Question 1 If shares in BHP Ltd are bought by a company on 16 June 2007 and sold on 3 February 2014

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Question 1 If shares in BHP Ltd are bought by a company on 16 June 2007 and sold on 3 February 2014, a company is able to calculate its capital gain and assessable income based on: a) Not indexing the cost base and not applying a discount factor b) Indexing the cost base and not applying a discount factor c) Not indexing the cost base and applying a one-third discount factor d) Not indexing the cost base and applying a one-half discount factor Question 2 Your client has sold a rare BMW motor vehicle for the sum of $450,000 in May 2014. The vehicle cost him $250,000 when it was purchased in July 2004. There are only six of this type of BMW in existence throughout the world. He has a carry forward capital loss of $100,000 from a collectible. What is the amount of net capital gain? a) $100,000 b) $200,000. c) $50,000 d) Nil Question 3 Your client purchased an investment property for $450,000 in May 2012. They borrowed the sum of $450,000 by way of a mortgage and when they sold it they still had to repay the sum of $450,000. They sold the property for $500,000 two years later in May 2014. They have a capital loss from the sale of a caravan of $10,000 from the 2006-2007 financial year. What amount should be included in their assessable income as the net capital gain? a) $10,000 b) $15,000 c) $20,000 d) $25,000 Question 4 Which of the following is how “taxable income” is calculated: a) Assessable income less exempt income b) Assessable income less allowable deductions c) Gross income less exempt income and assessable income d) None of the above Question 5 If you are required to work overseas and you have to rent out your main residence for a period of 5 years, the following capital gains tax consequences apply: a) You must pay income tax on the amount of capital gain that was made during the 5 years of absence when the home is eventually sold b) You do not have a CGT consequence as you have already paid income tax on the rent you have received

c) You do not have a CGT consequence as the home is still exempt for capital gains tax even when eventually sold d) None of the above, the home is exempt even if it was rented out for a period of 10 years or more Question 6 The High Court decision in Scott v FC of T, is authority for the following legal principle: a) You must pay income tax on an amount given to you if you are employed and the client gives you the money as a gift b) You do not have to pay income tax on a gift of money you have received from a former client if you have ceased to advise the client and you have no direct contact with the client. c) You do have to pay income tax on the gift, as it was part of the rendering of professional services. d) None of the above, all gifts of money are exempt no matter how it is given or by whom. Question 7 If a sole practitioner operating a small accounting practice accounts for his income using a cash basis, would the sole practitioner be better or worse off as a result of changing to an accruals basis the next financial year: a) Worse off as a result of paying tax on assessable income including amounts invoiced in the current year as well as cash paid from the previous year b) Better off by paying less tax because the amount of assessable income is less because of the accruals system c) Better off because they only pay income tax on the amount of assessable income collected in the current year and pay no tax on cash collected in the following year which relates to the previous year d) Better off because they pay income tax only on all cash received even if using the accruals method and having sent invoices to clients. Question 8 Bill Roberts is an investor in the stock market and works full time as a Quantity Surveyor. He bought some BHP shares for $25,000 in May 2000 to hold as a long-term investment. On the advice of his broker, he decided to sell the BHP shares. The shares were sold in March 2014 for $50,000. Bill has a $20,000 capital loss from shares, which he made in the 2001 income year. Assuming that Bill calculates his capital gain in the most tax effective way, the amount of capital gain required to be included in Bill’s assessable income is: a) $5,000 b) $25,000 c) $2,500 d) Nil Question 9 You buy an investment apartment, in your own name, on 16 July 2013 for a total cost of $300,000 and sell it on 30 June 2014 for $320,000. Settlement takes place in August 2014. How much do you include in your assessable income for the year ended 30 June 2015? a) $10,000 b) Nil

c) $20,000 d) None of the above, as property is exempt from capital gains ta Question 10 What is the amount of taxable income earned by John for the year end 30 June 2014, when he was paid a gross salary of $65,000 and had PAYG withholding of $15,000 deducted from his salary, income from part time military service of $8,000 and work related expenses of $1,200? a) $56,800 b) $63,800 c) $71,800 d) $48,800 Question 11 A company declares at the annual general meeting in May 2014 that it will pay a dividend to its shareholders out of the profits that it made for the half year to 31 December 2013. The dividend will be paid to shareholders still registered as shareholders as at 13 June 2014. The dividend is actually paid to the shareholder in July 2014. Paul is a shareholder and instead of receiving the cash dividend he took up extra shares under the dividend reinvestment plan When should the amount of dividend be included in the shareholders assessable income? a) 2013-2014 financial year b) 2014-2015 financial year c) Never as Paul did not receive income d) Only when Paul sells the shares Question 12 An individual taxpayer makes a capital loss of $5,000 on the sale of a rare manuscript and a capital gain of $4,500 from the sale of BHP shares that they held for 6 months. What is the net capital gain for the financial year? a) A net capital gain of $2,250 b) A net capital loss of $500 c) A net capital loss of $9,500 d) A net capital gain of $4,500 Question 13 A taxpayer buys an investment property to rent at a cost of $125,000. He rents it out for 3 years and makes a tax loss on rental of $3,000 each year. He sells the property for $100,000. What is amount is his capital loss on the sale? a) $25,000 b) $22,000 c) $34,000 d) $16,000

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Question 14 The principle in the case of Myer Emporium Ltd v FCT stated that a) any transactions will form part of your business, b) an isolated transaction will be considered as part of your business if the intention was to make a profit c) merely realising an asset to the best of your advantage is not assessable d) you only need to look at the intention of the taxpayer Question 15 How old does an antique have to be before it is regarded as a collectible, and not a personal use asset, for CGT purposes? a) Only 1 year b) No particular period c) 60 years d) 100 years at the date of disposal Question 16 Sage Pty Ltd is an investment company. During the year it sold a parcel of shares that it owned in BHP Ltd. The shares were bought in March 1989 and sold in June 2014. The shares cost $153,000 and the proceeds received were $275,835. In calculating the capital gain the company is able to: a) use the discount method of 50% b) use the discount method of 33.3% c) use the frozen index method d) treat the gain as normal income from a business assessable under s 6-5 Question 17 In the case of Mitchum v FCT, source was determined as: a) where he worked b) where he was paid, c) where the contract for his services was entered into d) where he was born QUESTION 18 A resident taxpayer has a taxable income of $46,500 for the year ended 30 June 2014, with PAYG tax of $12,450 deducted by her employer. She has no dependants and is not entitled to any tax offsets/rebates. Her net tax to pay or refund due when her assessment issues will be (include Medicare levy where appropriate but ignore low income tax offset): a) $1,160.00 payable b) $5,093.00 refund c) $4,500 refund d) $8,647.50 payable e) $12,450 refund QUESTION 19 In relation to assessable income, which of the following statements is most correct? a) Exempt income and non-assessable non-exempt income are included in assessable income. b) Ordinary income tends to be divided into income from personal exertion and income from property. c) Where a taxpayer recoups deductible expenditure, the recoupment will always be included in assessable income. d) A fringe benefit provided to an employee by an employer will be statutory income.

e) A capital gain derived under the capital gains tax provisions is an example of statutory income. QUESTION 20 Which of the following amounts is most likely to be assessable income under s 6-5 of the ITAA97? a) An employee received an amount of $15,000 from his former employer. The $15,000 was to reimburse the employee for deductible legal expenses incurred by the employee in defending his right to work. b) A mining company received an amount of $50,000, which represented a reimbursement of an overpayment of royalties previously paid for mining rights. The $50,000 had been claimed as a tax deduction by the company in an earlier year of income. c) A capital gain of $10,000 derived by a property investor from the sale of a rental property that he had held for eight years as an investment property. d) An amount of $35,000 received from a lottery win by an individual taxpayer who regularly enters lottery competitions. e) An amount of $570 paid by a taxpayer as an adjustment for rates when they purchased a rental property QUESTION 21 Which of the following characteristics is least likely to indicate that a business exists? a) The taxpayer’s activities are well organised. b) The taxpayer expects that the expenses from the activity will be greater than the income derived from the activity over time. c) The production from the activity is well in excess of domestic consumption. d) The goods traded by the taxpayer are inherently not suitable for domestic consumption. e) The activities of the taxpayer are sustained, regular and frequent. QUESTION 22 In relation to the operation of CGT, which of the following statements is least correct? a) A net capital gain is included in assessable income. b) A capital gain arises when the market value of an existing asset is greater than the cost of the asset. c) Assets purchased after 19 September 1985 generally require a consideration of CGT on their disposal. d) Net capital losses in any year are quarantined and carried forward to future years. e) Resident taxpayers will need to consider the application of CGT in relation to the disposal of all CGT assets. QUESTION 23 Nicholas purchased two residential properties in Toowoomba in October 1992. He used one of the properties as his main residence and used the other property, which was just across the street, as a rental property. He signed a contract to sell the rental property in November 2013 and the contract was settled in December 2013. The rental property had a market value of $230,000. As part of the purchase consideration, Nicholas was happy to receive a cash payment of $35,000, plus another property worth $150,000 and a promise from the purchaser that the purchaser would look after Nicholas’ home when Nicholas and his family were away on holiday. For the purposes of CGT, what capital proceeds will Nicholas be deemed to have received from the sale of the rental property?

a) $230,000 b) $185,000 c) $35,000 d) $150,000 e) $415,000 QUESTION 24 Daniel purchased a new rental property on 3 July 2013 and immediately rented it out earning $520 per week in rental income. He paid the following amounts in relation to the property: a) Purchase price $400,000 b) Stamp duty on purchase $3,500 c) Legal fees to transfer title to him $1,300 d) Interest paid on loan to purchase the property $28,000 e) Loan establishment costs $700 f) Extension to main bedroom $14,000 g) Rates paid to the local council $1,500 What will be Daniel’s cost base of the rental property for CGT purposes based on the above expenditure? a) $449,000 b) $447,500 c) $446,800 d) $418,800 e) $404,800 QUESTION 25 Robert, an Australian resident for tax purposes, has a carried forward ordinary capital losses from the year ended 30 June 2007 of $9,000 and carried forward collectable losses of $7,000 from the year ended 30 June 2006. On 5 May 2014 he sold land for $46,000 that he purchased on 4 November 2000 for $20,000. He also sold an antique on 10 June 2014 for $2,000 that he purchased for $550 on 13 October 2000. What is his net capital gain or loss for the year ended 30 June 2009? a) $17,000 b) $1,450 c) $5,725 d) $8,500 e) $4,000

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