Tutorial 5.doc

6Queensland University of TechnologyQUT Business SchoolSchool of Accountancy AYB 219 Taxation LawTutorial 5Semester 2, 2012 ALLOWABLE DEDUCTIONSSPECIFIC PROVISIONSWeek 5 Reading:1. 2012 CCH Australian Master Tax Guide: Chapter 16 Business and Employment Deductions, paragraphs 16-210 to 16-375, 16-430 to 16-460, 16-580 to 16-665, 16-700 to 16-730, 16-800 and 16-850 to 16-895.2. 2012 CCH Australian Master Tax Guide: Chapter 15 Gifts, paragraphs 15-500 to 15-600.3. 2012 CCH Australian Master Tax Guide: Chapter 17 Depreciating Assets.4. 2012 CCH Australian Master Tax Guide: Chapter 7 Small Business Concessions, paragraph 7-540.5. 2012 CCH Australian Master Tax Guide: Chapter 20 R&D, Films and Building Write-Off”, paragraphs 20-470 to 20-530.6. Taxation Ruling TR 2011/2: Effective Life of Depreciating Assets (available on the AYB 219 Blackboard site).Question 1:Angela Young purchased a rental property in Indooroopilly on 11 November 2011 for $495,000. She subsequently rented the house out from 24 November 2011 to 30 June 2012 to tenants for $420 per week. Angela provides you with the following information:(a) Angela took out a $450,000 loan with the Commonwealth Bank on 11 November 2011 for 15 years to purchase the house. Interest paid on the loan for the period 11 November 2011 to 30 June 2012 totalled $8,500.(b) Legal fees, bank establishment fees and stamp duty relating to the $450,000 Commonwealth Bank loan totalled $5,200. Angela paid these fees on 11 November 2011.(c) The roof was badly damaged at the time of purchase and was replaced on 17 November 2011 for $12,860.(d) One of the bedrooms in the house was repainted on 13 June 2012 for $2,100.(e) The timber floor in the outside laundry was replaced with a concrete floor on 3 April 2012. The floor was replaced due to water damage caused by a leaking pipe that was damaged in a storm on 27 March 2012. The cost of the concrete floor was $4,200.Required:Angela seeks advice as to what deductions (if any) she might be able to claim in respect of the above expenditure items for the 2012 income year. Please round all calculations to the nearest whole dollar. Assume that Angela wishes to maximise any deductions claimed. There are 233 days from 11 November 2011 to 30 June 2012.For any assets you consider depreciable, please use the Commissioners effective lives contained in Table B of the Taxation Ruling TR 2011/2 (reproduced in paragraph 43-100 of the 2012 CCH Australian Master Tax Guide).Question 2:Michael works with Phone World as a mobile phone salesperson. He owns a 1,800 cc non-rotary engine Nissan Pulsar, which he purchased on 14 January 2012 at cost of $47,000. Michael maintained a logbook for the relevant twelve-week period during the 2012 income year. For the 169 days from 14 January 2012 to 30 June 2012, Michael travelled a total of 14,000 kilometres of which 10,080 were work-related. The running costs of the vehicle for the period 14 January 2012 to 30 June 2012 are as follows: $ Registration 620 Insurance 819 Petrol and oil 4,560 RACQ 82 Car parking at clients premises242 Repairs and maintenance 670 Total:$ 6,993 Required:Assuming that Michael wants to maximise his car expenses deduction under Division 28 of the ITAA (1997), what amount can he claim for the 2012 income year in relation to his car?Question 3:Chloe works at an advertising agency and has decided to enrol part-time in a Bachelor of Advertising degree at QUT as she feels it will enhance her promotional prospects. During the 2012 income year, Chloe incurred the following study-related expenses:$ HECS-HELP fees 4,320 Student union fees 180 Photocopying35 Stationery125 Broadband internet connection at home. Chloe reliably estimates thatshe uses the internet 75% for study and 25% for personal purposes820 Purchase of text books (all individually less than $300)560 Bus fares from work to QUT to attend classes 175 Bus fares from QUT to home after class 160Total:$ 6,375 Required:(i)Would Chloe be entitled to a deduction for the above study-related expenses? If so, what amount would she be able to claim as a deduction in her 2012 income tax return?(ii)Would your answer be different if Chloe failed to pass any of the subjects she enrolled in at QUT during the 2012 income year?Question 4:Paul Smart established an antique shop in Caxton Street in Paddington during the 2011 income year. He operates as a sole trader. Business was very slow and the records show the following income and expenses for the year ended 30 June 2011:$ Gross sales 98,000 Net exempt income 2,200 Business expenses (excluding superannuation contributions)112,000 Superannuation contributions by Paul5,000In the 2012 income year, business improved for Paul and the records show the following income and expenses:$ Gross sales 172,500 Net exempt income 6,000 Business expenses (excluding superannuation contributions and donations) 148,000 Donations to endorsed DGRs2,100 Superannuation contributions by Paul5,000Required:Calculate Pauls taxable income for the years ended 30 June 2011 and 30 June 2012.Question 5:Consider each of the following independent transactions in the case of Christine, a non-business taxpayer who uses the assets below exclusively for income-producing purposes:(a)a photocopying machine purchased on 10 November 2011 at a cost of $1,680. (b) a motor vehicle purchased on 1 April 2012 at a cost of $88,000.(c) a calculator purchased on 2 May 2012 at a cost of $178.(d) Adobe Acrobat Profession