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Fresh Pty Ltd ( Fresh ) , a company owned by the Jones family, amongst other investments, owns and operates a profitable supermarket in Newtown.
Fresh Pty LtdFresha company owned by the Jones family, amongst other investments, owns and operates a profitable supermarket in Newtown. Freshs supermarket is independent from, and is not associated with, the major supermarkets such as Coles and Woolworths. Fresh also has a small number of investments. Fresh is an Australian resident company for tax purposes.
aFresh owns commercial premises in a busy retailshopping mall. The premises are
currently leased out to a company that operates a computer store. The tenant has
complained for a while about how hot it becomes in the summer period in the store, and
that this has adversely affected sales in summer. The tenant has regularly requested
Fresh to install airconditioning. Fresh eventually agrees and onNovembera
new single room airconditioning unit is installed at the premises at a cost of $
bFresh has ainterest in a partnership with an unrelated party, PartnerCo. The
partnership carries on the business of providing travel consulting services. Due to the
recent rise in the incidence of natural disasters at popular travel destinations, there has
been a decline in demand for travel consulting services. The partnership made a
partnership loss of $for theincome year. The Partnership Agreement
provides that Fresh and PartnerCo are each entitled toof any profits. Fresh also
received itsof the profits for the previous income yearonDecember
The amount received was $
cDuring theincome year, Fresh incurs advertising expenditure of $in
placing advertisements on digital screens displayed in publicthis is consistent with the
advertising expenditure in previous years
dFresh is also the trustee of a family discretionary trust which carries on a
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business of providing nutrition advice to various clients. In theincome year, the
trust estate earned income calculated under trust law principles of $The net
income of the trust estate, calculated under sITAAwas $OnJune
the directors of Fresh resolved to distribute the trust law income as follows:
$to Bob, who has been a resident throughout theincome year
and who is not under a legal disability.
$to Buck who has been a foreign resident throughout theincome
year and who is not under a legal disability
$to Brian who has been a resident throughout theincome year
and is agedyearsthe directors have resolved to hold the remaining $
in the trust, until Brian turnsyears of age
eFresh ownsof the shares in a mediumsizedAustralian residentcompany that
refurbishes old car engines and sells them at a profit. Fresh received two dividends from
the company during theincome year. The first dividend was $and it was
frankedThe second dividend was $and it was franked
fDuring theincome year, Fresh also made three frankable distributions. The first distribution$millionis franked atthe second distribution$millionisAssume a corporate tax rate for imputation purposes of
question:
Freshs accountant, Jerry, is in the process of preparing the companys income tax return for theincome year. Advise Jerry regarding the income tax implications to Fresh, arising from the above facts, in relation to theyear of income. In your answer, make sure you refer to any relevant cases, legislative provisions, tax rulings and principles of tax law.
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