Q1: Based on the definition of trading stock for income tax purposes, which of the following items I least likely to be trading stock?

a) Land purchased by food retailers for the purpose of building a new retail outlet in which to run their business.

b) Livestock purchased by farmers for sale in the ordinary course of their business.

c) Shares purchased by share traders for sale in the ordinary course of their business.

d) Partially finished goods held by manufacturers for the purpose of sale when the goods are completed.

e) Raw materials held by manufacturers for the purpose of sale when the raw materials are converted into finished goods

Q2: Jack owns a construction business and on 1 December 2019 purchased an excavator for $58,000 which has an effective life of 10 years.

To help fund the purchase of the excavator Jack traded his old one for $11,000. The old excavator had cost Jack $46,000 originally and had an adjustable value at the time of trade-in of $9,200.

Assuming Jack is not using the Small Business Entity (SBE) depreciation method of depreciation, what would be the balancing adjustment on disposal of the old excavator?

a) $9,200 assessable

b) $1,800 deductible

c) $11,000 assessable

d) $1,800 assessable

e) $9,200 deductible

Q3: Which of the following is most likely to be taxable food for GST purposes?

a) Milk sold in a supermarket.

b) Tea bags sold in a supermarket.

c) Natural spring water sold in a supermarket.

d) Salted peanuts sold in a supermarket.

e) Fruit juices containing at least 95% fruit juice sold in a supermarket.

Q4: In relation to business income, which of the following statements is most correct?

a) The proceeds from the sale of land purchased in 1986 to carry on a farming business will be ordinary income.

b) The value of a shop fit-out received by a lessee as a lease incentive will always be ordinary income.

c) If a business earns an amount from an unusual or one-off transaction it will not be assessable income.

d) Australian courts tend to take a narrow view of the scope of business.

e) The proceeds from the mere realisation of an investment or an income earning property are not always ordinary income.