Chapter: Tax Administration

How can we solve the following MCQ?

QUESTION 1 1 palms SaveAnswer Which of the following is an example of exempt income? O Interest earned by a public charity on an investment fund O lawn)!r Reserve pay for a part time member O Child support payments O All of the above are exempt income QUESTION 2 1 points Save Answer Warren was previously employed by Best Guess Lid as an accountant. While Doug is no longer an employee of Best Guess, he continues to provide them with accounting services from home. Doug has not passed any of the personal services businesses tests. Which of the following will be an allowable deduction for Warren? O Reasonable contributions to a superannuateon fund for Doug's wife, who provides secretarial support to Doug's accounting business Reasonable amounts paid to Doug's wife for the secretarial work The portion of household expenditure such as rates and mortgage interest applicable to his home office (based on floor space) O Workers compensation payments QUESTION 3 1 points Save Answer How does the treatment of income from a business differ from the treatment of income from a hobby? O Both income from a business and income from a hobby is income according to ordinary concepts and assessable under s 6-5 of the ITAA 1997 The Australian Taxation Office (ATO) considers income from a hobby is not assessable income The loss from a hobby is subject to the non commercial loss rules O The determination of whether income from a business or hobby is assessable depends on whether the turnover exceeds $75,000QUESTION 4 1 points Save Answer Mackenzie graduated with an economics degree in the CIY, and is currently working for a market research company. In her income tax return for the ClY she has a taxable income of $50,740. She also has reportable fringe benefits of $3,260. Shari has an outstanding Higher Education Loan Program (HELP) debt. What is the amount of Mackenzie's compulsory repayment of her HELP debt for the CIY? $2,160 $2,430 $2,030 O $0 QUESTION 5 1 points Save Answer Magnus receives the following remuneration as an employee: Salary $50,000 Cash divident - franked to 80% $5,000 What is Magnus's assessable income? O $57,142 $56,500 $55,000 O $56,714QUESTION 6 1 points Save Answer Which of the following statements best describes the taxation of individuals under the Australian income tax system? O A taxpayer's income is taxed progressively The tax rates applicable to a taxpayer will vary and factors such as age, residency and level of income are taken into account As a taxpayer earns more income, their average tax rate rises O All of the above QUESTION 7 1 points Save Answer Denzil has a salaried job but also carries on a small business activity making wooden toys which does not pass any of the non commercial loss tests. He does not have a determination form the FCT. He starts the activity on 1 July 2012 and in the first year he makes a net loss of $3,000. In the next year, he makes a profit of $1,000. Which of the following statements is CORRECT in relation to the losses from Denzil's business activity? O Denzil has not met any of the Division 35 tests and therefore he cannot carry forward the $3,000 loss to offset against the $1,000 income in the next year Denzil can offset the loss of $3,000 against his salary income in the current year O Denzil can carry forward the $3,000 loss and offset it against his salary income but not his business income of $1,000 O Craig can carry forward the $3,000 loss to offset against the $1,000 profit from the business activities. He can then carry forward the remaining $2,000 loss to offset against future profitsQUESTION 8 1 points Save Answer Eddie runs a copy editing business through his company, Proofreed Pty Ltd. Although he has had other clients in the past, for the 2013/14 year he worked for two clients - Lion Taming News and Snake Handlers Resort. His income was as follows: Lion Taming $45,000 Snake Handlers $10,000 Total $55,000 For both clients, Eddieprovides a review service for their regular publications. He has monthly publication deadlines within which he has to deliver the amended text. Eddie works from home using software provided by his clients. Eddie charges an hourly rate for his services, and charges based on the total number of hours he works, regardless of the productivity of his time. Which of the following statements is CORRECT in relation to Edward's business? O The personal services income legislation applies, as Edward does not pass the results test and the 80 per cent rule The personal services income legislation does not apply, as he passes the results test The personal services income legislation does not apply, as he satisfies the unrelated clients test O The personal services income legislation applies, because he does not meet all three of the unrelated client, employment and business premises tests QUESTION 9 1 points Save Answer Which of the following is NOT assessable on a receipts basis? Interest derived on an investment held by a major bank O Interest derived by an individual on a savings account O Services income of a sole trader Income received in advance with no obligation for refund