Assessment Task Description
You are required to complete the following assessments
PART A (10 Marks)
Advice Jordan on the tax implications regarding the deductibility, FBT and GST associated with the $2,000 gym membership. Show calculations and support your advice by reference to relevant tax legislation and tax cases.
Jordan does not operate a business, but has shares in Australian listed companies and owns one rental property at Coogee. Jordan is a full-time employee of Bendigo Bank and works as an assistant manager at the Sydney office on a salary of $75,000 per year.
Question 1 (2 Marks)
Jordan is interested in purchasing investment properties in regional Melbourne, in Bendigo because of the better value for money for properties compared to Central Melbourne or Sydney. After being introduced to a real estate agent in Bendigo, Jordan flies to Melbourne early on Saturday and returns back to Sydney on Monday morning. The real estate agent picks Jordan up from the airport and drives to Bendigo. The agent pays for the hotel accommodation and drives Jordan around the properties. Jordan incurs $700 in airfares from Sydney to Melbourne and incurs a $120 taxi fare from the airport to Bondi. Jordan decides to purchase one of the properties the real estate showed him for $450,000. The purchase was settled on the 20 December 2019 and the exchange of contracts was on the 11 November 2019 and has begun receiving rent from tenants from the 21 December 2019. The interest on the loan was $15,000 for the 2019-2020 income year. The rent received from renting the property was $30,000 for the 2019-2020 income year.
Jordan arranges for a concrete ramp to be placed at the back of the Coogee property as his elderly relatives s requested to have it as the stairs are steep and dangerous, going from the house to the backyard. The cost of installing the concrete ramp at the property was $4,000 and the contractors started work on the 21 August 2017 and the ramp was completed on the 30 August 2017. Jordan and his relatives were very happy with the concrete. Jordan purchased the property back in December 2017 for $350,000.
Jordan decides to sell the Coogee property because the elderly relatives would have to go to a nursing home as they are elderly, his uncle is 96 and his auntie is 95. Jordan advertises the property for sale and sales it shortly after to an investor for $400,000. Exchange of contracts take place on the 25 May 2019 and settlement occurs on the 15 August 2019, due to the sickness of his solicitor. The real estate agent’s commission on the sale was $6,000 and the solicitor’s fees for the sale were $4,500.
All staff at Bendigo Bank at assistant manager level and above, are entitled to receive one year of a gym membership on top of the normal salary. The value is not to exceed $2,000 and Jordan has decided to have the annual gym membership paid for and join “Fitness A” gym and attend classes 3-4 times per week. Bendigo Bank paid for the gym membership on the 1 March 2019 the amount of $1,800. Bendigo Bank and Fitness A are registered for GST.
Jordan decides to open a restaurant in the main street of Coogee Beach as it is busy with young tourists. The restaurant opened on 15 December 2019 and will be managed by his friend John as Jordan has a full time job. Jordan is planning to manage the restaurant on the weekends. The premises are leased, and the rent is $1,000 per week.
Taryn would like to open a new business as an interior designer, to funds her ambition she sold some of the following assets: 1. Antique Painting that was given to Taryn by her father 5 years ago. Taryn’s father bought it on 20 August 1984 for $2,500. Taryn sold it on 1’st June 2020 for $25,000 2. Taryn sold her car (Toyota Corolla) for the amount of $12,000 on 20’th May 2020, she bought on 1’st January 2015 for the amount of $20,000 3. Taryn sold her Harry Potter’s collection for the amount of $1,500 on 4’th January 2020, she bought it second hand on 10’th October 2018 for $350. 4. Taryn sold her gold necklace for $2,000 on 20’th March 2020, she bought it for $1,200 on 8’th August 2018 5. Taryn sold a sculpture for $6,000 on 1 January 2020, she bought it on December 1994 Advise the Capital Gain Tax Consequences for the above transactions, please have a look at the matrix below on how to answer the question
Assignments’ Instructions and Requirements Question 1 (10 Marks) Perisher Pty Ltd (Perisher) is a Ski equipment manufacturer that operates around Mt Hotham in Victoria. On 1 May 2019, Perisher provided Nikita (one of its employees) with a car as Nikita does a lot of travelling for work purposes. However, Nikita’s usage of the car is not restricted to work only. Perisher purchased the car on that date for $44,000 (including GST) plus $2,000 (including GST) dealer delivery charges. For the period of 1 May 2019 to 31 March 2020, Nikita travelled 12,000 kilometers in the car and incurred expenses of $770 on minor repairs that have been reimbursed by Perisher. The car was not used for 10 days when Nikita was interstate and was parked at the airport and for another five days when the car was scheduled for annual repairs. Calculate the Fringe Benefits Tax Liability for Perisher, please have a look at the matrix below on how to answer the question QUESTION 1: Calculate the FBT liability for Perisher Pty Ltd Weighting Identification of material facts (issues) regarding fringe benefits provided to Nikita 1 % Identification and analysis of legal issues / legal question and relevant taxation law in regards to fringe benefits (e.g. FBTAA 1986). 1 % Thorough application of tax law (e.g. ITAA 1936 and ITAA 1997) to material facts in Perisher’s case. 1 % Accurate conclusion of the FBT calculation. 5 % Correct information and taxation law have been used and properly cited. A detailed analysis has been performed. 2 % QUESTION 1 TOTAL MARKS: 10 %
QUESTION 2 - (15 MARKS) Taryn would like to open a new business as an interior designer, to funds her ambition she sold some of the following assets: 1. Antique Painting that was given to Taryn by her father 5 years ago. Taryn’s father bought it on 20 August 1984 for $2,500. Taryn sold it on 1’st June 2020 for $25,000 2. Taryn sold her car (Toyota Corolla) for the amount of $12,000 on 20’th May 2020, she bought on 1’st January 2015 for the amount of $20,000 3. Taryn sold her Harry Potter’s collection for the amount of $1,500 on 4’th January 2020, she bought it second hand on 10’th October 2018 for $350. 4. Taryn sold her gold necklace for $2,000 on 20’th March 2020, she bought it for $1,200 on 8’th August 2018 5. Taryn sold a sculpture for $6,000 on 1 January 2020, she bought it on December 1994 for $1,500 Advise the Capital Gain Tax Consequences for the above transactions, please have a look at the matrix below on how to answer the question QUESTION 2: Capital gain tax consequences Weighting Identification of material facts on regard to each case 2 % Identification and analysis of legal issues / legal question and relevant taxation law for each case. 2 % Thorough application of ITAA 1997 to material facts. 2 % Accurate conclusions are reached from each case. 6 % Correct information and taxation law have been used and properly cited. A detailed analysis has been performed. 3 % QUESTION 2 TOTAL MARKS: 15 %
X, aged 42 and a qualified lawyer, is in the process of completing his income tax return for the income year ending 30 June 2020. He seeks your assistance/advice on how to deal with the following transactions in his tax return:
On 15 October 2019, X sold all his shares in X1 Ltd, a company listed on the Australian Stock Exchange. He bought the shares on 7 July 2010 for $50,000 and sold them for $150,000. X purchased the shares with the purpose of making a profit from their sale. (X did receive dividends during the time he owned the shares). X advised his stockbroker to place the sale proceeds in a cash management trust that had its headquarters in Hong Kong. This trust was paying 15% interest per annum on short-term deposits and many Australian investors were using the trust. X thinking was to hold the money temporarily in the cash management trust while he decides what to do with the funds in the long-term. Unfortunately, on 30 December 2019, X’s stockbroker (Y) advises X that the proprietors of the cash management trust were professional fraudsters and that they had defrauded numerous investors of millions of dollars. In short, X’s $150,000 has also been stolen and there is no chance of getting any of the money back . Between 2009 and 2020, X only bought and sold other shares around five times. As at 30 December 2019, X was still thinking about the long-term use of the $150,000. X received an interest payment from the fund of $5,500 on 15 November 2019. X has a net capital loss of $20,000 from the 2015-16 income year.