Question 4 15 Marks
(a) In some cases trading stock for one taxpayer may be plant for another. Explain how the distinction is made and provide some examples of the difference. (5 marks)
(b) What options are available to a taxpayer when determining the effective life of a depreciating asset? Can the effective life ever be changed during the life of an asset? (5 marks)
(c) Explain why a tax offset has a greater value to a taxpayer than an allowable deduction. Does the marginal tax rate of the taxpayer have any effect on whether a tax offset has greater value than an allowable deduction? (5 marks)
Question 5 10 Marks
On 1 May 2012 a company purchased a new Holden Captiva for $43000 (GST input tax credits have been claimed on the purchase). Before delivery of the vehicle air conditioning was installed at a cost of $2000 and a UHF radio fitted for business purposes at a cost of $800.
The vehicle was made available to an employee for his exclusive use for both business and private purposes.
Question 5 continued over next page
Term 1 Standard Examination 2013
Taxation Law and Practice A LAWS19033
Page 5 of 5
Question 5 (continued)
Expenses incurred on the vehicle during the period 1 May 2012 to 31 March 2013 were as follows:
Registration and Insurance paid 1 May 2012
$750
Repairs and Maintenance
$2000
Fuel and Oil
$3100
The employee paid his employer $850 towards the cost of fuel used for private purposes.
According to the log book the vehicle travelled a total of 60000 kilometres in the period 1 May 2012 to 31 March 2013 of which 51000 kilometres of travel was work-related.
Required:
Given that the employer company has elected to use the operating cost method to determine the taxable value of the car fringe benefit calculate the fringe benefits tax payable in respect of the vehicle for the fringe benefits tax year ended 31 March 2013.