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Assessment Task – Tutorial Questions Unit Code: HI6028 Unit Name: Taxation Theory, Practice and Law Assignment: Tutorial Questions 2 Weighting: 25% Total Assignment Marks: 50 marks Purpose: This...

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Assessment Task – Tutorial Questions
Unit Code: HI6028
Unit Name: Taxation Theory, Practice and Law Assignment: Tutorial Questions 2
Weighting: 25%
Total Assignment Marks: 50 marks
Purpose: This assignment is designed to assess your level of knowledge of the key topics covered in this unit
Unit Learning Outcomes Assessed:
    1. Demonstrate an understanding of the Australian income tax system, the concepts of income and
deductions, CGT, FBT, GST general anti-avoidance provisions and income tax administration;
    2. Identify and critically analyse taxation issues;
    3. Interpret the relevant taxation legislations and case law;
    4. Apply taxation principles to real life problems.
Description: Each week students were provided with three tutorial questions of varying degrees of difficulty. These tutorial questions are available in the Tutorial Folder for each week on Blackboard. The Interactive Tutorials are designed to assist students with the process, skills and knowledge to answer the provided tutorial questions. Your task is to answer a selection of tutorial questions for weeks 6 to 10 inclusive and submit these answers in a single document.
The questions to be answered are:
Week 6
Mason is a car painter with Melbourne Collision Repair Centre. Mason studying BPA and his employer pays for his course fees at Holmes Institute costing Mason $12,000. Also, Mason lives in a unit apartment in Brisbane, which is provided to him by Melbourne Collision Repair Centre as his employer as fringe benefit. The market value rent for the apartment is $500 per week, and Mason pays $100 of rent per week for the apartment.
Advise the FBT consequences of Mason’s remuneration package (10 marks, maximum 200 words).
Week 7
Alex is a carpenter who purchased a vacant block of land in Sydney on 1 October 1980. On 1 September 1986, Alex built a house on the land. At the time, the land was valued at $110,000 and the cost of construction was $100,000. Immediately, after the construction finished, the property has been rented out. On 1 March 2019, Alex sold the property at auction for $1,400,000.
With reference to relevant legislation/case law, determine:
a) Alex’s net capital gain or net capital loss for the year ended 30 June 2019 using both Discount method and Indexation method. (8 marks)
) How would your answer to a) differ if the owner of the property was a company instead of Alex? (2 marks, maximum 100 words)
Week 8
Bowens Pty Ltd is a building materials supplier in Victoria. Bowens Pty Ltd has an annual turnover of
$24 million, and works under the accrual method of accounting. Bowens Pty Ltd purchases concrete mixer for $660 each from Builder’s Choice Pty Ltd, a company in Geelong with an annual turnover of around $21 million, and works under the accrual method of accounting. Bowens Pty Ltd plans to sell the concrete mixers at a 200% mark-up to its customers. In October last year it purchased 110 concrete mixers but in December they discovered that 12 of the concrete mixers were faulty and subsequently returned these faulty concrete mixers to the manufacturer, obtaining a full refund. Assume both apply the accrual method of accounting.
With reference to relevant laws, discuss the GST consequences of this a
angement for both Bowens Pty Ltd and Builder’s Choice Pty Ltd. (10 marks, maximum 400 words).
Week 9
Due to COVID-19 impact, Watson Co becomes insolvent and placed into voluntary liquidation by its directors. Dissolve liquidators have been appointed as the company liquidators. On the winding up of the Watson Co, Dissolve liquidators have started distributions and Paul as ex-shareholder of Watson Co received $7,200 from the liquidators, which was inclusive of $3,000 unfranked dividend pursuant to the provision of Income Tax Assessment Act 1963, section XXXXXXXXXXThis distribution to Paul was from his $4,000 investment in the shares of Watson Co on 2nd Fe
uary 2019.
With reference to relevant provisions of ITAA 97 and ITAA 36, critically analyze the tax consequences of the above scenario for Paul. (10 marks, maximum 300 words).
Week 10
Steve and his cousin Alex started an equal partnership business, Euca Sanitizers, motivated by the increase in the recent demand for hand sanitizers during the COVID-19 pandemic. Steve lives in Sydney and is an Australian resident for tax purposes. Alex however, is resident of New Zealand and is a foreign resident for tax purposes in Australia. On 30 June 2020, Euca Sanitizers partnership net income is $300,000, 60% of this income is generated from selling hand sanitizers to Australian retailers and 40% comes outside Australia from sale of hand sanitizers to New Zealand retailers.
With reference to relevant provisions of ITAA 97/ITAA 36, discuss how the partnership income is taxed. (10 marks, maximum 200 words).
Submission Directions:
The assignment has to be submitted via Blackboard. Each student will be permitted one submission to Blackboard only. Each student needs to ensure that the document submitted is the co
ect one.
Academic Integrity
Academic honesty is highly valued at Holmes Institute. Students must always submit work that represents their original words or ideas. If any words or ideas used in a class posting or assignment submission do not represent the student’s original words or ideas, the student must cite all relevant sources and make clear the extent to which such sources were used. Written assignments that include material similar to course reading materials or other sources should include a citation including source, author, and page number.
In addition, written assignments that are similar or identical to those of another student in the class is also a violation of the Holmes Institute’s Academic Conduct and Integrity Policy. The consequence for a violation of this policy can incur a range of penalties varying from a 50% penalty through to suspension of enrolment. The penalty would be dependent on the extent of academic misconduct and the student’s history of academic misconduct issues.
All assessments will be automatically submitted to SafeAssign to assess their originality.
Further Information:
For further information and additional learning resources, students should refer to their Discussion Board for the unit.
Answered Same Day Jun 09, 2021 HI6028


Suvrat answered on Jun 11 2021
150 Votes
Week 6
Advise the FBT consequences of Mason’s remuneration package.
Answer –
According to the rules governing the Fringe Benefit Tax, employer has to pay FBT on the taxable value of Fringe benefits provided to the employee during the year which runs from 1st April to 31st March. The employer has to report Fringe benefits in payment summaries if the Taxable value of Fringe benefits exceeds $2,000.
Taxable value of fringe benefits is calculated by grossing up the fringe benefits provided.
Grossing up rate is 2.0802 if employer can claim GST credit on Fringe benefits and 1.8868 if employer cannot claim GST on fringe benefits.
Tax rate on Fringe benefits is 47%.
In the given case, employer pays $12,000 for BPA course fees of Mason which is regarded fringe benefits and no deduction is available as the employee cannot claim deduction of the same if he had hypothetically paid for the course because it is not related to his employment.
Employer also provides rent accommodation and charges $100per week whereas market rent is $500 per week.
Therefore annual value of fringe benefits is:
$12,000 + ($500 - $100)*52 = $12,000 + $20,800 =$32,800
Assuming employer does not get any GST credit, gross up rate of 1.8868 will be used:
Taxable value of fringe benefits = $32,800 * 1.8868 = $61,887.04
Therefore Fringe benefit tax = $61,887.04 * 47% = $29,087
$61,887.04 will be added in employee’s salary package as Mason gives up $61,887.04 of salary because the FBT of $29,087 needs to be included in salary package cost.
Week 7
With reference to relevant legislation/case law, determine:
(a) Alex’s net capital gain or net capital loss for the year ended 30 June 2019 using both Discount method and Indexation method.
Answer -
According to Section 110-25(2) of ITAA 1997, cost base of CGT Asset include the amount the buyer has to pay for the acquisition of the property or the market value of the asset.
Section 110-25(5) of ITAA 1997 says cost base of the CGT property increases by the amount of expenditure made to increase or preserve the value of asset.
In the given case, Alex has market value of land in 1986 as $110,000 and spent $100,000 for construction to increase its value to convert it into rentable property.
Therefore total cost base for Alex is $210,000.
Alex sold the property for $1,400,000 on March 1, 2019. Therefore Asset is held more than 12 months and hence capital gain will be payable on sale of property.
· Calculation of Net Capital gains by discounted method:
    Sale price
    Market Value of land in 1986
    Add: Amount spent for construction
    Total Cost
    Capital Gain
    Less: 50% Discounted Facto
    Net Capital Gain
· Calculation of Net Capital Gain by Indexation method:
Indexation method is applicable if the asset is acquired before 21 September 1999 and is held for more than 12 months. Both the...

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