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Accg 924 Practice Multiple Choice Questions Answers

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Which of the following would be a consequence of being a non-resident for tax purposes?

  1. the taxpayer generally only pays tax on income derived from Australian sources
  2. the taxpayer pays tax on the first dollar of income earned from Australian sources
  3. Medicare levy is not generally payable
  4. All of the above.



Maddie has taxable income of $69,000 for the year ended 30 June 2013. PAYG tax of $27,000 was withheld by her employer during the year and sent to the ATO.  Maddie had no dependants, lived alone, was not entitled to any tax offsets and had no private health insurance. Which of the following amounts most closely shows Maddie’s tax payable or refund due after applying all relevant tax laws?

  1. $15,007 payable
  2. $13,028 refund
  3. $13,972 payable
  4. $11,993 refund


Which of the following is not a source of income tax law?

A. an income tax assessment that is issued after a taxpayer lodges a tax return

B.  legislation passed by Parliament

C.  binding statements made by the Commissioner about how the law will be interpreted

D.  Court cases on taxation matters


Which one of the following is not a relevant factor in determining if a taxpayer is carrying on a business?

  1.  the degree of system and organization in the taxpayer’s activities
  2. the scale of the taxpayer’s activities
  3. the fact that the taxpayer makes a profit in the first two years of operations
  4. the taxpayer’s intention to make profit from the operations.


On 1 July 2012, Molly borrowed $30,000 from a bank to purchase shares in CBC Co.  The loan was for a period of 10 years and the interest rate was 10%.  To establish the loan, Molly was required to pay a fee of $1,000 to the bank and stamp duty of $200 to the State Government. Which of the following statements correctly states the deductions that Molly would be entitled to for 2012/13?

  1. A deduction of $1,000 under sec 25-25 ITAA97 and $3,000 under sec 8-1 ITAA97
  2. A deduction of $240 under sec 25-25 ITAA97 and $3,000 under sec 8-1 ITAA97
  3. A deduction of $240 under sec 25-25 ITAA97
  4. A deduction of $1,200 under sec 25-25 ITAA97 and $3,000 under sec 8-1 ITAA97


Which one of the following would most likely be deductible under sec 8-1 of the ITAA97?

  1. Costs incurred by a company when it was deciding whether to commence a business in Sydney or Melbourne.
  2. Costs incurred by a newspaper publisher to prevent another company taking over the business.  
  3. Legal costs paid by a builder after he was sued for compensation for faulty work on a building which he built for a client.
  4. Self-education expenses incurred by an unemployed carpenter to improve his job prospects.


Emma plays cricket for Australia.  She receives a payment of $20,000 a year from the Cricket Association, and she is also employed full time by a law firm.  She is approached by a company that manufactures cricket bats, asking her to attend an awards night and to sign cricket bats as a promotion for the company. She is to receive $30,000 for this arrangement.  The receipt of the $30,000 is which one of the following?

  1. a capital receipt as a sale of her copyright
  2. unconnected with her full time job and so tax free
  3. unrelated to the exercise of her skill and so not assessable as income
  4. assessable as ordinary income as it is paid in return for her services


Which of the following statements is not correct?

  1. Offsets are a fairer way to give tax concessions than deductions because their monetary value is the same for all taxpayers
  2. Offsets are deducted from taxable income before the tax rate is applied
  3. “Offsets” in ITAA1997 has the same meaning as “rebates” in ITAA1936
  4. In the tax formula in section 4-10 ITAA1997, tax payable is calculated before offsets are applied.


Which is the most accurate statement for a taxpayer using the accruals method of returning income?

  1. Income is derived when the taxpayer is not contractually obliged to give a refund.
  2. Income is derived when payment is received in cash or cheque.
  3. Income is derived when a cheque has been cleared by the bank.
  4. Income is derived when the services are completed and an invoice is given to the customer.


Which one of the following statements is correct?

  1. Exempt income is the only category of non-assessable income.
  2. As a general rule, if an amount is both ordinary income and statutory income, the statutory provision will prevail.
  3. A taxpayer who is a foreign resident is assessable in Australia on income derived from both Australian and non-Australian sources.
  4. Examples of income from property are interest, rent, wages and dividends.


Which one of the following is not subject to income tax?

  1. money earned from the illegal sale of weapons
  2. $1 million won at the casino
  3. $1,000 prize to a photo-journalist for a photo he entered in the National Photography Competition
  4. a car won by a professional opera singer when he wins a national singing contest.


Which one of the following statements about the tax treatment of compensation payments is not correct?

  1. a compensation payment generally takes on the character of what it replaces
  2. compensation for permanent loss of an asset would generally be capital
  3. compensation for loss of trading stock is inherently of an income character
  4. where a lesser sum is accepted in compromise of wholly unliquidated claims, and apportionment into income and capital components is difficult, the whole amount is generally treated as income.


The High Court decision in FC of T v Dixon (1952) 86 CLR 540 is important for which of the following reasons?



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