Taxation Law

Taxation Law

Question 1 (5 marks)

The taxation formula

Calculate the Medicare levy payable (if any) on the following amounts for a single Australian resident taxpayer who is not entitled to the seniors and pensioners tax offset:

15,000;

$23,000; and

$40,000.

Question 2 (5 marks)

Residence and source

Ajay is a student from India who comes to Australia to study for a four-year bachelor degree in business. Ajay lives in rental accommodation near the university with fellow students and works part-time at the university social club as a barman. After six months, he has to withdraw from his studies and return to India because his father is ill.

Is Ajay considered a resident of Australia?

Question 3 (5 marks)

Income from personal services and employment

Consider the following situations and discuss whether or not they are income in ordinary concepts:

a. A cash prize for being the best student in income tax law received by a student who also receives a Youth Allowance from the government.

b. A gratuity (not being superannuation) received by a widow from her husband’s former employer in recognition of her husband’s services.

c. An honorarium received by a student for acting as honorary secretary of a small country town football club.

d. A bonus received by an employee for a suggestion adopted by the management.

Question 4 (5 marks)

Income from Business

In 1983 Bruce purchases 10 hectares of land for $1 million in an area that was ripe for subdivision. At the time of purchase he intended to get planning permission from the local council to develop the land by subdivision and then resell it at a profit, but instead he leased it for grazing horses. Three years ago Bruce attempted to get planning permission to subdivide his 10 hectares, but it proved very difficult, and finally in March of the current tax year the local council refused permission to subdivide. Bruce reluctantly sold the land in May for $3 million.

What are the tax consequences of Bruce’s sale?

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