MPC- Topic 2 Flashcards
Question 1
Kerry is a resident individual who received the following amounts during the year:
Gross salary
$50,000
Employer car reimbursements (at 44 cents/km)
$2,000
Income protection insurance claims while sick and unable to work
$10,000
Fringe benefits received from her employer
$20,000
How much is included in her assessable income?
$72,000
$62,000
$70,000
$82,000
Question 1
Kerry is a resident individual who received the following amounts during the year:
Gross salary
$50,000
Employer car reimbursements (at 44 cents/km)
$2,000
Income protection insurance claims while sick and unable to work
$10,000
Fringe benefits received from her employer
$20,000
How much is included in her assessable income?
- $72,000
- $62,000
- $70,000
- $82,000
Answers:
$72,000
$62,000
$70,000
$82,000
Response Feedback:
Assessable income includes ordinary income and statutory income, however it excludeds exempt income, s.6-1.
Gross salary is ordinary income, s.6-5
Reimbursed car expenses is stautory income, s.15-70
Income protection insurance claims are either ordinary income or otherwise statutory income under s.15-30
Fringe benefits in respect of employment are statutory income under s.15-2, however they are made non-assessable under s.23L(1) ITAA36.
Question 2
Paul is a resident individual who received the following amounts this year:
Maintenance payments received from ex-spouse
$10,000
Wages from part-time services in the army reserve
$3,000
Wages from part-time taxi driving
$20,000
Tips from taxi customers
$1,000
What is his assessable income?
$21,000
$34,000
$20,000
$24,000
Question 2
Paul is a resident individual who received the following amounts this year:
Maintenance payments received from ex-spouse
$10,000
Wages from part-time services in the army reserve
$3,000
Wages from part-time taxi driving
$20,000
Tips from taxi customers
$1,000
What is his assessable income?
$21,000
$34,000
$20,000
$24,000
Response Feedback:
The salary and tips from taxi driving are ordinary income from services and assessable under s.6-5, Brent’s cas.
The wages from part-time defence forces is exempt income, s.51-5.
Maintenance payments of a spouse or child is exempt income, s.51-50.
Kev is a builder. He builds a garden wall for a friend who owns a hardware shop. In return, the shop owner gives Kev building materials which he uses in his business. The stock had a trade price value of $5,000 or retail value $10,000.
How much is included in Kev’s assessable income under s.21A ITAA36?
- $10,000
- Nil
- $5,000
Kev is a builder. He builds a garden wall for a friend who owns a hardware shop. In return, the shop owner gives Kev building materials which he uses in his business. The stock had a trade price value of $5,000 or retail value $10,000.
How much is included in Kev’s assessable income under s.21A ITAA36?
- $10,000
- Nil
- $5,000
Response Feedback:
Kev has used the materials as trading stock which would ordimarily have entitled hime to an income tax deduction. Consequently the exception in s.21A(3) applies and the amount is not statutory income.
In which of the following scenarios will the amount be either exempt income or non-assessable non-exempt income? (multiple answers)
- A registered charity has sales of $1m from its chain of shops.
- A resident individual receives the government age pension.
- A public university receives an industry research grant.
- A full time school student receives a scholarship award after passing eligibility exams.
In which of the following scenarios will the amount be either exempt income or non-assessable non-exempt income? (multiple answers)
- A registered charity has sales of $1m from its chain of shops.
- A resident individual receives the government age pension.
- A public university receives an industry research grant.
- A full time school student receives a scholarship award after passing eligibility exams.
Response Feedback:
A registered charity and a public univerity are exempt entities under Division 50.
A scholarship awarded to a full time student is exempt income under s.51-10.
The age pension is ordinary income under s.6-5 and no exemptions apply to the basic entitlement.
In which of the following scenarios will the recoupment of expenses be assessable income? (multiple answers)
- A landlord investor receives a partial refund of council rates that were paid and deducted last year.
- A business recovers $1,000 of a trade debt written off and claimed as a deduction last year.
- A private home owner receives a partial refund of council rates that were paid last year.
In which of the following scenarios will the recoupment of expenses be assessable income? (multiple answers)
- A landlord investor receives a partial refund of council rates that were paid and deducted last year.
- A business recovers $1,000 of a trade debt written off and claimed as a deduction last year.
- A private home owner receives a partial refund of council rates that were paid last year.
Karen carries on a business as a shoe retailer. She reports the following receipts for the year:
Sales (net of GST)
$100,000
GST charged to customers $10,000
A free watch received from a supplier $250
Insurance claim for shop repairs $5,000
How much is included in her assessable income?
- $105,000
- $100,000
- $110,000
- $110,250
Karen carries on a business as a shoe retailer. She reports the following receipts for the year:
Sales (net of GST) $100,000
GST charged to customers $10,000
A free watch received from a supplier $250
Insurance claim for shop repairs $5,000
How much is included in her assessable income?
- $105,000
- $100,000
- $110,000
- $110,250
Response Feedback:
The sales net of GST is ordinary income, s.6-5
GST charged is not assessable, s.17-5
The insurance money recovered for deductible expenses is assessable either as ordinary income under s.6-5 (Warner Music case) or as statutory income under s.20-20.
The watch is a non-cash business benefit and statutory income under s.21A ITAA36, however the total non-cash benefits do not exceed $300 and the amount is exempt, s.23L(2) ITAA36.
