Question 5

Please click on only one check box option in answer to each of these parts.

1. TaP Plumbing Pty. Ltd. had $200,000 stock on hand at the beginning of the 2018/2019 financial year. It purchased $50,000 of additional trading stock during the income year. The closing stock on hand was $130,000. What are the tax implications for the 2018/2019 financial year?

A. Net deduction $50,000

B. Net deduction $130,000

C. Net deduction $70,000

D. Net deduction $120,000

2. Which of the following statements about the taxation of trading stock is correct?

A. Purchases of trading stock are treated as capital for tax purposes

B. When trading stock is purchased and a deduction is claimed under 570-5(2)(a), the amount of the deduction depends on whether the trading stock is valued at cost, market selling value or replacement value

C. For the purposes of s70-35, trading stock should always be valued at cost to obtain the lowest tax bill

D. For the purposes of s70-35, the taxpayer can give trading stock a closing value of either cost, market selling value or replacement value

3. Which of the following items would not be trading stock under s70-10?

(i) Land held by a property trust

(ii) Confidential documents held by a research company

(iii) Seeds purchased for sale by a plant nursery

A. (i) and (ii)

B. (i) and (iii)

C. (ii) and (iii)

D. (ii) only

4. Which of the following are not trading stock?

A. Bees kept for use in a honey production business

B. Horses used in a city horse carriage tour business

C. Undeveloped land owned by a land developer

D. Partly finished computers of a computer manufacturer

5. For the purposes of the Goods and Services Tax (GST), when a registered business makes an input taxed supply it means that:

A. It is liable for GST on the supply, but it is not entitled to an input tax credit on GST paid on its business inputs affecting that supply

B. It is liable for GST on the supply, and is entitled to an input tax credit on GST paid on its business inputs affecting that supply

C. It is not liable for GST on the supply, and is entitled to an input tax credit on GST paid on its business inputs affecting that supply

D. It is not liable for GST on the supply, and is not entitled to an input tax credit on GST paid on its business inputs affecting that supply

6. For the purposes of the Goods and Services Tax (GST), when a registered business makes a GST-free supply it means that:

A. It is liable for GST on the supply, but is not entitled to an input tax credit on GST paid on its business inputs affecting that supply

B. It is liable for GST on the supply, and is entitled to an input tax credit on GST paid on its business inputs affecting that supply

C. It is not liable for GST on the supply, and is entitled to an input tax credit on GST paid on its business inputs affecting that supply

D. It is not liable for GST on the supply, and is not entitled to an input tax credit on GST paid on its business inputs affecting that supply

7. Cheng runs an accountancy practice, and has purchased a photocopier for $5,000 to use in his practice. The amount of GST included in the purchase price is:

A. $500.00

B. $454.55

C. $475.55

D. $50.00

8. Which of the following statements is correct?

A. If an employer provides a benefit to anyone other than an employee, the benefit cannot be a fringe benefit

B. If anyone other than an employer provides a benefit to an employee, a fringe benefit does not arise

C. All of the above statements are true

D. All of the above statements are false

9. The decision in Myer leads to the principle that ordinary income:

A. Includes receipts from a business transaction that is undertaken with an intention to profit

B. Includes receipts from all transactions undertaken by a business whether they are capital or revenue

C. Includes profits from the realisation of a capital item

D. Includes all interest earned from a loan to another subsidiary of a parent company

10. Jake bought a house in July 2018. It was in fairly good condition, but needed painting. Jake rented out the house for 10 months, and then painted all the walls. 

The painting is:

A. Deductible under 525-5

B. Not deductible due to being an initial repair"

C. Not deductible, as painting something is not really repairing it

D. Not deductible as the walls are an entirety