Australian Taxation Law Assignment Brief

Schedule A

PART A

Issue 1

• On 1 August 2014 Andrew purchased a warehouse located in Melbourne from where he operates his clothing manufacturing business management. The warehouse was built in 2008. He paid $1,000,000 for the land and the construction cost of the building was $800,000. He commenced business at this location on 1 September 2014.
• On 2 September 2014 Andrew spent $30,000 repairing the building’s rusted tin roof.

Advise Andrew of the tax consequences of the above transactions.

Issue 2

On 1 October 2014 Andrew spent $15,000 transferring trading stock from his Sydney premises to his Melbourne premises
Advise Andrew of the tax consequences of the above transactions.

Issue 3

• On 15 December 2014 Andrew purchased a new knitting machine for his clothing business. The invoice from the supplier showed the following:
• Knitting machine                   $150,000
• Delivery fee                           $1,000
• Installation and testing fee    $1,000
• Annual maintenance fee       $2,000

Total                $154,000

• The new knitting machine has an effective life of 5 years and Andrew wants to claim the maximum amount.
• On 1 June 2015 Andrew sold an old computer for $3,000 that he used in his business activities. The adjusted value at the time of sale was $1,000. The cost price of the computer was $6,000. Advise Andrew of the tax consequences of the sale of the computer.
  Advise Andrew of the tax consequences of the above three transactions.

Issue 4

• On 1 October 2014 Andrew borrowed $100,000 from the CBA Bank to finance the purchase of his warehouse in Melbourne. He was charged interest at the rate of 10% per annum.
• The period of the loan is 8 years and the cost of establishing the loan was $4,000.

Advise Andrew of the tax consequences of the loan transaction.

Issue 5

• On 3 July 2014 Andrew paid a $30,000 non-concessional contribution to the Clothing Manufacturers Complying Superannuation fund.
• On 17 December 2014 Andrew paid a $3,000 spouse superannuation contribution on behalf of his spouse to a complying superannuation fund. During the financial year his spouse’s assessable income was $20,000.
• On 6 June 2015 Andrew paid a $40,000 concessional contribution to the Clothing Manufacturers Complying Superannuation fund

Advise Andrew of the tax consequences of the above three transactions.

Issue 6

• On 15 July 2014 Andrew paid $1,000 subscription to the Clothing Golf Club association to entertain his business clients at ‘business lunches’ where various business issues were discussed and negotiated.
• On 20 November 2014 Andrew incurred a $300 parking fine during business hours while delivering goods to one of his clients.
• On 20 December 2014 Andrew incurred $6,000 entertainment expenses to help promote and advertise his own brand name ‘Smart Designs’ at a major clothing exhibition in Melbourne which was open to the general public.
• On 3 May 2015 Andrew was informed that one of his clients who owed him $4,000 was declared bankrupt and will receive no payment. On 30 June 2015 he made a $4,000 accounting provision for bad debts in his accounts and notified his accountant that the debt was bad.
• On 18 May 2015 Andrew incurred $150 meal expenses while travelling overnight on business.

Advise Andrew what amounts (if any) he can claim as a tax deduction in respect of the above five transactions.

Issue 7

• On 17 December 2015 Andrew sold an extremely rare 1920 Rolls Royce to the Petrol Head Vintage Car Museum for $87,000. He purchased the car on 9 August 2011 for $17,000 and spent $21,000 to restore it back to its original condition. He also paid $1,500 in advertising costs to sell it.
• On 19 June 2015 Andrew sold 1000 NAB shares for $35,000. Andrew purchased the shares on 17 May 2010 at a cost of $10,000
• At the end of the 2013-14 financial year Andrew had a $10,000 prior year capital loss on sale of a rare manuscript

Advise Andrew of the CGT consequences of the above transactions.

Issue 8

On 1 July 2014 Andrew purchased a new Ford. The purchase price was $75,000. During the financial year he travelled 24,000 km, of which 12,000 were for private use. The rate of depreciation is 22.5 per cent. Calculate the amount of depreciation Andrew can claim for the financial year ended 30 June 2015.

Issue 9

For the past five years Andrew and his wife resided in a property that is owned by Andrew’s family company. Andrew used 50% of the premises for income producing purposes. The company sold the property on 1 August 2014 for $475,000. The company purchased the property on 1 August 2009 at a cost of $275,000.
Advise Andrew of the CGT consequences of the above property transaction.

Issue 10

Due to his heavy workload Andrew maintains a home office where he finds it convenient to complete some business reports at home. During the financial year he incurred the following expenses

• $400 ‘running expenses’ such as cleaning costs, depreciation and repairs of his computer and office furniture, heating/cooling, lighting and telephone calls.
• $3,000 ‘occupancy expenses’ such as mortgage interest, council rates, house insurance, rent and repairs

Advise Andrew what amounts (if any) he can claim as a tax deduction in respect of his home office.

                                                                        

                                                                                                        

PART B (FOOTBALL ACTIVITIES)

Issue 11

During the football season Andrew incurred the following expenses in respect of playing rugby for the Melbourne Storm Rugby Club.

• Andrew paid $5,000 management fees to a professional management agent to negotiate contracts, sponsorship, media contracts, endorsements, advertising and promotional work.
• Being a little underweight Andrew was instructed by his coach to consume specified quantities of steak potatoes bread beer and sustagen to help keep up his weight during the football season. He spent $700 on additional food to meet his coach’s instructions.
• During a home-and-away football match the field referee reported Andrew for an illegal tackle against an opposing player, and as a consequence the NRL tribunal fined him $1,500.
• As Andrew could earn five times more money playing Twenty20 cricket in India, he spent $10,000 on private coaching lessons to improve his skills as a cricketer, in the hope of getting a contract to play professional cricket in India, when his three year contract to play ruby for the Melbourne Storm Rugby Club ends.

Advise Andrew what tax deductions (if any) he can claim and the relevant authority to support your answers.