Question 1

Lennie was a professional cricketer who, during his last game for the club, collected donations from the crowd for a meritorious performance in a game. Are these receipts likely to be assessable as income?

Accepted Answer

The receipts are likely to be considered assessable as income because there is a direct connection between the money collected and Lennie's services as a professional cricketer. The donations were given in recognition of his performance in the game, which is directly related to his profession.

Question 2

Sarah purchased a small flat in Sydney on 14 December 2014 for$520?000which she lived in until she was forced to move interstate in March 2018. Sarah lived in a rented apartment interstate and has not owned another property. Sarah returned to Sydney in March 2020 and then sold the flat in June 2020 for $750,000. Does Sarah have any CGT liability on the sale of her Sydney flat?

Accepted Answer

Sarah can claim the main residence exemption for the entire period of ownership because she did not own another property and the flat was considered her main residence, even while she was living interstate.

Question 3

Babu is a bicycle courier who rides for a company called Crisis Couriers. Babu is required to wear a distinctive yellow uniform whilst riding for the courier company and is subject to various rules and regulations imposed by the courier company who also set his hourly rate. Crisis Couriers do not deduct any tax from payments to Babu nor do they provide any superannuation on behalf of Babu. In light of this information, which one of the following statements is likely to be true?

Accepted Answer

Babu is likely considered an employee under the control and integration tests because he is required to wear a company uniform, adhere to company rules, and his pay rate is set by the company, indicating a level of control and integration into the business typical of an employment relationship.

Question 4

Trevor is a resident of Australia and who owns 1.000 shares in BBC Bank and during the 2020 tax year the Bank paid him a total of $1,400 in fully franked cash dividends. In light of these facts, which of the following is true?

Accepted Answer

In Australia, the dividend imputation system allows shareholders to receive a credit for the tax already paid by the corporation on their dividends. Therefore, Trevor must include both the $1,400 cash dividend and the $600 franking credit in his assessable income, making the total $2,000. This system prevents the double taxation of dividends.

Question 5

Johnathan is a resident and during the 2020 tax year he derived $62,000 in salary from which $13,000 in PAYG withholding was deducted. He also received $1,100 in bank interest and he also received a fully franked dividend of $700 that had $300 in franking credits attached. Johnathan incurred $2,100 in various work related expenses for which he has kept the required documentation and which are all fully deductible. What is Johnathan's taxable income and will be receive a tax refund or have a balance of tax to pay?

Accepted Answer

Johnathan's taxable income is calculated by adding his salary, bank interest, and the grossed-up dividend (dividend amount plus franking credits), then subtracting his deductible expenses. His taxable income is $62,000 (salary) + $1,100 (interest) + $1,000 (dividend) + $300 (franking credits) - $2,100 (deductible expenses) = $62,300. The tax on this income, including the Medicare levy and taking into account the low and middle income tax offset, and after subtracting the PAYG withholding and adding the franking credits, results in a refund. The correct calculation based on the given figures and Australian tax rules as of the 2020 tax year leads to a refund of $1,443.

Question 6

Sagar is a non-resident and during the 2020 tax year he derived $28,000 in wages from a part-time job in Australia from which $9,100 in PAYG withholding was deducted. He also received a fully franked dividend of $2,100 from an Australian company that had $900 in franking credits attached. Sagar incurred $290 in various work related expenses for which he has kept the required documentation and which are all fully deductible. What is Sagar's taxable income and will be receive a tax refund or have a balance of tax to pay?

Accepted Answer

Sagar's taxable income is calculated by adding his wages ($28,000) and the grossed-up dividend (the dividend plus the franking credits, which is $2,100 + $900 = $3,000), totaling $31,000. After subtracting the deductible work-related expenses ($290), his taxable income is $30,710. The tax on this income, including the Medicare levy for a non-resident, and the tax offset from the franking credits, results in a situation where the PAYG withholding ($9,100) exceeds his tax liability, leading to a refund of $94.25.

Question 7

Sanjiv is a resident and works full time in an office as an administrator. On weekends from April 2020 he began using his own car as a ride-share operator with Guber. Sanjiv has come to you for tax advice as he thinks his income from Guber is not taxable as he enjoys driving and to him the activity is a hobby. What would you advise him?

Accepted Answer

Sanjiv is mistaken because the income generated from ridesharing is considered business income, not a hobby. Therefore, he is required to register for GST if applicable and must keep accurate records of his income and expenses for tax purposes.

Question 8

Dennis purchased a property in Adelaide in April 2010 for $400,000. Dennis lived in that property until 2012 at which time he moved interstate for work and rented out the property. The property remained rented until April 2019 at which time Dennis returned to live in the property. Dennis then sold the property in April 2020 for $560,000. Does Dennis have any CGT liability on the sale of this property?

Accepted Answer

The answer of Dennis purchased a property in Adelaide in...

Question 9

Which of the following is not true about a genuine early redundancy payment?

Accepted Answer

A genuine redundancy is not an ETP (eligible termination payment) but rather consists of a tax-free amount up to a certain threshold that is non-assessable non-exempt income.

Question 10

Byron, a resident of Australia, received a partially franked dividend, franked to 80%, for $1,400 from CBC Bank and a partially franked dividend, franked to 40%, for $1,360 from Sea Worths Ltd in the last tax year. What is the amount of the franking tax offset that Byron is entitled to?

Accepted Answer

The answer of Byron, a resident of Australia, received a...

Question 11

Don owns a rental property and during the year ended 30 June 2020 he received gross rent of $14,040. From this gross rent, the property manager took out his fee of $1,404 and a leasing fee of $130 and paid, on behalf of Don, the council rates of $1,200. Don paid the water rates of $1,100 and undertook various minor repairs of $220 and also paid bank interest of $7,500. What is Don's net rental income for the year ended 30 June 2020?

Accepted Answer

Don's net rental income is calculated as follows: Gross rent ($14,040) minus property manager's fee ($1,404), leasing fee ($130), council rates ($1,200), water rates ($1,100), repairs ($220), and bank interest ($7,500). This results in a net rental income of $2,486.

Question 12

Saif is a non-resident of Australia and he has received a fully franked dividend of $700, which has a $300 franking credit and also a partially franked dividend of $1,400, franked to 80%, from Quarry Bank. What is the amount of the franking tax offset that Saif is entitled to?

Accepted Answer

The answer of Saif is a non-resident of Australia and...

Question 13

Patricia is 52 years old and she has owned and operated a small cafe bar for the last 6 years. She made a capital gain from selling this business of$600?000the 2019-20 tax year. Patricia also has a carry forward capital loss of $10,000. Assume that Patricia's business meets the basic conditions in Division 152 ITAA97 and so she qualifies for the CGT small business concessions. What is Patricia's net capital gain likely to be for 2020?

Accepted Answer

Patricia's net capital gain is likely to be $145,000 before the lifetime retirement exemption and/or small business rollover are applied because the CGT small business concessions can reduce the capital gain significantly. After applying the 50% active asset reduction, her gain would be reduced to $300,000. Then, by applying the 50% general discount for individuals, it further reduces to $145,000. The carry forward capital loss of $10,000 can be applied before these concessions.

Question 14

Anthony contributed $5,000 into his spouse's superannuation fund. His spouse's assessable income was $38,000. What is the amount of the low-income superannuation tax offset that Anthony may be entitled to for the 2020 tax year?

Accepted Answer

The answer of Anthony contributed $5,000 into his spouse's superannuation...

Question 15

Harry is 56 and is under preservation age and has received a lump sum from his superannuation of $250,000. The lump sum was from an untaxed source. What rates of tax will apply to this lump sum?

Accepted Answer

Since Harry is under preservation age and the lump sum is from an untaxed source, the tax rate is 30% up to the untaxed plan cap amount.

Question 16

Eddie is single and a resident and his taxable income for the 2020 tax year is $26,000. What amount of Medicare levy will Eddie pay in the year ended 30 June 2020?

Accepted Answer

The answer of Eddie is single and a resident and...

Question 17

Christine is a 45-year-old single woman. For the 2019-20 tax year, Christine's taxable income was$110?000, and she had reportable fringe benefits of$30?000. Christine did not have private patient hospital cover at any time throughout the year. What is Christine's Medicare levy surcharge liability?

Accepted Answer

The Medicare levy surcharge (MLS) is an additional charge applied to Australian taxpayers who do not have private patient hospital cover and earn above a certain income. For the 2019-20 tax year, singles earning over $90,000 (or families earning over $180,000) who do not have private hospital cover may be charged an extra 1% to 1.5% of their income, depending on their income bracket. Christine's total income for MLS purposes is $140,000 ($110,000 taxable income + $30,000 reportable fringe benefits), placing her in the income bracket where the surcharge is 1.25%. Therefore, her MLS liability is 1.25% of $110,000, which equals $1,375. However, since the calculation should be based on her total income for MLS purposes ($140,000), the correct calculation is 1.25% of $140,000, which equals $1,750.

Question 18

Domenic is a practising lawyer and he recently completed his law degree and his outstanding HELP debt as at 29 June 2020 (before the 2020 tax return is assessed) is $14,800. Domenic's taxable income for the 2020 year was $121,000. Domenic also has a reportable fringe benefit amount of $12,000. What amount of HELP repayment will Domenic have to make in the 2020 tax return?

Accepted Answer

In Australia, the Higher Education Loan Program (HELP) repayment is calculated based on your total income for the year, which includes your taxable income plus any reportable fringe benefits. For the 2020 tax year, Domenic's total income would be his taxable income of $121,000 plus his reportable fringe benefits of $12,000, totaling $133,000. Based on the HELP repayment thresholds and rates for the 2020 tax year, this income level would place him in a repayment bracket where he is required to repay 9% of his total income. Therefore, his HELP repayment amount would be 9% of $133,000, which equals $11,970.

Question 19

Robert is a resident and during the 2020 tax year he derived $86,000 in salary from which $25,800 in PAYG withholding was deducted. He also received $400 in bank interest and he also received a fully franked dividend of $2,100 that had $900 in franking credits attached. Robert incurred $3,400 in various work related expenses for which he has kept the required documentation and which are all fully deductible. Robert also has a HELP debt of $10,200. What is Robert's taxable income and will be receive a tax refund or have a balance of tax to pay?

Accepted Answer

Robert's taxable income is $60,200 ($86,000 - $25,800 - $3,400). His tax payable is $10,232 ($60,200 x 0.17). His HELP repayment is $10,200. Therefore, he will receive a tax refund of $1,403 ($10,232 - $10,200).

Question 20

Shane Edwards, is a resident individual who earned a gross salary of $25,000 and received a fully franked dividend of $10,500 for the year ended 30 June 2020. Shane's also had tax instalments (PAYG) deducted from his salary income of $6,000. Shane has no dependants and is not entitled to any dependant tax offsets/rebates.
What is Shane's net tax payable/refundable (including Medicare levy if applicable but ignoring tax offsets) for the year ended 30 June 2020?

Accepted Answer

The answer of Shane Edwards, is a resident individual who...

Quiz 10: Taxation of Individuals