(a)
Wilh an nput laxed suppy the enlerpnse makno the supoiv does nol charge GST on lh6 supply and does not gei an nput tax credit for GST paid on pu.chass lhat reate to the input iaxd supply With a GSTffee suppy lh ontsrprise making the suppy dos nol charge Gst on rhe suppy and does not pay GsT on ts purchases lhar relate io lhe suppy
charqe GST oi the suppy and dos not get an nput tax crdit for the GST pad on lne purchases that rerate 1o the suppy. With a csTf@e suppy tlre enloDrs maklng lhe supply does nol charae GsT on the suppy blt geG an input lax cedl lor the purchases rhat retab to lh
FEEDBACK TO STUDENTS
I hc rvcnsc
wlh
an inpul taxed suppy tlre enteQ se makng the suppy does nol
mrk
rbr rrc
'cs
&\
r:l rq
th. igh$tmrk wb
18/20
Wilh a GST tie supply lhe enterpdse makng the suppy does not pay GSTon ls purchass but musl charge GSI on ils suppties Wlthen npul taxed supply rhe ntlpris maki.g (he supply does nol charoe Gsr on
the supply and does notgol.n npul lax credit for GST pa d on puEhases thal relate to $e nputlaxd slppy
(r) (b)
r,
J rbJ ".o-!dc qc, fn cd l q Fri l ' srrdcns vho lailcd rhc ra should .onracr John Taylor via c mail d.hiled fcedback .rtr . r'Lf\r.ntr b rtunsc an xppolntmcnt to obtain
l \Fl'n
'
aborl thcn pcrlbnaicc n
rhc tc$.
wirh a GsT fiee suppiy rhe enteDdse does notcha.ge GsT on rhe suppty bul gels an input l.x credit for the purchases thal bte to rhe suppy With an npul laxed supply the enteFrise makng tho suppy does not charge GsT on the suppy and does nol pay GsT on rhe purchases ihar
(e)
'norc
corecny.
'\or
(- a-.>
suwty arc input tax.d supply' is ft.nt b convey that GST is payzble on yout pLtchases (ioputs) but that tou .1o n6t cha/ge cST on youl input tated sales and do n6t ger ao input ta' credit lor th. csf th.t you paid on wu. putchas.s. Hence you inputs ate taxed but your Bales arc not. fhe lffi csf fi@ is n.ant to conwy that you don t charge GSf on yo'l sates but get a credit for the GsI pald on yout inputs. fhis credit can be ofiset against GST payable on othet sales that you nay nake th.t arc not csr iee ot input tated, lf yout GSf lnprt ta' crediE exceed Wut othet cST liabitities the excess is refundable. Hence there has be.n no GST o, the purcha.e an.t sate tmnsaction.
13
Cotect answet
!b).
The
tens
tm
(a)
LEGT 275
A s ae o . s h r d n. .
d ra.
^orro
[ "1 -o
..o, to
{ou,o o1\
o,,
.^j".l
be o.o, a6d o!
be1.r,.e har QUESTION'THREE
'"ltF.l
*rucs lchs helt(h trd education. shoutd dever be prcvided by govehmenl as parr c! ar usrs dannot be exctuded trom beneii( ng flo;
Thal
Thlt seruices such as heafih and educaUon sho!d etherb prcvjded or \,brdr.o
61ed b-.4
b, 9o,4 re I
rr
rhe
!o cure,
_q
re both esidnts ot rhe newty ,ndependent cou.t[, Euphora anler.ddE-ao. ,0 ,u.- o. $50000 aln ,"orh de Fd ro I T cataru oc a t.d, -e orL.al,t a. d ..o, d dno.agp. . ^d. dE rddaEubh'roae $ro0.o0011.qa:{torro-;"oron ile ecr-,-1-ru-o'ld bdn., Jrar'neE'o o.a1ld....!irdtal q d.pdar,.r r " o'2506 Ioa t sf ,e tsr".. r tr,"d dr d ra.e or'o;o Ior $I the Luon.,,in
Amie and Jane
() Consisten( wth hoizontat equ ly
le)
None
orrhe.bove
Itu- tle
i d,e.9to..e.crJ . oi^a\
ower incooe a( a
a'sunent.hete is that these have to b? tunded by a totn of taxation not posstbte o. pacticar to have
is phhet dnT y .r thrcLsh su6'diest socicty as a whot. wi undwpend on them. Studenrs who a4swd ra) ere po.ribty contu,e.t beten thc tetn .he t goods, an.J the t.m soci.t soods. things that penkutat users cannot be.x.tuded non (such 6 steet tighttnst are s@ial goods. the gowtnnant c,pnditure
or srch seryices /o rhe wder cohnunny it gofthnenr d6es ptovt@ then ot subsidisc ben. tn othe, wotds nt6s the,enor eil]:,ct <one
fhe corect answ. Ms td). answet @t is ctose to c'tcct hut the nerit g.oods aryunent do.t not rcqui,e that theonty.uppti.t ot snch setukes be the gouptnnent. Rathet it say\ thar na*et p,hes wir not ftttect that vdhe
k) co.ssredtwith
same rale
.s
(rd'I
o..,>re,,
^r
or o h9-.
rnconssrenl with horzonlat equ ly as ir laxes intresl income lhan it lares salary li.one.
al:
.o1.
tower rare
a3
is
with vo.licat
eqlly as
laxnq
bw ln.one tevets. tto;z;n@ o1ufiy the sane incotu ,..vet shoutd p.y the ,"." .^.,h ;t white this sounds tike sinpte connon icnse ii ia .tso usu,tty ,ad to heah that-a taxpayd e*nks t1 ot int rest iocome shoua pay ke sane anounl of k., on it a< a E payc' eaming S1 ot ,atary inco." u turp"y., @mks s1 ol dividend incone. "i t.x.
says
corecl ahswq @< p). ver cat equity ..ys that ta,payere .n diffdcnr hr6ne teftk shoutd be E e.t.tfihen y. Thc u,uat exp,eas equity prlncipte is rhat ta,par6 on hight h.one tevel; shoutd pay norc ta,
(.nd at
t!1t 6xe6vq' on
g20ooo
t30OOO
$ 5.000
$15,OOO
MtrlriIeCl$iLe Ie{. Sl
2008
A s ae o . s h r d n. .
.h.tGn .\cdbr.q. e. FVdn..p,oo6r, i5a /.id d"dJcl'o- orAu.iar"n oF'd, o-.oo<esvJLotm. !,ab.. in6re ro..,c
pbperty
$1O,OOO
70% of sl udents . nswe.ed this question correcfly. Tha corcct answer was (h). Both the forcign in.ome tax offser retet.d to in la) and the hankinq credh ta, of8er retetred to in F) ate exanptes of tax oft'ets but ther are not the onry c,anptes or tax oflses. Answc, tc) is atso inconect as, 4fthough tax ofi.ets arc son tines apptied b th6e sjauations.
his rncome lems orhe. than lhe ncome exempl under s23AG) lss $10000 (beng his intresl dedlclons) ess hs lax offsel of$30000 for thedividend catcutared as $7o.ooox 30/70 rhe end
resultoflhe
th.y arc not atwys applied. Fot etanpte. sone typos ot toGign source
cu
aton wiLbe
tax.b
e incomo of$130.000
\l 0ooo bqna rA <-n o an h , (--i\aro lha, n. ir.ore u-de .2)A', 16<. { 0.000 oa.nq 1 nEe,t d"du4o.ar
(d)$170 000 (beng rhe
exempt under s23AG).
1/
[-1]:,1.
c!
i -lz-, \ --\-\! -
lhs tncome
l..i o i
?.Of
le) $190,c00 (beina the sum or aL his income Lleds) ress gloooo (beinq hts
fd the d v dend alc! atd as $70,000 x 30/70 The end resul ot lhis cualion wilbe a laxabte
nteresr deduclions) 6ss
h
';)1--rA
(t
l-.{: '-''-')
corecrty,
he calcularlons in le) shoutd h.ve b@n s150p0o, fhe tnpo,lant rctunbet here js that faxabte Incore equar Assessable ,rcore ress Deductions. Non Assessabre o, Ex.npt tncone is not inctude.t in 4ssessab/e /r.ou e, A tax ofset is aot a deduction. A .te.Juction is subtt.cted ttud assessab/e lncore to dot.rhtne taxabte incore. A kx ofiset i. subtacredfrcm gro.sta\ otho ke payabre to detetninenet tax payabte.
rcsun of
thing to
(c).
.5 r
6e
O.
y avaiab e to taxpyers who have some fore gn source ncoms.
('
slblcted
always lppied aqalnst rhe ncome oi a taxpayer grossed up for foreign $urce income and lax pad by compan es on dividends. Sublracted from laxab e income betore appy nq th re evant lax rates. Onlyava iable to laxpayerc who receive divdends on shares.
IicT 2?1t
MultlrlCholcc lcn.
SL 2003
LtcTtT5r
Mu tipleChoi.eTen.Sl :008
v
A s ae o . s h r d n. .
,&tiiesrror,r etosr
Assume rhat lhese we th facls n Whilatds Baach: llislori dosl olthe land lo the company $100,000 va ue of th and when I was venlurd n the solted veitu.e bus ness afler
lhe dhange ofoMrship or the company $200 000 Cosl of intemed ale works a.d ofsrbdivson $500 000 Total sal prcotal lols ailer subdivis on $5 000.000 The efiecl ol th Hgh Couddecis on adoptnq th lax accounl ns agreed by counse Wh dr or lhe rollow ng was nol sbted 1o be a th Ofi was Lncome in Stull
vFcI
The racl thal the sol ctor had aways charged full profess ona fes for
The
(j,."-.prcrro
-$.00
d
6 c i200 000 .d .6 or d d 4L cn 000 m,. or w:s venturd n the busifessi = 54300000 was ncuden in Wh lrords Baach assessabLe ncone.s odinary ncome bul$l00,D00was a capila
oa n and was nollaxed
(b)The net proft rrom lhe venue. nmely 55000 000 (sae pEceds) lss $500000 (dosl or nle.medale works)l6ss 5200.000 (value orlandwhon il was venfured n lhe busnss) = $4.300,000 w6s n.uded in Whitfords
Beaoh assessabl income as drdnary income bulF100,000was taxed as
fhe co@ct.hswer @s (d). AII the othet factots wete henti.ned as beins rc|ev.nI in detetnlnhg whethet ot not the gfii was ordlnary (d) was nor mn oned at al and in fa.t tho gih horc no apparent rch o6hip to the valu. of the saic.s ptovid.d W S.ott- fh. gift was probahly grGsly in
ercess ot the vatue of the seNices sEvEN
(c)rhe
.r.-ouEsnoN
n
nt prorl om lhe venturc namery $5,000,000 {sae proceeds) ess $500,000 (cosl ot lnrerdedalo wolks) less $100,000 = 54400.000 was included ii Wlr lfods Beach assessab incom as ord narv n@me
*id
Donlpaym
ord nary ncom Whlllords Beech was a so alowed a ded!.lion lor lhe $500,000 dost ol inlemedial
wo Gbulwesnolalowedanydeducllonsforthecoslofte .o
end
p!
id.d in .Ll 9
\.
(e) lhe trading slock provis ons included the gross proceds of$5.000,000 n Whifods Bach s assassabl income and Wh lfords Beach was. rowed
.d.du.rontrndersB l tdthohstorcalcostotthe
30% ot students answerd this
and
ltwas
a'estion corectlv
qu*tion coiiecdy.
she did 3onething tike this .nd therc was no finding that she was t' t e 6/srress of lelrlrg storres ,el atone lurning het talent lo account fot profil. Ahhough thete waj discussion of lhe iss@ of eonstuctive Beipt in the ase that was in rctation lo the batanee ot the anaunt payable, fhe question was dneated al the anount paid to he. the paynent to Mrs Brcnt . The recejpa was tabhle as a rcwatd b. the seryic6 she Novided, nndy t6 inq hq stoty to
c. ect answet Ms (c). Mts Brcnt had no opedy in the sto.! because she didn't have .oMight in it as she didnl wrile it. she was not an enployee of eithet rhe ne*papet ot the fv stati6h. This was the fi6t aid onty lime that
atthe ne
fhe cnect answor was (a). fhe dfiference between the Voceens ol sate and s venturcd in the buskess was l3mble undet the thq equivalent of s6-5. Alsthlia did not have a qenenl capital gains ta'
the $1oo,ooo being the difference hetw@a hislorical cosl ahd the s connitted to the busk6s was a ta' tree
anolnls civd
by lhe
hlher were:
5 as a businssqan.
(a)
of TM97 s6
LECT 275t
s!
2003
A s ae o . s h r d n. .
G'
TaxlbLe undr (h lhen quvaent ol TMST s6 5 as a perlod c recipl because no ixed gross sum was pavable (o lhe lallrer lnder rh-" contacl
N.l'r,br
apilalassel
'e
fhe cotect ats@t was (b). Although the fathet hznsfetred th' Fopedv to th' .iii n etcnanqe Ar ne ,iqat b iceive thc pavnents the p'tncipte th't was .^i"a ;" o" i.. *". oai ttt d. une of a caoitat.seet, as no ftxed srcss sun w's as'edatntbta hon ';; contaa. ror exinpte it was inpossibte to knos how tons the t'thet wttd rne
fi@ .fter entedig into lhe agreemenl QUESTIONTEN
ln Faftsay v
/Fcthe
pad io acqu
e a
>se'.rolc '@n. oF o ie6 r\'/ w' ' orosrq,m Fre8ed on lhe sale ota.aeilalassel
ficd
\ D.c .o"@ a
"oloo:'
ould
/"\
*c.crv oerc' reo 01 p!r'ro *"-"0r" 'ii.*. qross "",,. "' sum srrted in thednxacr would be pavable v
(e) None ol tre above.
in'rar1 e'
! r'' vs
20% ol
fhe corcct answet w.s (d) Although we Each this case in the contett of .ssessabte lncone lhe.ritial i*ue in the case was *helher the dentst could obtain a deductoo fo/ the payhen,3 The cold nonelhel$s applied lhe sane &si, ,n ,?xed grcss sud l;. a s it awti.s in the lncone context bul stetched i h h. timits. Alrhourh lhe qi.e under the contact coutd ary dccurling to ;h" the bus;ess, the coud tocussed on lhe hct th.t. 6 the event of ","fiE "t det';uh. the ti'ad qost sun seted in the conxa.t wout.t be p'vahte Hen'e
MulL p e Cho(e
LLCT 2?5]
LECT 2r5l
T.e. Sl
200R
A s ae o . s h r d n. .
,r'-ouEsroN
ETEVEN
*
c.!d hor.rh,r
au<d The key d srinction belween ihe facts in Ro/s Ro/ce y Jetrrey and Evans MBdicat Supplies was:
th.sein Ma
air
r{F . .016 *-*,", a ae'e o, tr'10,d sa,lbe ^:< rlF"^". op ,i./of o ? be *Fe- FedFs'r LotFddLc\'.Fi d
Tlre .eceipt by Federa Coke was income beuse it income if Belambi had received il
(a) tbi, v
(c)
mutd have
The taxpayer n Ralls Ray6 v Jetney \|as pi\tig up an ex slin harket whe@as the taxpayer in Morirdy v Fvads Medl.at Slppres was nor
ben
to Belambibecause il was
?.G - n Mana-' \ rt--. MeoLr ,rodFs qd o,,no -p a.,sr,g -e,.-t 1,.r.'z.pd.6i,1Ror.po,!d Jdh. ^d.d,por m.*els were il was unabre lo pmdue iGef
-1e
Bumese govefrmnl.
a.
Therc was no pdvity ol conlract berween Ev.rs r'redical Sdpp/tes and rhe
lo it as it cosen down
ils
ld) (e)
The taxpayer in Ma ady v Evans Medicol Srpp/tes wes expoirng a marker where it was uiab e to prdduce tsetfwhereas rhe taxpayer ii Rol/
Rolr
ha*ei
w6
a.e.
j4
lfan amounl
s ord nary indome to a recipent
{a) (bl
'ncohe
recip ents ossessabe in6me va a provis on but trre ru es about ordinary income wt prevait.
#
(
wherc you Neviousty have not been abre to prcduce (Ro s Royce) and being conpensated for the toss ot an exbttns na*et tEvans Itedlc.t Suppties), fhe na*et w.s significant enough to Evans Medicat Supplies fot cohpensatio, f.r iis ,oss ro be charaderised as a c.p at re.eipt. rhe orhet point to note about Rotts RoWe v Jeffrey k that the .hatactq of an asset can b. changed because of the circunstarces of lts rcatisation, That is the patenb and t chnlcal knowledge that Ro|s-Royce pdtted with had onty be4 c.pit t assets ol its uK nanufacturi.g opehtions hut by exptoitins then in the My lhey did they werc corctdercd to be revenue assets to sone extqt,
.set in darkeE
fhe conecr ansret was (b). the distincton dawn w.s bet eeo exptoi ng .n
ll
may
n today:
ta
t a,o
.ro,.'
ano
()
n rhe rcipenls assessabe ircofre via a slarutory inomepovision lhed gener. ry the statltory incone provision w tprevat.
lfitisarso ncuded
paoroC@ladc"d"
holldays d sreo.rding
ncomeeven
ifilisexempt ncone
(b)
by any rhe non deductibte enlerrainmenr perceniaqe and any amounl remainlnq woud be rexed as a business gain under tTM 1997 s6-5
The przcwourd belaxen under
," ue o.r'e
reduced
rhe curcct answet eas ld). answet (c) was atso p.tti.Iy coaect in the sense that the sane lten can be included in a reciplenl's assessahte ircone undd both a s6tutoty ptoelsion and as odinary incohe btt answr (d) is nore correct as it goes on to s.y vhat happans in this sluation - that is, generatty the rules about otdlnary ihcone prevail.
lTM36 ss2r and 21A n combinelioi woutd determine rhat rhe vaue ot lhe consideralion pad ro Cook an! Sherdei was (he ams enqrh veue of rhe horidays dsegarding rhe facl rhat lhe hotidays were nor rransrerabte and TAA07 s15 2 wourd rax lhe anounr so delermined
1TM36 ss21 and 21A in combinaton woud derermine that rhe vatue of the consideralion pid lo Cook and Sherden was the arm's teigth vaue ot the
Nlu l
MLI'inlcah,,i.c leq. Sl
2UUB
A s ae o . s h r d n. .
hoid.ys disro!ardna the fa.r that the hoidays werc nor transfebre end the
amounrso delemned
wo!d be(arcd
l't
OUESTION FIFTEEN Oaze lndustes Lld s an Auslmian residen(companywilh fourdvsons These are (i)the srease divsion (i)lhesumpordivson (ii)the landrrldvis'oniand (iv)lhe bEke tlud divson Allthe sales oflh b6k6llud dvsion areton dis(ribulon of Fasl Slop Brake F ud a product manufaclured by a Ch nese company FromlJuly 2000 unll30 June 2009 Ooze ndustres Lld has hld thesore ALsrraran dslributon r ghts for Fasr Slop Brake F uid. Sals fiom the bke fud dvson presenl5% ol the revenue ot Ooze lndustrios Ltd On I Juy 2009 the Chrnese company canco s ooze rndustdes Lld s d strbutro. rjqhls lor Fasl stoD Brake Flu As a rcsulr ooze nduslies Ltd decdes to cos down ls brak nuid division entiry. The Ch ies company pays Ooze lndustries Ltd: lump sum of$500,000 as compnsalion ror the ross of ls bdketluid divison. Thecompensation paymenlwolld b6lkelytobe:
(f)
,10ql.
Tho solt drlnk manufaclur would pay Frnge Bonlits Tar on at the rat .146.5% on lhe qrossed up laxable va ue ol the holdays
,he cotect answe. was (a). fhe idpo anl point to note here is that s21aod s21A ate valuation prevkions rol asessirg prcvisions. fhe oths inpotEnt point to note b that .21A is only concsed with non bustness beretls. Cook and Shetden the non convenibilw ol the holidays lnto cash prcrented then lrcn helng tated undet the then equivzlent of s6-5. The L& th.t the
/t
activities
them undet the then equivalenl of s1r2. fhe cotubine.t eEe.l or ss21 aad 21A is that the holidays witt be valued at thet artu s lenglh vatue dErcgatding ben non tansfetabitity. section 21A then saes on lo rcduce the vatue by a',y amount th.l reprcs.nts non dedu. ble enlethn.nt .xpenditurc ro the payer
@nt
(a)
A.
Cook and Shsden w.rc cl.a y in business th. valEtion ru|. rculd then hav. ov.rcone tha only rcton why they were not ass*ed undar the then equivalent of s6-5. llence they would be assessed under s6-5 or ary ramahing amount attet vatuing the holidays at theh an s length anouot ard rcducing that valuaion hy any non deductible entertainnqt conponent.
returence to Ooze ndustes ostsals ol brake iluid. (b) Taxedassiatutory ncomeundersl5-20asabyaltyunderlheordlnary meaning ol royalty whch is not incomo undr ord nary donceprs (c) A cap ralreceiptlo Ooze ndushs as mmponsaton for the oss ofa structural asset be.use diskibu106hLp accounled for all the sales of th
bEk flud
d vision
F
(d) Taxd as odlnary income beuse il was cohpensation for oss ofsales of
ser
rh
.,
'b.ve
coiiectly.
fhe host conect answer Ms (e). I the sales fron the bruk. fluid divislon had ep@ented a hote siabte propodtutn of ooE lndustrias Lrd's sares f,en answet (c) woutd have been co.rect as tt was wn rhese sates reprcsentins onty s% of totat sats lhe principte in alied Mitts (narely that you have to take inro accoanr rhe rckttue significa'Ge or t e asser !o &e bustss as a whote ]n detetnlnlng whethq ot not it is a stuctuht asset) @utd be rctewant. This wutd man ttnt note of tho auenatives (a) to (.1) werc M6l which heans
rhat
-{
ouEsloN srrrEEN
Undr the
Alga
ns fmm commercaltransaclions enlercd iolo by laxpayers who are othMise in business w r be ordrnary income
wh ch
interestpayable over mo.e lhai oneyea. s onydeduclble in the yarto il s Pbperly referab e.
Ihe chense D the share ownership ol lhe @mpany was a c lca evidentary ractor in establishing thal lhe purpose of lho company had
6
MultlplcChoicc
.l
the laxpayls
bus ness may be in.oma t the raxpayer had rhe nrenrion ol pror I makng by the (ransaction lmm lhe nception .l tho thnsaclion
ld(
Sl 2003
Mulrip
e Cho
ce
'ei.
Sl 2008
A s ae o . s h r d n. .
hktton
cource ol a
t xpaye, s business lt nay stitt be incone ll the taxpayet had the of pt'fit making by the tansaction fren its tnception, Answt (a) too br@d to be conect and wuld not take into account cases tike wes$ietd.
fhe corcct answet was (d). fhat is ir a trcnsaction k oLtside the otdinaty
@
{b)
A.oL
{
'lq
ar d e
'o\ari."
o.,
Amdnrs lhalare rci Dyallies underlh ordinary meannq ofhyary.bul \ara..o.dna\ nd.r'hFod. ronp.op.n p.- pd
'.oac
ae
-o.n
'ov.lv
M
s odd ro -on..nde- s - d a'p no. buL Lhar are nol 0rd na^ ncome
qu
ath
"r"
o d
-"D
nr"n
q o
rhe cottect .ns@t was (a). fhis rolow ftom the |'oftts ot the prevldM irsefi, fhd is h taxs .noun! thar ae rcydfiies undet the Mcc."iv neanns ot 'totElt'y but which .ft hot otdioary tncone. Royahi6 undet the otdi;aty Mnlng rhich are otdn.ty ircome ate taxed tndet s6-5, fhe $econditiona for the opehtion ot s1r20 tuan that there can onty be retativety fea ir anv, receipb nhich a.e tax.d undet it. L is inportant to note that the sktutoty delinition of 'rcyafty is not r.levant ro. s1r20 putposes. one area where the st.tutory doflnttton ot toyatty is is rcyahy w hhotdins tat pay.btc fi4 a rcyalty is patd by a .esident'etevad ro a for.tsn reeide .
*r
oUEsTloN EIGHTEEN
DrOOer
Lld. an AusrGrian resdent company, has ben nvo ved in @d mnnq operalions tor many yea6 Oigler Ltd devetops a new systm (lhe ,Dtg Deep syslam )for lhe min nq ol coa. The unque tealure ol lhe Oiq DeeD syslm ia that il does nor invove exvation. DiOOe. Lld enterc rnlo a @nlcl wirh Oz Mne Ltd fd.on aoo Do Deep,yser to o.Mac -ndF w !h rag e-. ro o-o,'de
tu
't.ho
system. D gger hes nver tod anyone aboul rhe detar s or the Dig Deep syslem previousy The rece pls bv D qoer Ud wi be:
o rD
n assessabe dcone undersl5-20 asan amount that is a.oyatry n Iheodinary meaning bulis nolordinary ncome ro D qqeras
{c) Noltaxable
il snotl
s c.ro ".
i..
i\lullipcChons en S
2003
LEG
t 2r5r
200q
A s ae o . s h r d n. .
30%
QUESTIOII NINE'EEN
fhe conect answt was (a). fhe racts are very sinllat t6 sheri', cudon Mins wirh the difier.nce lhat the laxpayer is an austatiai resident mrhs th.h a CAnadian rcsident. Sheu,tt G'rdon Mioes is authdfty that the paynenE wse not rcyatties hecause they @te not in rcspect ol the exercise of a dght. Rathet they w.te p.yments for the proision ol lnfornation_ As a Canadian Nident the Double Tax Agteenent betwen Arst@tia and Canada neanl that sherilt Godon Mines @uld only he taxe.r 6n Austmtian some I'usrress ptoftts if they wde ad.ibutahle to a petnaneot estabtishnent that the conpany had in Australh- As Sheftitt Gddon ttinos djd not have a p nanent stablishment in Australla h coutd not be taxed on that basis, Ot the olhet
Drew s Vc Chance or of Euphoria Univers'ty pty Lrd (a new prtvare un vebrty n lhe Northern subuds of sydfey). Euphora univercty pty Lrd s takn ov;by s.ienta Ltd (!n AuslEtan res deit company) Drew is irnhappy aboul the rakeo; and lhreatns b res qn fmd his empoyment as V Chancetor. Scienta Lrd to encouge DGw to renain in h s pos tion as Vce Chancetor ol Euphora Un versty
Ply Lld agrees Io pay h
an eddronatannue bonus ofgl0O.OOO and to pbvide hi; 9200 OOO. The provsion ofthe
hand
withholding tat wouid be rcqui.ed to be deducte.t lron then by the paveL Thar js why the cohnissionet aryued that the payments rere rcy.hi6. tn Digge/s case as the Expayar is an Austatkn resident thar is t, business and is providing a setvice to another taxpdyer it is tikety that tbe paynent wutd b. assesebte t6 Disset un.tet s6-5 as otther a business gain seNic6. Myet Enpoiun shoutd neaa that the f.ct that Digg.r h.s nevet dbne ahis hoforc w||l nor prcvent the .ecejpt fron being drdinaty incone. Rotr Royce v Jetuey should ne.n that the ract that the tntotnation has previou3ty be6 a @pital asser of Digget .toes hat prevent gains lrcn s e'ploitation trcn being otdinary incon.. fhe p.ynents wi still rct be 'rcyatties urdet the ddinaty neankg af layaky' fot the satue reasons as wrc stated in shenj( Cotdon Mines. Thaa is the paytunts rete not in respect .r the s6nt ot exercise ol a ight in retation to propett that Digget has. Not th.t the slatutory delinhion of rcyafty, which woutd he., that rcyahy withholding t.x woutd be payable if the actuat facts i, sherjtt 6ordon Mires occutred .gaih, is not
rclevant tot elthd s6-5 or s15-20
rar Td
Noneo
he abov.
putpo*s.
fhe @rect ansEt Ms (e). fi th. ptovision of the cat had been thn.fe,abte wuld have been otdinary iicohe to Drcw but I the cat is pravided by an a*ociate of Drew's emptoyet in respect of Drew's enptoyment it ts nost likety to be a hinge benelil which woukJ nean thaa jt wolt.r b non exenpt ihcore under lfAA 1936 s23L_ fhere i. no evjdence that Drew is h business which wil nean that ss21 and 21A in conbinaton wil not apply in his situation to v. tue the caL Fot FBT putpose s it js hreh4vant that Drcw is not an enploy.e of Scientk as long as the benefrt is prcvtded by ar asso.i{e ot
then it
Pty
orew\ enployrent ln rcspect ot Drew,s enptoyrent wjth Euphotia UnireBity Ltd. CorsisEntly with Dean & McL.., Dew is prcbably in rcceipt ot sal.ty
if
scientk fd FBf putposes) but in any ewnt ||hethd he is o. k not is ndtevant the prcvisiot is by an assocraie of hts ehptoyet in respect of that
fthe facls
ii
fl
'lriplcO
un. l<{
(l
luu3
Ltct )ri
Mu lpleChorco
Tc\i,St
2003
A s ae o . s h r d n. .
(c) KPMG wou d have been subject b rnnge benerIs tax oi rhe taxabte va ue of the ifequenl flyer benefls od Ihe bas s lhat ih benefil uas provided by an associate ot he. emptoyer to an empoyee in respecr of her efrpoymenr Because KpMG woud be subicl b FaT on lhe bentits
lhey would be non .ssessabte non exempr income lo payne under |TAA
(d) KP[/C wou d nol have been subjecr lo tnge benetils lax on rhe taxab]e value olthe frequenl tyer benefils bemuse payne was n @ceipt of satary
o rrporre
nol appry to the tequenl flyer benefits as lhey wore ndl bus ness benefih KPMG rculd not be subict 10 tinge benlib lax on lhe lrcquent fryer
Moslsludenrs answe.ed thb question coiiec{y, Ihe corcct answt eas (e). pryre wo!/d ror be assessed un.rer s1S-2 for the \ane tsonasshe Ms nor assetsed undet th. dlcn equiv.t nto!s15-2inrhe
business and hen.e s21A eoutd not .ppty b valrc then as lt onty arylt s to 6usiness berei?rs, XPMG would Dot be a;t;ject b Faf. fher. w.s no suggestion i4 the case of therc t6ins an atange;ent h.treen KpMc and eantas tot the prevision of beoef^E which woulitflgger the opehtion ol FBfaa s'4a,
St 2003
^luh,pl.ChoiceTe!.
f
THE UNIVERSITY OF NEW SOUTH WALES
Fred onducts a l-la al butcher shop in He bulcheE lhe sheep
A s ae o . s h r d n. .
@ss
wh ich he slauqhle6 h msell and the s aughteed sh@p inro wdous cuts such as chops
ir@i'l
leg of lamb, shouder of lamb and so on. His totaleles eeipts lor the cuts fbF each sheep @ss aE $220 whl e tlre lolal sa es elds nom ihe cuts trcm eacn s aughlered sheep are $220. Assume that Fd has a suffcjenl annua lumover to reOisteEd fo. GST and do6 in lacl s sler ior GsT The GsT consequences for Fred of rhese tGnsactions
ffi +6
SCHOOL OF BUSINESS LAW A}ID TAXATION LEGT 2751 BUSINESS TAXATION
MULTIPLIE CHOICE TI]ST SI
DURATION:40 MINUTES READING TIME: 10 MINUTf,S
ansser
sheet provided
(a)
Al the purcnases are GST lree and al lhe sa es are GST fr as purchases and sles of t@d Hene F@d does not e @ any inpd lax crediis on the purc$ases
aid is not liable lor GST on hls
sa es
(b) The purchase ol the sheep rcases is GST fe as a purchase of food The purchas ot the live sheep ws rol a purchae of lood and hen@ Fd reres an nput lax credit of s55 x 11]10 x 1cy! = $5 for each live sheep he purchass. Ho@ver, lhe lnput tar credits inol be funded to Fd as h s sates a cST fce (c) The p!rchase of the shep erssses is GST rre as a puBnase of food. The purchase of the live sheep Ms not a purchase of f@d bul Ms inpd tared This mns thal no GST was payab e on either of FEds puEha*s and henc Fred
nnoft4eive
any ifpul
tz; cd
ls
fe
2OO9
(d) The purchase of ihe sheep ercasses s GST f@ as a plrchase of food Tne purchas of the llve sheep was nol a puehase ol food and hene F@d r@Es an nputlaxcreditol$55x 11110 x 10% = $5 toreach live sheep he purchases. Fds sales a GsT lree and afy ex@ss lipLl lax cEdits rh.t Fed has a lunded io
Indicate rour
Cddidates nay bri.g an un annotated copy of either: CCH Core Td l-caislarion: ATP Fundame.tal 1d LeEislalion: or Lcxh Nexis Concic Td Leglslatio. into the exanimtion
ElecLionic
(e) Fd re@ives an lnput ld @dl of $55l 11/10 x 10% = $5 for each tile sh6p he puEhases Fred also rews an inpur lar credit ot 5110 x 1llro x loEq = $10lo. each shep rcass he purchases. Fd is IabteforGsT ofs22ax 11I1a x1oo = $20 for the tolal 4is of each shep caEss and $220 x 11llo x 105 = $20 for lhe loralcul6ofivesheepthalhe*ls. Fred otrsets his ioia npll ld credits ot$5 per liw sheep and 110 per sheep eMss against his GST tiabitiv ot 520 per tve sheep and $20 per sheep @ss and mits lhe ba ane 10 the ATO.
cored .nswer
rs (d)
cnlcllato( nay be brought inlo rhe dahination r@n Mobilc phones fray be brought into the exmralion roon but mNt be switch.d olt and
A s ae o . s h r d n. .
assum ng thal lh nleresl on the oan used to acqu re lhe lvlan v pmpedv ls a
Ann e and Jrne are both residenls of the newy independent country Euphora Annie had a tarab e n@me in lhe year end nq 30 June Y1 of550,000 ufilch @s who y dedved lbm her
id
deducrionforausteianin@melaxpurposesMacolmslaxablencomelorthevearending
(a) $1c0,000(beinsthesumof dnuc1ns)= $13o.ooo
salary as a teacher of Engllsh as a se@nd langlage Jane hrd a takble in@me in the same year of $100.000 which @s trholy deived lrom nteEsl in Euphoran banks under the Euphor an lax system salary s taxed al f al ru te ol 25% frcm 51 vlhi e inlerest s tded a1 a rate of 100% frcm $1. The Euphodan 1ax sysled is: {a)
alhslnmmeilems)less$r!,000(beinqhs nterest
equ
ly as I iaies
S1 of
interesl n@he
fieent
y frcm ihe
of salarv income
(b) $170 0oo (be ns the sum ol al hls lncome items olher than tlre n@me qempt under s23AG) ess$1o,ooo (being his n1erest deductons) ess his tax ofisel ol $30 000 ior aiion wil be a the dvidend culaled as $7o,ooo x 30/70. Theend Esult of lhe laxzble income of5130 000.
*c!
(b)
li@is stenl lith vend equly as it laf,es $meone on a lorer nmme at a higher
rale than i
(c)$r7O,OOO(bengthesumolal
s23AG)
l6s
his income lems oiherlhan the ineme $10,000 {belnq h s intered deductions) = $r60.000
dempl under
(c) cons stenl wlh venirequity as ii laes someone on a rate as 1 taxes someone on a orer income
(d)
$r7oo0!(beinglheslmoralhisin6me
lemsolherlhantheLncomexemptunder
(d) nconsislentwth vertcalequiry as I laes someone on a rorer in@me atlhe same te or a hgher rate as it laxes sofreone on a high$ ndme and inconsstenl wilh honzontal equly as I t4es inlere$ nmme at a o@. te th:n t taxes elary (e) nconsisle.t wlh honzoniai
Ete P@froles savings
{e) $rso,ooo (belng lhe sum or all his iicome items) es $10.00c (beins his interest deducions) Les his lax oflset of $300c0 tor the dvdend dlaled as $70.000 x 30/70 Theend resu l ofthislculation wll be a laxable incomeof$160 000
ly as it laxes iiterest in6ne at a lo@r rate than I irxes salary income bul @nsistent wilh venil equ ly as t inq nteresl a1 a o@r
equ
corcct answr is
(c)
g n mme
and ex
Annie, an AuslEian resldenl purchases a vant block ol land at Leu Nsw on 1 Julv 2OO7 for $TOO,OOO The @nveyancing costs assiated wlh the purchase rere s2000 Ann e borowed $50 ooo rrcm Bi! Bank Ltd {an ausl@ ian sldenl bank) at 5q/" Io ass st ln iunding lhe purchase ln the year ending 30b June 2ooe Annie paid nlerest on the l@n fom Big Bank Lld ot $2 5oo ln lhe sme penodAnnieaso pad ound ralesol$30o0in sre.l of the LelE pbpny The redu@d cost base ollhe LeuE popenvbAnne as at (a) $100,000 (bens lhe purchase pnce) p us $2000 {be na th conveyaicing cosrs) pus $3000 (beino the muncll 6tes) = $105.000
(b) $loo,ooo (benq the purcha$ price) plus $2000 (bens the @nleyanonq
osts)
sidenl bank) (c) $1oo,ooo (benolhe puEhase pnce)pus $2000 (beinsthe conveyancing @sts) plus $3000 (beng muncil tes) plls $2,500 {being nleresl paid io Big Bank Ltd) =
(d) $1oooo0 (beins $epurchas pd@) plus$2000 (benslhe @nveyanc nq cosrB)pus 12.500 (be ng inleest pad to B g Bank). (e) $100,000{beinslhepurchasepnce)plus$2s00(bens corccl answe. is {a)
nte.est on oan
usd
n1eslpaidtoasBank)
A s ae o . s h r d n. .
we
the
Hlsiori stolthe
A lax
that: charge
Value of the and when it @s ventured n lhe soaled venture business alter lhe chanqe ol owne6h p otlhe company $200.000
Cosl ol iniemediate
(a) (b)
A person pay ng a
usr
as a whole whe.s funds raisd by ldes seru es pmv ded by the oovemment.
muld be ppaEd to pay tor bnefts to society a noi appljed to pan cu ar g@ds or
@fts
A user chaqe s ony ever appied to goods or sefris !!heE particutar use6 nnol be exc uded frcm beneft ng
oflhe High coun decision adopt ng ihe tax a@ounrna aqreed bv@unse
A user chaae s
app! d systemat
(a)
The nel p@fl from lhe renlu namety $5000.000 (sate pF@ds) ess
$500000 (cosr of intemediate
@*s ol ehergency
v/hereas
redetemiied pnncip es
td
is
Mfts)
*ien itMs
A usr charge s
spices
app
Ms
pila
aain and was That such as health and educalion, shoutd be povided by govemment be qc uded fbn benelit ng from them.
(b)The nel prort om the venue namely $5,00c,000 (sate pb@eds) tess $5a0,000 (@st of nlemeniate M ) ess 5200,000 (vatue ot and when it Ms reniurd in the busness): $4 300 0oo was ncluded in r'!fi fords Bech assessab e n@me asordlnary jnmmebut$100,000waslaxedasapiia qatn.
(c) The nel prolir trcm the wnture namely $5 000,000 (sate prcceeds)tess $500 000
as parl cular
usrc nnor
corEct.nswer is (d)
QUESTIONSEVEN
ln
(cost
of inlemediate
w*s)
Ms
incuded
arerl
v FC7 the
in
!4,hillords Beach assessab e ii@me as ordinary income. (d) The grcss prc@eds ot lhe sale, nahe y $5,000 000
@re
nc
uded n
ltfi lfods
She @nsttuctively
h
BeiEd
shen she
eid
Ms
rwad
for
Be.ch asessble in@me as ordinary iicofre. lthinords Beach Ms ate a owed a deduclion i' ihe $500,000 @t ol niemediate mfts blt was not al ored a ny dductions for tte @st ot the and
() The tEding stock prousions included the deduction unders3"1 tor the
h
I was a
qrc$ peeeds of
$5.000,000 tn
Ms
oflie taid.
decbio. Aust6[a did nol
correctanswer is (.). Nore rhat at lne time ofihe have a gene6l capltal gains td.
on herbusiness
-A s ae o . s h r d n. .
AUESTION EIGHT
QUESTIONTEN red b/
L'elt'"' @ P
lAAq ol
sb-5
1n
^9
Mvet
Enpdiun
@se o!
_come
Lnlo th
lFe
'n
tansaci on
a
quesrcn
orol aa\
nq
nfn t 'nleed
a
a,
(b)
rs a p'-@c ?cau bea-sa nol.eoq'osslur waspaydbe orF ilre_-_oq lqeconmc 4th h'sons
Nor taiable undr the lhen equivalenl
sa e
to
inE
oo4 I o-
D!4 nrli's
prie
for a
1al assel.
Taxable
u nd
lTM97
s6 _5
as a
,-.
TaEble underthelhen elurvalenl of
LTAA7 s6-5 as a business gain
"'no
ng Lle
Notlaxabe underlhe then equientofs6-5 becausethev psented the purchas pnce of an ainuitv
"
irp:-ty
as
15
-x4
r'
an as< gnnF-r of
-noe'vni coo'nv
c rchr t
*"'w Ib'
oro''aa
icor'
tulure income
corect.ns{er
ihpoft.ntto
un'
OUESTIONELEVEN
pl bv
1""t" i""
heme beuse (
even t
,dt a e."1"
9r - oeau* ln6t w$
no
o'\ $ o (onr5Rbd^a'n
"""" -*"**,
itc L"
",, iooi i*
ld
ln@me to Bel aFbi beeuse I was onstruct velv ree ved bv Bellambi Deducl be to Le Nicke
' lhe oaal"g point home under a moitgasee's po@r or sae Paul sells "erB;n!e" for $aoo ooo and the teme hou* at Rdtern ror $400 000 and the ;;me un 1 at ;;;r;s F rhal Ba* ror $2oo ooo. All s es l?ke p a@ on 27s Deember 2003' For pita J,"r irct
ns L
gains
*.* - R{rem'o $l0oooo Folio -d re h'a-dd oc\ n * ;","'-"' ""* --"Fp o eo c-o I de'pe?E nem or cah -o ' ve't har .*
r
"'" o,*"r""
tr,'
i"""stment banker who.esdes na manslon al Darins Port of $2 mil'on to Thal Bank Ltd Paul purchases a home J"*",! ioo6 icr $3OO OOo and puah6es 10,000 shaes in That *" o"'it tank) ror $30 pe' share on the same dav oi 1 JuLv 2003
(a) H ollsels the pila oss on the That Bank the Brcnte hom un I ri6l.
caplalqan
on
No'
co
a^ ooe<'o' hrr'eaae-eral
(b) It he appodions the capltal toss on the on bolh p@peftles equallv
ihat Bank
epila
pita
gain on
(e) Noneottheabove
A s ae o . s h r d n. .
corEt
arcwer is (d)
!e,
Lc
io losp- o ' rt otu gar'c dBeda ded cGT e?en' e\enl p uprd_c o:rr"or"pp-.srortsep- tr. r.ecrDla or,n soqFgr-dedbad-sd rhe E_dMs
her emplove' uider Eiza G ensldedno enleing into a salary sacrilice aftangemenl fith prdided with a new B[4W wth a lease vahF or $90 000 She esiimales which she nill be 30 000 kns per ihaishe wl only us the mr for pnvaG purposes and lhat she wil l6reL
and ru-1_9 co<rc o- t'" t d are'sr aieo o oe $3 500 r^" '.-' ** p,;ec "', n\- a.e ieicr-a.e u--i-s cossr r- "sd-ars o be $2000 oe' "".t=' - r* i'; nonth Elz ; drenlly on an annua sa ary of $2oo 0oo per annum lfElzaenlereinlothe ovq Fd-ces -e sa arv ov rhe a'e ra *s. nro rar re, .,i";" _";.^""",--""'"",-O ,rv rBl pa{abe'ro ne ororcio on ."" .l .-.* -,
rro
r""o
. ."r,ta
Re@nllv they had a maiorargumenl v!'illiam enle6 ch wlliam prcmises lhat he aill not enter lhe "ith ".D rt"t. i. ouilt lor a period ol 1o vea6 Haold pavs Wliam $10 000
neighbolF
lnder *h
adnlageols amngementlo
E iza
@uld be
to,
tl," o"ul,uu"
"gr""ing
"ovenant
olths
tBnsacuon lor
(a) For the slatutory fom ula mth od to be used (b) For the opGling costs melhod to be used
b valle
ih
ft nge benefl'
(a) cGT evenl A1 wllhappen as vMliam has disposed of hls ngft to nler
Habd's
and
value the
if nge benelt
he_
q'A-oeoe_e'lo Io
o-'1 or
alie
laY
'b.
LCr eve Dl
CGr
I'appe^ ior W
!r
ard
re
caan dr beaLaplaloar
lowlar
re'1er l:^
{(
e!"r' D ur' -4pe_ lo Wlrn r_o rne $'ooOO esq nc oe_ral e1a'lqrlo hF es_dw,Fna'rw b'o'dr.ryi'o"'bw iaf
@qls ol
p,
corEt
e< rc
mrl
oorob" used rovaue so ru(" o the l''nge oenerl rs ?aredravJa'o lo' lhpooe6r-o esis Ferqoo obeu*d ovaLe
,.r cGIerenLO
fl
l^.!pe-'o W
izr' ! .
t-etuoLa aa"qlb"lcJEr'da'S10000
@
amwer is (.).
s4
re CGtev.nlD
oedu*
qappe-
oulr'pE oa-"31o0O0w
o
i"", .*
$20
000
o4'
moq r."
*ro rr'"
ooo
_"
cG 6_*o"eEe' 'o'
a ccf everx p, -aDp._" b-l t ' pral gar 'c o !eg!{ed @ se lne and sas ot .'" .cr . loseDh AsCG e'dA' -aope_s CGT e!er'D ooec
^*t
in@me lo Pavne under s15 2 {a) The lrequent ilyer benelits MU d be assssable
rbl cGT event A1 does nol happen beuse the land @s a pre ccT assetlo Josph ' ' acT eventDt happens beuse Josph has crealed contcrual rights n Ha'nah
6)
The arm s length value ol the freqlent iver benefls @uld be ncluded a$essable n@me undor ITAA 1936s21A
Payne s
happens a-a loseon F l+ed on lhF !lalda- ol $ 30000 b_r n orco ad,s(o-n o,500 .-,(. .-ouc"<"isora,9an.oS90000
c
s
o@o a d.@un
Joseph
^-(D1 s lzxed under CGT event A1 he is nol taxed u^der CGT evenl
o {io
o'cph
rFoler
'<
La^ed o_ ihe
-!
a'rrl9a-
Drai
9!'
o $90000 Bea !e
ol
$ 30000b'l
kPMC rc-d have oee- c-bjec lo linge @n'.F la? onrhP ldbla!rl-e ol 'he rrouenl flver @nelle on lhe bass fal lT oe^er'@s ltr'ded o/ a_ ae'cia(a r sFc o' l'e entovl'n B' se lt.ovc u" o n*
thev
non
A s ae o . s h r d n. .
E o- -e edbevoueo! woulo -olha?"oee- rube' oi-q'be''r' ^PMC kaqes lne -aaLen '/e oanFlls o'a-e' Prvn' mr'"ce'oror*aryo
oer' 5' a'revFend
,d, "
IlMr6 !s?'a_a 21a - o_onaro" C""\ d"o Sne{e- '2" le" a'r' -*0"*.""" " ." r'o ou" *-
e_glh
/'
e or
rA tl'dare
<o
''F. Tnekeduedlc oenc'rsM . eto(es -IJ' e36 s? A wo-rd aor apph o l.e . *."Jiia ".,*'* *'e oi b-'iaess be_e|s tDMc @_Ldrolb' n,", t-""''t,. b' errs as he\ re'e 01 ""t "..,.ir * '.;'"';'." in ,""p*t""-"". " ot n", ptoulo"o ".povt"nt
corrcct .ns{er is (e)
OUESTIONSIXTEEN
v Jotrey and tiose in Mananv v Evans The key disl'nct on beNveen the lads in Folls Rdvce
e,
" "usne*eaholdavs
"oF
'"o*o'oee5-5 'rAAe7
Enpaiun
.rhe-n4i*
Ln
bus'nss
sl
beordlnary n@de
b,
lnr.
eslpavaDreo\e-ToF
pu'oo* o
Lt'e
'r -
w!644>
s PrcPerY reledb e
'.
- Mod4y r E a's Meoldt '!DD e' :' -,-p"," d Ro* pa/', Jetrev ra\ e\oo'I-e -d'ie* ree I ;;;":i; was unable 10 lrodu rce f o'hveen EL'r! MedlcJ Suolres r'o tFe
Tne G,Da'e_
ar
s,pprs war
' (e)
c'rG
eeo'nt
af
i"jJ.n';io .-';ql';ri"
'o'o" '
'uoc'u"eea
;;"';
Al
i-;;,a(pave
ours dF lne
ol lhe insacton
( ld{-s ov he
o ' (e)
;".';,,
Jefrrev
r'1"' r'- rarpdre n Vo'dat E\sns Meca S'DoFs wa' e^oo'mg aearce Pa
rnaoa ro P'ooLe ^" Ms s vin! up an exlslmo mailet
'
'
OUESIION NINETEEN
(a)
OUESTIO SEVENTEEN
lt the lacts in
nol
jbj ., '-'
A-oun6
am.-^rs
0' 'oldN i-
6-b''rlo_ @'a oelen-e rdr lhe 'aue o rhe '' s eo -ehoda\s ."*.n.."." *o. c-" rqe -on ".0 /< re? -or r,ans e,abre eo-ced ov an! ai"!i:",i,:,1#.i" d. .- -1oa ( Frr ' @- d De r&ed r a
.;;;;
;;m" m*-';e
'n
Lhat are
;;i;;;;i;;"--*
p.-*s'
d^o
va-ou
(b) r,
business ga n urder ITAA 1997 s6_s' ln @mbnation' The pnze would be1arcd under llAA36 s2l and s21a
'rs
'
-r.
a'e
'rcYaq
TM97
'o\E
I'e(
o_
wihr he edeno'o
'e21 9ol
Ililj".i"' ""'i'" c,i"l a"d s-erd"- ^ar i',il!.ii,l ,:i,,"".., '. ned MU ta^ th amount ro detem
o't"' - A " Lonb aro_ M.'d oerF-n'lhar re val-e ,'{e;oF "'d r-Aro s 5'2
Arou s pao
A s ae o . s h r d n. .
lf lis pmvded lo
an emplovee
vfieheror
nol
it
s salaryorwages
x 465=519250
be
ony
lit
sprovidedbvlheempoveescurcnlempover
as an enplovee
wuld
dlaled as
beneit
fo
x 6st of prcvlding
Al
or the
abole
esc);
x
lrLnge
$500
(runnins cosrs)
@ul!
be 524 153 39
i.""*r*lr" ro,..p t",gt"L te raxpaver unless lhe 6 a larivev hilh blsnss * G. statdory Fomula merhod b@m6 mo prrabre as the i",i""eo" * l.
kilomets
Per Year
ln oeneBllems. as
Ms
slld
be $200
000 $=
$175.34'61
"dift incrca*
T*
on $175.34561rcu|d be $56,333.30
the stalL{ory Fomu a fie1hod is likelv Hence here yourinilia th nking al least should be that absence or sarary Note rhat h;e lhe bus ness pecnraqe is zerc in rhe
@! d
be
as rcpodable
ldlaling
E iza s
lvedie @nlribulion
linge
'dded
" "o
.*n.a
Hen@
Ellz s elary
sebe ili"'-iil i* r-.'-.4-oo ov'u"'q-n'ou'o-''p'owharmuoohefr Fdue * *-4. --oe'-" sra.t"ry'o- u -Fnod r"sw 1s ;;;;;..;;*'.". *'c (loz'!a-o_enwile'__areFBTont''r' * . i"" "* "-. " *i J." .."i in"r"lrn" "*" *l nor ha@ 2 reportable rhnse beneft li specr or the r
and
,3 nr
b"efq
Td
r1
sa ary after
Td
henewllliol
",plv*
lew ncased
miqhl meai lhd E ia s whai makes lhis queslion a bit lhckier is that the saary sacnr@ He-ere r 'ed to chec' 'r a*' ** i,,1*' ""i o',i" E aner larco 'ouron br iTa t l oldce h' na b"le ooc'ion
$24.ooo
(eae
as
follM:
$27
make no (a)M/here value frlnge benefit Ging staiutory Formul' method and
30 Oo0 kmvannum lEve led slalulory f'acilon wLl
slo x2.0647
= S56 779 25
CalculaUon of taxabie
lue. Wlh
nge beneft
A s ae o . s h r d n. .
red t $2750
Td
and
Med
LeW $66,547 33
Elza's salary
afle.Tdand Trredicarc$1
.o27 62
$26,402.35
70 =$13481.65
Less Elzas
co
nbdon
T4
and Medire
$ l*e
99oo
wu
d be $35,931 65
Eliza s
ary after
slarywuld
be $2oo ooo
(ii)
cohtttbution equal to
Muld be added as
a rcponab e
tnnge benefl1 in
cu
alin!
pLus
E iza s
Medi ew
e fringe
podab
$3 soo
le$
i220s
mud
be $3,311 96
$r97 795
th.
sum
olEliasTdand I
T4
and
Tdon$19779s=$66.00775
N4ed are
Lew MU d be !109 09 19
(c) lvhere statutory Fomula is Ged to valuethe benefit bul conklbutions ate mad bY th enploye
Ta
E
(i) a For iLluslralve puaoses ih.ee levels of @ntbution w I b analvsed herc: (ii) a contnbuton coitr but on up lo the p grcssed up laxable value ol the benelit eqlaL to equal ro the ;as 6sls bul nol the operins 61s and (lit a mnt bution
ia s s
Td
and
Medle lew
$123 32C 32
iz
(i)
Utbdjo"
equat
'rthe
henellt'
to
'of
/65e coslt
x.7 = $rT,325lesscontibulioi
Grossed uP value of benont $6 400x 1 0647 = $13,214 03
$7 42s = $192.575
FBTpayable$13214.03r 465
= $6144 55
A s ae o . s h r d n. .
$24000 ess$2,400(GSTinputtarcEdil)=$21.600x.7+$61t4.55x.7=
$23,!42.05x.70=S16 129.44
Salary ducl on 5200,000 - $1s.120 - $16129 d4 = $163.7s0 56
31
Td
in
The qrcssed up
lue
The q@ssed up value of ihe fdnqe benetit wil beaddedasaporlabletrngebenefl in cu ating Eliza s i,ledi le!y.
lcu atn!
E iza s
Hen Eliz
s salary and reporlab e ninqe benelits wlll ber 9214,303.36 e on salary and reponab e ftinge benelits $3274.55
Hene
ia
w I be $2 !06 9
sum ofTaxand Med @re e!rypayable$57.174.95
and lvledirc levy
iz s Td
si lb $61 17.35
Eliza s
T*
oll
Elu
s
Eliza s
@dnbutui
3s00
3500
E
zassaary essTaxandlrediereandcontribution$103,075.61
Contibution equal to IeBe c6rs
*lary
(iD
usd.nd
if Eliza @nl bured the value ol lhe finge benell she @uld be beanaq the vlhoe @st hetself and no saary packaglng @ud be involved Hen@ in this slualion the filo ilustlive @ntribut ons thai haw b@n made ae: (i) a contdbdion equalio nre running @sls only: and (il) a onnitudion equa to lhe ea* osls but nol
Here
(i)
Contibdlon eq@l 6
?he
tunnlng cosF.
465 = $3,360.30
After tdx
sst
ol P@v s on of benefl
upwlue $24,000 x
$3360 30 x .70
$2352 21
Afier tax
61
of pblision of benefit
70 = $15.120
A s ae o . s h r d n. .
The gossed up value of the fdnge beneft will be added as a repodab e ninge benerl in lculat ng El z.'5 iredi le!y.
Hen@ E
iassa
Medie
and Med
eW $67.939.30
levy $127,453.49
ld
sa ary ess
Ta Med