Question 1

As a resident, Zayn Papas signed a contract to sell his investment property in the Perry Beach in September 2020. On March 2021, Zayn received $855,000 from the buyer when the sale was settled, also he acquired legal fees of $3,500 (inclusive of GST) and a real estate agents commission of $7,500 (inclusive of GST) in relation to the sale.

Zayn bought the holiday home in April 1997 for $95,900 and paid $1,800 in stamp duty on the transfer and $1,200 in legal fees. In 2006, Zayn hired a builder to build a garage on the property for $19,000. Calculate Zayns net capital gain for the current year. Assume he also has a net capital loss from 2019 of $15,000 arising from the sale of shares.

Required:

Would your answer be different if the loss arose from the sale of an antique container?

Question 2

A resident company that has a corporate tax rate for imputation purposes of 30% pays a $15,500 dividend with $8,500 of franking credits allocated to it to each of its five shareholders.

Explain how its shareholders are taxed assuming their relevant details are as follows:

• Berry is a resident who has salary income of $35000.
• Jenny is a resident who has no other income.
• F Co is a resident private company that pays tax at the rate of 25.5%
• Luxury Co is trustee of a complying superannuation fund that has no other income
• K Co is a company that is resident in the United States and has no other income.

Question 3

Peg is a permanent resident of Australia. She was born in France and keeps her French citizenship. Peg spends most of the year working off the coast of Singapore on an oil rig for a European company. She was recruited for this job in Australia and signed a contract with the company in Melbourne. For the last five years, Pegs husband has lived in Australia with their three children. They purchased a home in Australia three years ago. Peg and his husband have a joint account with Australian-New Zealand Bank. Pegs salary is paid directly into this account. All the familys other investments, including a share portfolio that generates dividend income, remain in France. Peg gets one month off from work every second month and, on these occasions, she meets with her family either in Australia or on holidays in Europe (usually in France, where her parents reside). Discuss whether Peg is a resident of Australia and how her salary and investment income would be taxed.

Question 4

Ziggy, Jughead, Alison and Bib have been carrying on a property business in partnership from 2003.

Alison has decided to leave the partnership at the end of the 2021.

The partners agree that to make things easier, they will prepare the partnerships tax return on basis that Alison resigned from the partnership at the end of the previous financial year (few months earlier).

Required:

What are the consequences of this agreement? Assume also that Alison will receive a payment of $3.5m in respect of her interest in the work in progress of the partnership.

How is such payment treated?

Question 5 (7 + 7 = 14 Marks)

1. Is timing important in taxation? When is trading stock on hand and why is this concept important? Illustrate your answer.
2. L opened a retail business in the 2020/2021 income year. During the income year he purchased 25,000 inventories from suppliers for $755,000 and sold 13,000 of them for $550,000. Calculate his taxable income for the 2020/2021 income year.