WEEK 8 TAX ADMINISTRATION TUTORIAL QUESTIONS ANSWER GUIDE STUDENTS-1
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Jan 9, 2024
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1
LAW 2466 TAX 2
TAX ADMINISTRATION TUTORIAL QUESTIONS
GROUP DISCUSSIONS:
Question 1
Elizabeth Wilson prepared and lodged her return on 1 October. On 10 October she
received notice that she had received a $120,000 distribution from a family
discretionary trust. She assumed the trustee would have paid the tax on her behalf,
but in case this was wrong and she notified the ATO of the distribution. Her
assessment was issued, stating no tax was payable. She was unaware that the ATO
did not take the trust distribution into account when issuing the assessment.
Elizabeth realized that she had failed to claim deductions she had incurred in relation
to her home office. Advise her. Two years later she was the subject of an audit in
relation to the trust distribution. Discuss.
GUIDE:
Elizabeth has informed the ATO of the later trust distribution so there is no issue re
false and misleading statements or fraud and evasion. If she is not out of time, and on
the facts she isn't, she can request an amendment to her assessment to include the
claimed deductions. Under s 170 of ITAA36 it appears that she is subject to a two-year
time limit rather than a four-year one: see
[24.140]
. Alternatively, within a two-year
time limit she could lodge an objection to her assessment. If she is out of time she can
apply for permission to lodge a late objection: TAA, s 14ZW(2), (3); see
[24.210]
.
When the ATO audits her, because she has informed them of the trust distribution
within the requisite time limits, the ATO will exercise its discretion not to impose a
Shortfall Interest Charge (SIC) or any other penalties: see
[24.200]
.
Question 2
Dr Hook a GP claims he is also carrying on a business of primary production as a
professional fisherman. He has considerable experience and can navigate his
own boat in open seas. For the past three year he spent 30 weekends and four
full weeks in carrying on his fishing activities each year. In those three years he
included the profit form the fishing activities in his tax returns.
In the current income year he spends less time because of a medical condition. As a
result he lost $5,000 from this activity.
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He therefore stopped his fishing activities. In his original tax return the loss was
allowed but on a subsequent desk audit the ATO disallowed the $5,000 loss.
Required:
What can Dr Hook do?
GUIDE:
Dr Hook should lodge a notice of objection which disallowed the $5,000 loss. See s
175 and s 14ZL to 14ZZS of TAA.
Should be done within 60 days of service of notice of amended assessment.
If loss disallowed should the prior year profits be exclude can they be amended?
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