Question 6

You must answer both A and B

Ajay borrowed $10,000 from his employer, Creative College, on 4 September 2019 as his home was damaged by a hailstorm. The loan was provided at no interest. On 20 January 2020, the college informed Ajay that he was only required to repay half the loan as he is a valued employee.

Required A (5+5=10 marks)

Advise Ajay and the college:

How the benefits would be characterised when determining Ajays assessable income for the 2019/2020 financial year. (5 marks)

How the taxable value of the two fringe benefits arising from the transaction is determined. You should refer to relevant sections of legislation and either explain OR show through calculations how the taxable values are determined.

Please note:

The statutory/benchmark interest rate for FBT year ending 31 March 2020 is 5.37%

You do not need to calculate FBT payable

Click or tap here to enter text.

AND

Sian Suds (a resident of Australia) and Luke Suds (a non-resident) own a handcrafted soap shop in partnership, and trade as Suds Soaps. Gross income for the current income year is $40,000. $8,000 of this amount was made on Suds Soaps sales outside Australia. No expenses are incurred for these sales. Business expenses of $25,000 include a salary of $5,000 paid to Sian. All expenses relate to Australian source income.

Required B (10 marks)

Assume that the assets of Suds Soaps are sold. How are capital gains or losses relating to partnership assets dealt with?

In your response give reasons and refer to sections of legislation and cases, where relevant.