ConTax Student e-Newsletter: June 2009
Sample Exam Questions
Example exam questions
Questions 1 to 10 relate to the following facts about Robyn
Robyn a computer programmer (aged 45) has accepted the following salary package of $160,000 from her
employer Computer Plus Pty Ltd. The package of $160,000 is inclusive of Superannuation Guarantee
Contributions, additional superannuation contributions, cost of fringe benefits (net of GST input tax credits),
fringe benefits tax and salary. Robyn does not make an employee contribution towards any benefits
provided.
For the FBT year ending 31 March 2008 Robyn’s package consisted of the following:
Description
Additional superannuation contributions (in addition to any
guarantee superannuation contributions)
Cost to the employer
$20,000 (not subject to GST)
2
Laptop computer (this is the only one provided to Robyn this year
and is used solely for work purposes)
$5,500 (including GST)
3
Payment of childcare fees for her children at a childcare premise
located on her employer’s premises
$10,000 (not subject to GST)
4
Electronic diary for work
$660 (including GST)
5
A car park for 230 days at Robyn’s primary work place.
Car park provided between 1 April 2007 and 31 March 2008.
There are three commercial car parks within one kilometre and
they charge the following for all day car parking: $3.30, $4.40 and
$6.90. There are two commercial car parks two kilometres away
charging $7 and $1 a day. All car park prices include GST.
In relation to the single park
used by Robyn, the annual cost
to her employer is $7,700 (inc
GST)
A loan to Robyn of $10,000 on 1 April 2007.
Robyn used the loan to pay off her home loan ($7000) and the
remaining $3000 to purchase shares. The interest charged by
the employer on the loan is one per cent (1%) per annum, and
Robyn makes re-payments every six months.
The cost to the employer is only
the principal amount of
$10,000.
$6000 Living away from home allowance ($1,000 each week for six weeks), when
Robyn was required to live away from home to perform her work for six weeks.
The cost to the employer is
$6,000.
1
6
7
Out of the $1000 paid each week:
$300 each week represents compensation for additional
accommodation expenses;
$400 represents additional food expenses each week –
without taking into account the statutory food component;
and
$300 each week was for hardship because Robyn was
required to live away from her family.
8
Salary & guaranteed superannuation contributions
The employer leases the
premises where the car park is
provided, and claims GST input
tax credits on the lease
payments.
The employer did not claim a
GST input tax credit in
providing this loan.
Employer did not claim a GST
input tax credit in providing this
benefit.
Remainder of salary package.
For the FBT year ending 31 March 2008 the:
Benchmark interest rate is 8.05%;
Car park threshold is $6.78;
Taxation Institute of Australia
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ConTax Student e-Newsletter: June 2009
Sample Exam Questions
Reasonable food component is $110 per week; and
Statutory food component is $42 per week.
Assume that Robyn has no HECS liability and she has private health insurance and these are her only
receipts/income for the year. Additionally, neither Robyn nor her associates hold shares in her employer.
Question 1
In relation to the facts for Robyn, which of the following statements is TRUE?
(a)
The fringe benefits taxable value of the laptop computer will be $5,500.
(b)
The fringe benefits taxable value of the salary sacrificed superannuation contributions will be
$20,000.
(c)
Provided the childcare facilities are located on the premises of Robyn’s employer, then the fringe
benefits taxable value will be $nil.
(d)
Provided the childcare facilities are located on the premises of Robyn’s employer, then the fringe
benefits taxable value will be $10,000.
(e)
The fringe benefits taxable value of the electronic diary will be $660.
Question 2
In relation to the facts for Robyn, which of the following statements is TRUE?
(a)
A car park fringe benefit will arise, as there is a commercial car parking station within two kilometres
charging $7 for all day car parking.
(b)
There is no car parking fringe benefit as a majority of the commercial car parking stations within one
kilometre charge below the car parking threshold.
(c)
Since the employer is only leasing the premises where the car park is being provided to Robyn, no
car parking fringe benefit will arise.
(d)
The fringe benefits taxable value for the employer in respect of the car parking provided to Robyn
would be approximately $1,587.
(e)
The fringe benefits tax payable by the employer in respect of the car parking provided to Robyn
would be approximately $729.
Question 3
In relation to the facts for Robyn, which of the following statements is TRUE?
(a)
Robyn would have to include the living away from home allowance in her assessable income
pursuant to section 15-2 ITAA97.
(b)
The fringe benefits taxable value of the living away from home allowance is approximately $6,000.
(c)
The fringe benefits taxable value of the living away from home allowance is approximately $2,052.
(d)
The fringe benefits tax payable by the employer in respect of the living away from home allowance is
approximately $7,088.
(e)
The fringe benefits taxable value of the living away from home allowance is approximately $3,792.
Taxation Institute of Australia
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ConTax Student e-Newsletter: June 2009
Sample Exam Questions
Question 4
In relation to the facts for Robyn, which of the following statements is TRUE?
(a)
Robyn would have to include the $10,000 loan in her assessable income pursuant to Division 7A
ITAA36.
(b)
The fringe benefits taxable value of the loan fringe benefit would be reduced to the extent that Robyn
uses the loan to pay off her home.
(c)
The fringe benefits tax payable in respect of the loan fringe benefit would be approximately $494.
(d)
The fringe benefits tax payable in respect of the loan fringe benefit would be approximately $429.
(e)
Both statements (b) and (c) are true.
Question 5
In relation to the facts for Robyn, which of the following statements is true?
(a)
The total amount of fringe benefits tax payable by the employer in respect of all the benefits provided
to Robyn for the 2008 FBT year would be approximately $4,454.
(b)
The total amount of fringe benefits tax payable by the employer in respect of all the benefits provided
to Robyn for the 2008 FBT year would be approximately $5,292.
(c)
The total amount of fringe benefits tax payable by the employer in respect of all the benefits provided
to Robyn for the 2008 FBT year would be approximately $4,950.
(d)
The total amount of fringe benefits tax payable by the employer in respect of all the benefits provided
to Robyn for the 2008 FBT year would be approximately $4,546.
(e)
The total amount of fringe benefits tax payable by the employer in respect of all the benefits provided
to Robyn for the 2008 FBT year would be approximately $3,529.
Question 6
In relation to the facts for Robyn, which of the following statements is true?
(a)
The total amount of GST input tax credits that the employer would claim in respect of all the benefits
provided to Robyn for the 2008 FBT year would be approximately $1,260.
(b)
The total amount of GST input tax credits that the employer would claim in respect of all the benefits
provided to Robyn for the 2008 FBT year would be approximately $760.
(c)
The total amount of GST input tax credits that the employer would claim in respect of all the benefits
provided to Robyn for the 2008 FBT year would be approximately $2,169.
(d)
The total amount of GST input tax credits that the employer would claim in respect of all the benefits
provided to Robyn for the 2008 FBT year would be approximately $500.
(e)
The total amount of GST input tax credits that the employer would claim in respect of all the benefits
provided to Robyn for the 2008 FBT year would be approximately $2,714.
Question 7
In relation to the facts for Robyn, which of the following statements is true?
(a)
For the 2008 income tax year Robyn’s salary component of her package will be approximately
$88,941.
Taxation Institute of Australia
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ConTax Student e-Newsletter: June 2009
Sample Exam Questions
(b)
For the 2008 income tax year Robyn’s salary component of her package will be approximately
$160,000.
(c)
For the 2008 income tax year Robyn’s salary component of her package will be approximately
$87,785.
(d)
For the 2008 income tax year Robyn’s salary component of her package will be approximately
$93,028.
(e)
For the 2008 income tax year Robyn’s salary component of her package will be approximately
$91,872.
Question 8
In relation to the facts for Robyn, which of the following statements is true?
(a)
Robyn does not have a reportable fringe benefit for the 2008 income tax year as the fringe benefit
taxable value of the benefits she receives is less than $1,000.
(b)
Robyn does not have a reportable fringe benefit for the 2008 income tax year as the fringe benefit
taxable value of the benefits she receives is greater than $2,000.
(c)
Robyn does have a reportable fringe benefit amount for the 2008 income tax year of approximately
$8,011.
(d)
Robyn does have a reportable fringe benefit amount for the 2008 income tax year of approximately
$9,430.
(e)
Robyn does not have a reportable fringe benefit amount for the 2008 income tax year as Robyn has
salary packaged her benefits.
Question 9 and 10
Additional facts provided for Questions 9 and 10.
Robyn restructures her affairs by resigning as an employee of Computer Plus Pty Ltd and incorporates a
company, R & A IT Services Pty Ltd to operate her IT consulting business. Robyn is the only professional
computer programmer, with her husband Harry, employed to provide adminstrative support. Robyn enters
into a contractual agreement with Computer Plus Pty Ltd to provide contractural services on an hourly basis
for work completed. She provides 30 hours of work to Computer Plus Pty Ltd, and 10 hours of work to
Computer Solutions Pty Ltd, a subsidiary of Computer Plus Pty Ltd. Both of her clients provide her with the
equipment needed for the job. Robyns convert her garage into an office.
For the year ended 30 June 2008, R & A IT Services Pty Ltd billed $160,000 in fees (including GST) and
paid Robyn a salary of $60,000 and Harry a salary of $20,000. Of the $160,000, $120,000 was from
Computer Plus Pty Ltd and $40,000 from Computer Solutions Pty Ltd.
Question 9
In relation to the above additional facts for Robyn, which of the following statements is true?
(a)
Alientation of personal services income pursuant to section 86-15(3) ITAA 1997 will not apply as R &
A IT Services Pty Ltd is a personal service business.
(b)
Alientation of personal services income will not apply as the results test under section 87-18 ITAA
1997 for a personal services business has been satisfied.
(c)
Alientation of personal services income will not apply as the business premises is satisfied under
section 87-30 ITAA 1997.
Taxation Institute of Australia
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ConTax Student e-Newsletter: June 2009
Sample Exam Questions
(d)
Since Robyn has formed a company, R & A IT Services Pty Ltd, which operates the business there
is no ‘personal services income’ to which Division 86 ITAA 1997 could apply to.
(e)
R & A IT Services Pty Ltd would not satisfy the unrelated client test pursuant to section 87-20 ITAA
1997.
Question 10
In relation to the above additional facts for Robyn, which of the following statements is true?
(a)
If Divisions 84 to 87 ITAA 1997 applies to R & A IT Services Pty Ltd then R & A IT Services cannot
deduct the amount paid to Harry as salary.
(b)
If Divisions 84 to 87 ITAA 1997 applies to R & A IT Services Pty Ltd then R & A IT Services can still
deduct amounts of mortgage interest, rates or land tax relating to the office in the garage.
(c)
If Divisions 84 to 87 ITAA 1997 does not apply to R & A IT Services Pty Ltd then Part IVA ITAA 1936
could be applied by the Commissioner.
(d)
Part IVA 1936 does not apply if R & A IT Services Pty Ltd is considered a personal services
business under section 87-15 ITAA 1997.
(e)
Both statements (a) and (c) are true.
End of Questions
Taxation Institute of Australia
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ConTax Student e-Newsletter: June 2009
Sample Exam Questions
Answers
Question 1
(c)
Provided the childcare facilities are located on the premises of Robyn’s employer, then the fringe
benefits taxable value will be $nil.
(a) is false - is exempt under section 58x.
(b) is false - super contributions are excluded from being a fringe benefit.
(c) is true – exempt under section 47(2).
(d) is false – exempt under section 47(2).
(e) is false – is exempt under section 58x.
Question 2
(e)
The fringe benefits tax payable by the employer in respect of the car parking provided to Robyn
would be approximately $729.
(a) is false – needs to be within one kilometre.
(b) is false – only needs to be one car park within one kilometre, not a majority.
(c) is false – employer leasing the premises is fine.
(d) is false – this is taxable value of 230 * $6.90 which is the highest car park within 1km; can use the
lowest.
(e) is true – this is FBT payable of 230 * $3.30 * 2.0647 * 0.465.
Question 3
(e)
The fringe benefits taxable value of the living away from home allowance is approximately $3,792.
(a) is false – this section is excluded from application as LAFHA is a fringe benefit.
(b) is false – this does not take into account the exempt accommodation and food component.
(c) is false - $6,000 less 1800 less (400-42)*6 is an incorrect calculation of food competition.
(d) is false - $3,792 * 1.8692 has not done by 46.5 also.
(e) is true - $6,000 less 1800 less (110-42)*6.
Question 4
(d)
The fringe benefits tax payable in respect of the loan fringe benefit would be approximately $429.
(a) is false – as fringe benefit not included in her income and Division 7A would not apply as not a
shareholder in the company.
(b) is false – the FBT tax value would be only reduced to the extent she uses the loan to produce
assessable income.
(c) is false – this is the FBT taxable value of 7,000 * (8.05-1)/100.
(d) is true – this is 7,000 * (8.05 -1)/100 * 1.8692 * 0.465.
(e) is false.
Question 5
(a)
The total amount of fringe benefits tax payable by the employer in respect of all the benefits provided
to Robyn for the 2008 FBT year would be approximately $4,454.
(a) is true – car park $729 + LAFHA $3,296 + loan $429.
(b) is false – car park $1,567 + LAFHA $3,296 + loan $429.
(c) is false – car park $729 + LAFHA $3,792 + loan $429.
(d) is false – car park $729 + LAFHA $3,296 + loan $521.
(s) is false – car park $1,567 + LAFHA $1,533 + loan $429.
Taxation Institute of Australia
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ConTax Student e-Newsletter: June 2009
Sample Exam Questions
Question 6
(a)
The total amount of GST input tax credits that the employer would claim in respect of all the benefits
provided to Robyn for the 2008 FBT year would be approximately $1,260.
(a) is true – 500 computer + nil child care + 60 diary + 700 car park + nil for LAFHA + nil for loan.
(b) is false – missing 500 computer.
(c) is false – missing 500 computer + 909 for child care which has not GST.
(d) is false – missing 60 diary + 700 car park.
(e) is false – 500 computer + nil child care + 60 diary + 700 car park + 1/11th of 6000 for LAFHA +
1/11th of 10,000 for loan.
Question 7
(a)
For the 2008 income tax year Robyn’s salary component of her package will be approximately
$88,941.
(a) is true - $160,000 = 1.09x + 20,000 + 5,500 + 10,000 + 660 + 7700 + 6000 + 10,000 + 4454 FBT
less GST input tax credits (1,260).
(b) is false – this is the total of the package amount.
(c) is false – forgot to deduct a GST input tax credit.
(d) is false – forgot to deduct cost of FBT.
(e) is false – forgot to deduct a GST input tax credit and add FBT.
Question 8
(c)
Robyn does have a reportable fringe benefit amount for the 2008 income tax year of approximately
$8.011.
(a) is false – is greater than $1,000.
(b) is false – if greater than $2,000 then Robyn does have reportable fringe benefits.
(c) is true – 3,792 + 494 * 1.8692; does not include car parking.
(d) is false – 759 + 3792 + 494 * 1.8692; includes car parking which does not get reported.
(e) is false – salary packaging benefits does not affect whether they are reportable or not.
Question 9
(e)
R & A IT Services Pty Ltd would not satisfy the unrelated client test pursuant to section 87-20 ITAA
1997.
Option (e) is true as R & A IT Services Pty Ltd will not satisfy the unrelated client test on the facts
given as both clients are related to each other.
Question 10
(e)
Both statements (a) and (c) are true.
Option (e) as both (a) and (c) are true is true as Henry is Associate doing non-principal work: section
85-20.
Taxation Institute of Australia
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