HA3042 Taxation Law
T2 2018 Individual Assignment
(2500 words)
Due date: Week 10
XXXXXXXXXXMaximum marks: 20 (20%)
Instructions:
This assignment is to be submitted by the due date in soft-copy only (Safe
assign – Blackboard).
The assignment is to be submitted in accordance with assessment policy
stated in the Subject Outline and Student Handbook.
It is the responsibility of the student submitting the work to ensure that
the work is in fact his/her own work. Ensure that when incorporating the
works of others into your submission that it is appropriately
acknowledged.
Question 1 (5 Marks)
The Lotteries Commission conducts an instant lottery called ‘Set for Life’ under
which a winner who scratches three ‘set for life’ panels wins $50,000 each year
for 20 years. The first $50,000 is payable as soon as the winner is notified, and
later amounts are payable on the first anniversary of the first payment. In the
event of the death of the winner, the Commission may pay any outstanding
amounts to the deceased’s estate.
Requirement:
Is the annual payment income? Give reasons for your decision
Question 2 (06 marks)
Corner Pharmacy is a chemist shop. It provides no credit sales but accepts major
credit cards. It sells items off the shelf and the proprietor fills prescriptions for
cash and for payments made under the Pharmaceutical Benefits Scheme [PBS].
Three (03) assistants are employed. The following financial data is provided:
Cash sales --------------------------------------------$300,000
Credit card sales-------------------------------------$150,000
Credit card reimbursements -----------------------$160,000
PBS:
- Opening balance -----------------------------------$25,000
- Closing balance ------------------------------------$30,000
- Billings ----------------------------------------------$200,000
- Receipts ---------------------------------------------$195,000
Stock
- Opening stock--------------------------------------$150,000
- Purchases-------------------------------------------$500,000
- Closing stock ---------------------------------------$200,000
Salaries ------------------------------------------------$60,000
Rent ----------------------------------------------------$50,000
Requirement:
On the assumptions that an accrual basis applies and the cost of sales and other
outlays are allowable deductions for tax purposes, calculate the pharmacy’s
taxable income.
Question 3 (04 marks)
What principle was established in IRC v Duke of Westminster [1936] AC 1? How
elevant is that principle today in Australia?
Question 4 (05 marks)
Joseph (an accountant) and his wife Jane (a housewife) bo
owed money to
purchase a rental property as joint tenants. They entered into a written
agreement which provided that Joseph is entitled to 20% of the profits from the
property and Jane is entitled to 80% of the profits from the property. The
agreement also provided that if the property generates a loss, Joseph is entitled
to 100% of the loss. Last year a loss of $40,000 arose.
Requirement:
How is this loss allocated for tax purposes? If Joseph and Jane decide to sell the
property, how would they be required to account for any capital gain or capital
loss?