Please cite the legislation and case law from the Australian Tax Law in the answers where relevant.
Below are the questions:
1. Jack is an Australian resident who receives interest from a deposit in a Singapore bank:
a.Explain if the interest he receives is assessable in Australia?
b.If the interest is already assessable in Singapore, what can Jack do?
2. Ryan, who is employed by a bank, is a single resident taxpayer with private health insurance. He earns a salary of $120,000 a year, and he owns a rental property which he receives rent income of $15,000 per year and $4,000 interest. During the year, Ryan spent $4,000 dining in fine restaurants, $4,000 in self education expenses, $2,000 to find a someone to walk his pet dog, $15,000 of investment property repairs and $3,000 of car expenses.
a.Calculate Ryans taxable income.
b.Calculate the basic income tax liability on the taxable income.
3.Since 2014, Michael has been travelling around the world. He is currently in Indonesia and has bought a house in Bali. He has also met an Indonesian girl, Sari, and intends to marry her and settle in Bali. In 2017, Michael has been travelling back and forth between Bali and Australia, to move his furniture and personal belongings to Bali. He intends to leave his home in Australia empty or give it to his sister Margaret as a gift. Explain the following:
a.Is Michael a resident of Australia?
4. Mimosa Ltd finished tax year 2015-16 with trading stock at cost of $15 million. During 2016-17 sales totalled $150 million and purchases totalled $60 million. Closing stock at cost at the end of the period was $10 million, its replacement value was $20 million and market selling value $7 million. Calculate the companys assessable income alternatives for 2016-17.
5.Andy works as a surgeon at the local hospital. In year 2010, he was diagnosed with Parkinsons disease. This causes his hands to tremble and shake, which prevents Andy from performing any more surgery.
In case of a disability and Andy cannot work or perform any surgeries, Andy will receive a monthly benefit of $5,000 for the period which he was partially or totally disabled. In 2015, Andy ceased work totally and he made a claim on his insurance policy of $300,000 for the period between 2010 to 2015 and he was paid the $300,000.
Explain the following:
a. What was character of the of the claim?
b. Is the claim assessable? Explain why/why not. (2 marks)
c. Would your answer be different if Andy had an accident and the $300,000 payment was solely for Andys loss of use of his hands?
6. In 2010, Sorano Ltd, a company dealing with the production of industrial steel, bought a parcel of land to use half the land to build a plant, and the other half of the land for storage facility. The cost of the land was $2 million.
However, due to the booming economy and the scarcity of good industrial land, before Sorano start construction of its plant, Evita Ltd offered to buy the land from Sorano Ltd for $3 million. Sorano Ltd rejected the offer because they felt they would not be able to find another suitable land to build its plant and storage facility.
It later became clear that the costs of the proposed work made the proposition uneconomic at prevailing interest rates and the property sat idle for 5 years. In 2016, Evita Ltd made another offer to Sorano Ltd of $5 million as Evita is rapidly expanding and needs the land.
However, Sorano Ltd was also negotiating with Bert Ltd with a view to joint development. Bert Ltd agree to buy the land from Sorano Ltd for $2.5 million, to construct the facilities needed by Sorano Ltd and to lease them to the Sorano Ltd on a long lease.
a. If Sorano Ltd sold the land to Evita Ltd in 2010, is the $1 million profit assessable income? (2 marks)
b. If Sorano Ltd sold the land to Evita Ltd in 2015, is the $3 million profit assessable income? (2 marks)
c. If Sorano Ltd sold the land to Bert Ltd in 2015, Is the $0.5 million profit assessable income? (2 marks)
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