HI6028 Taxation Theory, Practice, And Law Tutorial Questions Homework Answer

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Question :

Assessment Task – Tutorial Questions Assignment

Unit Code: HI6028

Unit Name: Taxation Theory, Practice, and Law

Assignment: Tutorial Questions Assignment (Individual)


This assignment is designed to assess your level of knowledge of the key topics covered in this unit

Unit Learning Outcomes Assessed: 

  • Demonstrate an understanding of the Australian income tax system, the concepts of income and deductions, CGT, FBT, GST general anti-avoidance provisions and income tax administration.
  • Identify and critically analyse taxation issues.
  • Interpret the relevant taxation legislations and case law.
  • Apply taxation principles to real life problems.


Each week students were provided with three tutorial questions of varying degrees of difficulty.  The tutorial questions are available in the Tutorial Folder, for each week, on Blackboard. The Interactive Tutorials are designed to assist students with the process, skills and knowledge to answer the provided tutorial questions.  Your task is to answer a selection of tutorial questions from topics 7 to 12 inclusive and submit these answers in a single document.

The questions to be answered are:

Question 1          (7 marks)

   (Note this question is based on the Topic 7 Lecture: Fringe Benefits Tax)

GoodMates Pty Ltd loaned one of its staff, Munir, the amount of $5,000 (interest free) for one month. Due to personal life issues and financial hardship that Munir was suffering, it turned out that demanding the loan will endanger his health and will cause him not to be able to provide basic needs for his family. At the discretion of the board of directors, this loan was waived on compassionate reasons and Munir was informed. 

Is the company required to pay any fringe benefit tax? Kindly use the template below and discuss in detail. 


Rules and or cases:



(7 marks. Word limit: Minimum of 120 words. Maximum of 150 words)

Question 2 (7 marks)

(Note this question is from the Topic 8 Lecture: Capital Gains Tax)

Ajay Ltd purchased a depreciating asset with the value of $5,000 on 31 March 1989. On the same day, the company paid $50 to transfer the ownership. One year after, on 31 March 1990, this company spent an additional $1,500 for the asset functionality improvement. Later, on 31 March 1992, the company moved to a new place, and paid $200 to transfer this asset to the new location of business. Finally, the asset was sold in 2020 for $12,000 (Ignore GST effect in all calculations of this question).

Calculate cost base, and capital gain (Loss), and capital gain tax, if any, considering Ajay decided to index (if applicable) and the relevant corporate tax rate is 30%. 

(You can use your presentation slides for indexation, if required, and round to two decimals only, only use tables and no narration format is allowed, otherwise, the answer would not be marked).

(7 marks. Word limit: minimum 120 to maximum 150 words)

Question 3 (11 marks)

(Note this question is from the Topic 9 Lecture: Goods & Services Tax)

A large company in Australia, called Alex Ltd, supplied $22,000 (GST Inclusive) worth of products to one of its local customers, Beta Pty Ltd, on 1 August 2019. Beta paid this bill in two equal instalments of $11,000 on 10 May 2020 and the second instalment on 15 September 2020. 

Discuss how each entity should account for GST. Alex Ltd is a GST-registered entity with ATO and accounts for GST on accrual basis, files BAS monthly and remains registered, while Beta is not registered for GST at all in both years. (No law sections or cases are required to be included in your answer, calculation of GST amount if any is required). 

(11 marks. Word limit. Minimum of 120 words. Maximum of 150 words)

Question 4 (11 marks)      

(Note this question is from the Topic 10 Lecture: Taxation of Companies)

Calculate the tax liability for Andre, a single tax resident, receiving $1,000 dividend (80% franked) from a large company, called Margin Pty Ltd, which uses imputation tax system and 30% corporate tax rate. Other income and expenses of Andre are as below:

  • Employment income $ 63,013 (excluding 16,467 PAYG withholding)
  • Allowable Deduction of $500
  • Consider Medicare Levy, Medicare Levy Surcharge (if applicable), and relevant offsets.

(No law sections or cases are required to be included in your answer. Please use a table to answer this question, no decimals are required. Tax year 2019/2020).

(11 marks. Word limit: Minimum of 120 words. Maximum of 150 words)

Question 5         (7 marks)

(Note this question is from the Topic 11 Lecture: Tax Avoidance, General Anti-Avoidance Provisions, Income Tax Returns, Assessments, Rulings, etc)

Briefly explain what factors significantly affect tax avoidance. (At least two journal papers from google scholar, from 2019 onwards, must be used with Harvard intext citation and referencing style. Please note that you must include the link of your chosen journal papers when referencing them. No direct copy and paste are allowed and you must answer in your own words. You can choose the country or context, meaning the research should not necessarily be done in Australia or for Australia).

(7 marks. Word limit: minimum 120 to maximum 150 words)

Question 6         (7 marks)    

(Note this question is from the Topic 12 Lecture: Trading Stock, Partnerships, and Trust)

Ryan, Maria and Mike are partners in a law firm. The partnership earned $1,200,000 net profit during the financial year ending 30 June 2020 and did not pay any salary to any of the partners during the year. On 1 July 2019, Maria loaned $100,000 to the partnership and received $10,000 interest from the partnership over the 2019/2020 fiscal year, which is already considered in calculating partnership earning for the year.  Meanwhile, Maria also earned $200 from gambling. Allowable deductions for Maria during the year consist of $300 paid for allowable professional subscriptions. Calculate net tax liability for Maria. 

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Answer :

Q 1: Case law related to FBT:

Facts of case law:

The facts that are provided in the question are as follows:

  • The interest-free loan provided by GoodMates Pty Ltd to Munir of $ 5000.
  • The loan is waived by the company due to personal life issues and financial hardship.
  • There is advice needed that the company is liable for FBT on the loan amount waived by the company.
  • Also FBT liabilities on the interest amount as per standard rates prescribed by the tax authorities.

Applicable taxation law:

As per the taxation law of FBT, there are fringe benefits for the employee in case of benefits provided to the employee during the employment such as car benefits, accommodation, interest-free loan, waiver of loan, etc. and the employer is liable to pay tax on the fringe benefits provided to the employee (Potgieter, 2019).

However, there are certain exceptions in the fringe benefits regarding waiver of loan liabilities for the employee. The waiver of a loan is not considered as fringe benefits if the following conditions are satisfied:

  • The employer has taken sufficient and appropriate actions for the recovery of the loan amount from the employee.
  • The employee has not financial assets for the repayment of the loan amount.
  • The waivers are done after proper negotiation and consultation considering the financial and health conditions of the employee.
  • The employee has become bankrupt and unable to repay the debt.

Impact of taxation law in a given case:

As discussed in the taxation law, there is a question of whether the waiver of debt is considered as fringe benefits or not. However, as per taxation law, the waiver of loan given to Munir has satisfied the following conditions:

  • The waiver of a loan is given after discussion with the board of directors.
  • The waiver takes place considering the personal life issues and financial hardship of Munir.
  • It is also found that the demand for a loan will endanger the health of Munir and also cause him not to fulfill the basic needs of his family.

Therefore the waiver of a loan is not considered as fringe benefits as it satisfied the condition of exception of fringe benefits. However, the interest on the loan is considered as fringe benefits and the employer is liable for FBT on the interest amount.

Tax liabilities
Waiver of the loan amount
No FBT liability as it is not considered as fringe benefits
Interest on the loan amount
Considered as fringe benefits and FBT is applicable for an interest amount of one month.
(5000 * 5.37% / 12)
= $ 22.4

Q 2: Valuation of CGT:

Total amount 
Calculation of cost base 

The purchase value of an asset (5000 * 1.33)
Cost of transfer ownership (50 * 1.33)
Improvement cost (1500 * 1.22)
Total cost base as per indexation
Consideration received against assets 
Less: Indexed cost base
Capital gain on sale of an asset
CGT (3453.5 * 30%)

Working note:

  • The assets which are hold by the owner for more than 12 months are liable for index or discount benefits as the discount benefits are not available to companies. Therefore index method is applied (Minas& Freudenberg, 2020, March).
  • Using the index method, in this case, the assets that are purchased before 30th September 1999. The index based on CPI is as follows:

CPI as of 30th September 1999 = 123.4

CPI as of 31st March 1989= 92.9

CPI as of 31st March 1990= 100.9

Index factor for purchase= 123.4 / 92.9 = 1.33

Index factor for improvement = 123.4 / 100.9 = 1.22

  • The expenses incurred for shifting of asset is not the part of asset's cost base as it does not increase the efficiency of the asset.

Q 3: Calculation of GST:

Value in $
Sales amount including GST
A standard rate of GST applicable
GST amount included in the sales (22000 * 10 / 110)

Working notes:

  • As per taxation law, there is the standard rate of GST applicable to the supply of services or goods (Walpole, 2020).
  • The date of payment by Beta Private Limited does not affect the occurrence of GST liability as there is accounting based on the accrual method.
  • There is GST liability on the seller and it is not affected by the registration status of the customer. However, the purchaser cannot take credit for GST if the purchase is unregistered.

Q 4: Tax liability for Andre:


Value in $
Gross income from employment (63013 + 16467)

Dividend income including 80% franked dividend

Assessable income before allowable deduction

Less: Deductions

Taxable income of Andre

Basic tax liability (3572 + 32.5% * 42980)

Medicare Levy (Assessable income * 2%)
(80480 * 2%)

Assessable income is less than 90000 therefore no Medicare levy surcharge is applicable

Gross tax liability before tax credits

Less: Credit of PAYG

Less: Credit of franked dividend (1000 * 80% * 30%)

Tax liability payable by Andre


(Joseph, & Mallon, 2019)

Q 5: Rules of tax avoidance:
The process through which the taxpayer can avoid tax liability due to loops in the tax law and hide information is known as tax avoidance. The tax avoidance increase to avoid tax liabilities and make arrangement to exploit the taxation law (WANG, 2020). Many factors significantly affect tax avoidance which is as follows:
  • By tax avoidance, the taxpayer can decrease the tax liabilities, and to reduce these cases, the government has introduced an anti-tax avoidance process and benefits by legal compliance.
  • The tax authorities motivate the taxpayer for the tax planning in place of avoidance of tax.
  • The tax authorities also impose penalties and interest liabilities for tax avoidance cases.
  • The knowledge and education of tax planning increase by providing advice and services of taxation consultancy.
Q 6: Taxable income of Maria:
Calculation of taxable income of Maria:
Value in $
The profit share of a partnership firm (1.2 million / 3)
Interest income on loan provided to a partnership firm

Less: Deductions is allowable to the subscription of professional
Taxable income 
Basic income tax liability (54097 + 229700 * 45%)

(Trad, & Freudenberg, 2018)

The Australian Taxation law does not impose tax liability on the income earned from hobbies and gambling is considered under hobbies. Therefore there is no tax liability on income earned by Maria from Gambling (Armstrong, & Carroll, 2017).