Accg 924 Practice Multiple Choice Questions Answers

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- because it shows that compensation payments take on the character of what they replace

- because it shows that an amount that is not connected to services can be still be ordinary income if it is received periodically

- because it shows that voluntary payments by a third party are only ordinary income in exceptional cases

- because it shows that sportspersons may be assessable on the sponsorship payments they receive.

QUESTION 14

FC of T v Applegate 79 ATC 4307 is an important tax case because it explains which one of the following?

- the source of income from services

- factors to be taken into account in determining whether a foreign resident is carrying on business in Australia

- the meaning of permanent place of abode outside Australia in the domicile test in sec 6(1) ITAA1936 for when an individual is a resident

- the tests to determine when a company is a resident for tax purposes.

QUESTION 15

During the income year ended 30 June 2013 Wendy received salary and wages income of $35,000, interest income of $3,000, a net capital gain of $5,000, an exempt compensation payment of $23,000 and commission income of $4,000. What is Wendy’s ordinary income that is assessable for the year ended 30 June 2013?

- $42,000

- $47,000

- $38,000

- $70,000

QUESTION 16

Ben is a non-resident in 2012/13 and has taxable income from an Australian services contract of $45,000. Which of the following amounts shows Ben’s liability to tax in Australia for 2012/13?

- $14,625

- $6,172

- $8,550

- $15,300

QUESTION 17

Which of the following statements is correct ?

- An amount paid by a company to a registered tax agent to manage their GST affairs may be deductible under sec 25-5 ITAA97.

- An amount paid by a student to a registered tax agent for help in lodging their income tax return may be deductible under sec 25-5 ITAA97.

- Compensation paid by a newspaper to a politician who has been defamed in an article would never be deductible under sec 8-1 ITAA97.

- A loss incurred by a business when an employee steals money from the work premises could not be deductible under sec 8-1 ITAA97 because it is not a loss incurred in gaining assessable income.

QUESTION 18

Which of the following statements is not correct?

- Repairs to a car may be deductible under sec 25-10 if the car is used in gaining assessable income.

- Entertainment is not generally deductible, although there are exceptions.

- Penalties and fines are sometimes deductible, but s 26-5 limits the deduction to unusual cases.

- An improvement to an item would normally not be deductible under s 25-10 because it is capital expenditure.

QUESTION 19

Jenny is a professional dancer and has supplied you with the following information relating to the year ended 30 June 2013

.

Appearance fees $75,000

Winnings $190,000

Interest income $1,500

Income from sponsors $50,000

Travel expenses $39,000

Manager’s fees $25,000

Childcare costs $9,000

What is Jenny’s taxable income for the year ended 30 June 2013?

- $95,500

- $243,500

- $252,500

- $145,500

QUESTION 20

Sebastian is a partner in a large law firm based in Sydney. When the building that the firm leases is compulsorily acquired by the Government to put in a new road, the firm looks around for new premises. The firm is approached by the developer of a new office block who is keen to sign up a prestige tenant. In return for agreeing to move into the new office block, the firm is paid a lump sum of $20 million. The payment is distributed amongst the partners, and Sebastian receives $400,000. Which of the following statements describes the correct tax treatment of the lease incentive payment?

- It is assessable income under sec 6-5 because it arises from an extraordinary transaction entered into by the firm in the course of earning its income.

- It is exempt income because Sebastian has not done anything in return.

- It is subject to capital gains tax because the firm has committed itself to the new building and has given up the right to rent other premises.

- The partnership has to pay tax on the $20 million, but Sebastian does not have to pay

tax even though he receives $400,000.

ANSWERS

- D

- D

- A

- C

- B

- C

- D

- B

- D

- B

- B

- D

- B

- C

- A

- A

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