Required:

1.Is Basil a resident of Australia for tax purposes? [You should consider leading case authorities and rulings in your answer. Suggested maximum words: 500 words for this part.]                                                                                                     (15 marks)

2.Assume Basil is an Australian resident. Advise him of his tax position and the assessability of the following. [Make sure you consider relevant cases, legislation and rulings in your answer: Suggested word allocation approximately 1000 words]

i)Salary and rent subsidy

ii)Motor vehicle, phone account and holiday

iii)English rent

iv)English shares and Australian shares

v)Chairs.

(6+ 6+6+6+6 = 30 marks)

3.Advise Basil whether he is entitled to a deduction on any of his home office expenses. Note: consider both occupancy expenses (i.e. rental, rates and insurance) and running expenses (i.e. heating, cooling, lighting and depreciation) associated with the study. [You should consider leading case authorities and rulings in your answer. Suggested maximum words: 500 words]                                                                                    (15 marks)  

Required 1

Under the Lay-by sales conditions customers pay a non-refundable deposit of 10% and agree to pay off the balance within 12 months. The goods are taken from the store’s inventory and set aside at the time the deposit is made.

i)Should FVS return on a cash or accrual basis? Cite relevant case law.

ii)When is income derived in a lay-by sale?

iii)What is the tax treatment of a) the deposit; and b) progress payments?

iv)What is the tax treatment of the trading stock the subject of a lay-by?

(10 + 7+ 7+ 7 = 31 marks)

Required 2

Under the ‘take now, pay later’ contract customers pay a 10% deposit and may take the goods on condition that a further 8% of the sale price is added to the balance owing which the customer then pays off in 12 equal monthly instalments. [See example] The contract notes that title passes to the customer at the time of sale and, if the customer defaults on any payment, the whole debt is immediately payable and recoverable.

Example: List price $3000; deposit $300; balance $3000 + (3000 x 8%) 240 – 300 = $2940/12 = $245 per month. [Total paid: $3,240]

For the year ended June 30 records show sales of $1,125,000:

Deposits received                   $112,500

8% interest charged                    90,000

Progress payments received     700,000

Balance owing                           515,000

(Cost of goods subject to contracts $690,000)

Advise FVS what income is derived and when and what tax consequences follow on default?                                                                                              (9 marks)

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