ACFI3004 TAXATION INDIVIDUAL COMPULSORY CASE STUDY

 

 

ACFI3004 TAXATION

 INDIVIDUAL COMPULSORY CASE STUDY

 Assessment:               25% of final assessment

 

Required:

Complete assignment tasks 1 to 3 inclusive.  Refer each task for suggested word length where applicable.  In grading task one and task two examiners will focus on your referencing to case law, appropriate sections of the ITAA 1936 and ITAA 1997 and income tax rulings issued by the Australian Taxation Office.  Section referencing is not required in respect of task 3.  A list of references used to answer all assignment tasks should be attached to the assignment. 

 

Assignment Task One

Tom is an Australian resident who is employed full-time as a school teacher teaching art at a Newcastle high school.  Art has always been a passion of Tom’s, particularly street art.  He has always been active in the street art scene as a personal hobby and was recently asked by the local government if he would volunteer to paint some street art projects on council owned buildings around Newcastle.  His completed project received a great deal of media attention and this has resulted in two private companies approaching Tom to complete some street art murals. The companies will pay Tom $1,000 each for the murals as well as reimburse him for all materials he uses.  Tom is not sure whether any further opportunities will arise to paint street art commercially however he has placed some posters advertising his work in local art galleries.

 

Required

In the form of a professional correspondence (not exceeding 500 words) advise Tom of the possible income tax implications, if any, arising from his street art activities.  

10 marks

 

Assignment Task Two

Section 8-1 of the 1997 Income Tax Assessment Act provides, inter alia, that:

“all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income are allowable deductions except to the extent they are losses or outgoings of a private or domestic nature.

 

Required:

  1. Discuss the judicial tests applied to the evaluation of the term “private and domestic” in reference to s8-1. (approx. 300 words)
  2. Prepare a report outlining the recent precedent in Frisch v FCT (2008 ATC) and its potential impact on the judicial evaluation of what is “private and domestic” in terms of s8-1. (approx.

10 marks

Assignment Task Three                    5 marks

Ms Nora Bombora is a 48 year old individual resident of Australia (Newcastle) for taxation purposes.   She was employed as a school teacher for the full 2019 financial year.  Nora is single with no dependants and did not have any private hospital cover. The following information relates to the year ended 30 June 2019:

 

Receipts

Gross Salary as per payment summary (note 1)                                   $88,880

Fully Franked dividends received from ASX listed company                         4,200

Unfranked dividends received                                                                  950

Net Interest Income received from New Zealand bank account (note 2)       800

Gross rent received                                                                                6,200

Gift from her grandmother                                                                    5,000

Cash prize for “NSW Teacher of the Year” award                                      1,500

 

Payments

Expenses relating to the rental property (all deductible)                                 8,500

Purchase (12/01/19) of a computer used 75% for business

with an effective life of 4 years                                                        1,850

Purchase (01/01/19) of a briefcase used 100% for business

with an effective life of 4 years                                                                 280

Personal contribution to a complying superannuation fund                 2,500

Personal medical expenses paid (after Medicare refunds)                     4,250

Annual fee – Australian Teachers’ Trade Union                                          1,300

Other deductible expenditure relating to Australian income                     1,000

 

 

Notes

  1. The payment summary also showed $31,000 PAYG deducted, a Reportable Fringe Benefit amount of $4,500 and a Reportable Employer Superannuation Contribution amount of $3,300.
  2. The New Zealand government withheld $200 tax (Australian dollar – AUD equivalent) from the gross $1,000 interest earned.
  3. At 30 June 2019 Nora had an accumulated HELP (HECS) debt of $7,500

 

Required

Calculate the taxpayer’s minimum taxable income and net tax payable/refundable for the year ended 30 June 2019.  Show all workings.  Referencing to the Income Tax Assessment Acts is not required.