Question 21

1. In which Income Tax Assessment Act would you find s 25-35 regarding the deductibility of bad debts?

a.

Income Tax Assessment Act 1997

b.

Fringe Benefits Tax Assessment Act 1986

c.

Income Tax Assessment Act 1936

d.

A New Tax System (Goods and Services Tax) Act 1999

1 points

Question 22

1. You operate a day spa business with one location in Perth.Your landlord is refusing to renew your lease and you incur $40,000 in legal fees to fight this.The tax treatment of these legal fees is?

a.

Not deductible - legal fees are never deductible but are always capital

b.

Treated as a black-hole cost.

c.

Treated as part of the cost base of your business.

d.

Deductible - legal fees are always deductible

1 points

Question 23

1. Donny purchased a new rental property on 3 April 2020. The property was rented out immediately after purchase and throughout the income year. Up to 30 June 2020 he paid the following amounts in relation to the property:

- Purchase price $375,000

- Stamp duty on purchase $2,800

- Legal fees to transfer title to him $1,100

- Interest paid on loan to purchase the property $7,000

- Plumbing Repairs $700

- Extension to main bedroom $19,000

- Rates paid to the local council $800

What will be Donny's cost base of the rental property for CGT purposes?

a.

$406,400

b.

$396,800

c.

$405,700

d.

$397,900

1 points

Question 24

1. Which of the following statements about the case of Thomas v FCT (1972) 3 ATR 165 is most correct?

a.

The taxpayer was held to be carrying on a business of primary production because he planted more than one type of tree.

b.

The taxpayer was held to be carrying on a business of primary production because he had planted more trees than what would be expected for domestic use or for a hobby.

c.

The taxpayer was not held to be carrying on a business of primary production because there was little prospect of a reasonable profit in future years.

d.

The taxpayer was not held to be carrying on a business because he still worked full-time as a barrister.

1 points

Question 25

1. An employer (DEF Ltd) owns and uses a car in its business operations. The company allows its managing director to travel in the car for both business and private use. The managing director has his licence suspended for 3 months as a result of a drink driving offence. The company provides the services of a chauffeur to the managing director and the chauffer drives the same car at the managing director's direction for both business and private purposes during this time. The car travels 6,000kms during this period and the company is invoiced for $10,000 for the chauffeur's services. What category of fringe benefit does the taxable value of the $10,000 fall into?

a.

Car fringe benefit

b.

There is not fringe benefit in this case

c.

Expense payment fringe benefit

d.

Residual fringe benefit

1 points

Question 26

1. Fred is a mobile dog washer. He goes to clients' houses and grooms their pets there. He has a medium-sized BMW (2000cc) which he uses to travel to his clients' premises. Fred bought the car on 1 January 2016 for $85,000. Fred estimates that he used the car for business purposes to travel a total of 12,000 kilometres for the year ended 30 June 2020. The car travelled a total of 20,000 kilometres for the year. He incurred the following expenses in relation to the car:

Insurance $340

Registration: $660

Petrol: $2,300

Repairs: $1,200

Depreciation: $8,500 (assume the car-limit has been correctly applied).

How much can Frank claim as a deduction for his car expenses if he used the "logbook" method?

a.

$5,200

b.

$13,000

c.

Nil, Fred is not eligible to use the log book method.

d.

$7,800

1 points

Question 27

1. Which of the following items are subject to decline in value?

a.

Trading Stock

b.

Building an extension on your rental property

c.

Landscaping on a rental property

d.

Replacing a car motor

1 points

Question 28

1. In April 2020, Harvey Hemp sold all his shares in Lion light Pty Ltd for $8,000 as the share market was quickly losing value. He had paid $13,000 for them in January 2000. He had paid brokerage fees of 5% of both the purchase and sale values. What amount must Harvey Hemp include in his assessable income for the year?

a.

$0

b.

$3,000

c.

$3,550

d.

$3,550 less brokerage fees

1 points

Question 29

1. In relation to the case of FCT v Studdert (1991) 22 ATR 762, which of the following statements is most correct?

a.

The court held that there was not a sufficient connection to the current income earning activity as a flight engineer and disallowed the deduction under s 8-1 for the flying lessons.

b.

Expenses that might result in a new income earning activity will always be capital in nature and non-deductible.

c.

The flying lessons were held to be deductible because he undertook the flying lessons with his current employer.

d.

The court held that there was a sufficient connection to the current income earning activity as a flight engineer to allow the deduction under s 8-1 for the flying lessons.

1 points

Question 30

1. Steve exports high quality custom car parts to other countries and is registered for GST. In August of the current year he exported some parts to a New Zealand mechanical business and the parts were returned to him because they did not fit. Steve undertakes the repairs and uses a number of smaller components in the process. The repaired car parts were returned to the customer in New Zealand in December of the current year. Steve charged the customer for the repair including the parts used. In relation to GST which of the following statements is most correct?

a.

Steve should not charge GST on any part of the transaction.

b.

Steve should charge GST on both the initial sale and the repairs.

c.

Steve should charge GST on the initial sale but not on the repairs.

d.

Steve will not be entitled to input tax credits for any costs associated with the initial sale or the repair of the parts.

1 points