Taxation

Income Classification

Briefly discuss the income tax implications of the following, stating which sections of the ITAA 1997 or ITAA 1936, if any, are most relevant.

1.      A $10,000 bonus paid by the Australian Cricket Control Board to the captain of the Australian cricket team for outstanding leadership during a successful tour of England.

2.      A boat valued at $35,000 given to an amateur footballer to turn professional.

3.      Profit of $25,000 made by a trucking company on the disposal of one of the 30 trucks it has leased to carry on its business.

4.      An exchange gain of $500,000 made by a manufacturer in respect of money borrowed in 1997 and used to finance construction of a new building.

5.      Gift and payments made by a football club and its supporters to a star professional player, largely in their delighted response to his being selected to play for Australia. The club gave him a car valued at $25,000; supporters, through a collection at one game, gave him $2,425.

Week 5 Capital Gains Tax

Because of his wife’s ill-health, Brain sold his gift shop and family home in Victoria and moved to WA on 20 June this year. Brain had acquired the vacant premises 10 years ago for $750,000 and established the business on that date. He sold the business on 20 May this year for a net consideration of $1,880,000. This was made up as follows:

Items

AUD $

1

Goodwill

440,000

2

Trading Stock

60,000

3

Fittings

120,000

4

Shop and Land

1,360,000

5

Less debt taken over secured over stock and fittings

(100,000)

In addition, Brain received a further $20,000 for signing a contract not to open another business within a 10 Km radius for the next five years.

The turnover of the shop for the previous financial year was $540,000.

Brain’s home is valued at $1.8m. He also has a 45% interest in a property development company which has assets of $5.4m. His wife also has a 5% interest in that company. The turnover of the property development company last year was $1.2m.

Advise Brain of the tax consequences arising from the sale.

Fringe benefit tax

The taxable value of fringe benefits provided by XYZ Ltd to its employees for the current FBT year is:

·         Cars – $32,000; input tax credits are available for GST purposes

·         Loans – $6000; no GST has been paid

·         External expense payments – $4,000 inclusive of GST. An input tax credit is available.

Calculate FBT payable for the year.

Capital Allowance

Explain tax consequences for following term:

·         Pooling of Assets

·         Low – value pool assets

·         Software development pool

·         Small business concessions