SECTION B

SHORT ANSWER QUESTIONS

The short answer questions are worth 50% in this paper.

QUESTION ONE

(a)The study of risk and return relationship continues to be an area of vital importance for financial planners. Explain risk and return relationship.

What is the purpose of a product disclosure statement (PDS)? Is there an argument for scrapping PDSs on the basis that most investors are financially illiterate and dont read or understand the documents?

When making recommendations (assume that you are speaking to a husband and wife with children) in the area of Life insurance, what factors does a financial planner have to consider? In general, how would you work out the required level of Life insurance to recommend to clients?

QUESTION TWO

JKL Ltd. purchased a car for $32,200 for use by an employee who frequently travels to oversee the companys business operation. The car was fitted with vehicle-to-vehicle communication system costing $2500 and other necessary upgrades costed the company $1,800.

For the year ended 31 March 2017, the car travelled 18,500 km. Receipts show that the contribution by employee to the provision of the vehicle is $950. The car was made available for 280 days during the year. The car is used 70% for business usage.

The cash expenses paid on the car during the year total $6,500.

(a) You are required to calculate the Taxable value of the fringe benefit using the Statutory Formula method.

(b) What will be the Taxable value of the fringe benefit using the Operating Cost method?

(c) Show the FBT payable using the method that provided the lower taxable value. (Note: Gross up amount 1.8868)

(d) What are the general conditions that need to be satisfied for an expense to be considered an allowable deduction for tax purposes?

QUESTION THREE

What are the key estate planning matters that a financial planner should identify when advising clients.

Jasmine receives a distribution from her fathers estate which includes a property. Jasmine sells the property four years later and wants to know if there are any CGT implications. Discuss.