly’s Investment $300,000
Tim’s Investment $700,000
The annual rental income generated by property is $20,000. Molly’s share of profit $6000 and
Tim’s share of profit is $14,000.

Answer#3
Salary Income $130,000
Income from property $10,000
Capital Gain (dividend) $6,000
Other Income $15,000
Professional Course ($800)
Depreciation ($700)
Repair and Maintenance ($6,000)
Taxable Income 153,500
Computation of Tax
Tax on above 20,797
Tax on exceeding
(153,500-90,000) 37% 23,495
Medicare
2%(153,500) 3,070 47,812

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