24 Pages 6215 Words Capital Budgeting

Case Con-over (3 talents => A, B & C) The circumstance con-over requires students to supply a minute segregation of a event top beneath applying the taxation laws to reach at a disposal. Part A (12 notes) XYZ Ltd is a occupant Australian conorder that eatables service equipment to affaires and not-public individuals in Sydney. XYZ Ltd has two resembling divideholders – Kate and her wife John – who remain 50 manifestationd divides each in the concourse. Kate and John artificial their divides for an manifestation expense of $300 per divide on 1 January 2008 when XYZ Ltd was incorporated. The affair of XYZ Ltd was initially carried on from leased ground. On 1 January 2012 XYZ Ltd forfeitured the leased ground which moderate an government service, a repository and an commensurate car field for customers. Initially, XYZ Ltd considered the forfeiture of merely the repository for $800,000, but then determined to forfeiture the government service, the repository and the car field for $2 pet. XYZ Ltd was required to attribute $950,000 on 1 January 2012 to forfeiture the affair ground. Attention on the 12-year mortgage was 10% and there was an upfront science fee of $3,000. In March 2012, XYZ Ltd set out that the plumbing and electrical systems in the government service deficiencyed repairing and gone-by $30,000 to remodel the problems. In January 2013, XYZ Ltd hired a agent $80,000 to add two rooms to the government service. The driveway induced to the car field had to be repaired in 2014 at a absorb of $18,000 accordingly tree roots were detrimental it. In December 2015, a outrageous hailfume caused dropping to some talents of the repository roof. XYZ Ltd determined to reinstate the all roof at a absorb of $45,000 and acquired insulation and air conditioning at a absorb of $30,000. The fume besides droppingd a extensive badge advertising the affair and it absorb XYZ Ltd $2,000 to get it agoing again. XYZ Ltd forfeitured some equipment on 1 July 2013 that would be used barely to stir product encircling the repository. The equipment absorb $44,000 (GST additive) and XYZ Ltd is entitled to assertion an input tax confidence for the GST moderate in the forfeiture expense. XYZ Ltd assertioned a principal expiation for the bearing for 2013/14, 2014/15 and 2015/16, using the consummate absorb order and basing the forethought on an effectual activity of five years. On 1 July 2016, XYZ Ltd sold the equipment for $12,000 to the match of Kate, one of the XYZ Ltd divideholders. The negotiate esteem of the equipment at the space was $28,000. XYZ Ltd determined to relocate its affair to New Zealand from 30 June 2017 and, as a product, on 1 May 2017 entered into a retrench to retail the affair ground for $3.8 pet. Juridical fees associated succeeding a while the sale were $12,000 and other retailing absorbs amounted to $8,000. Required: 1. Grounded on the notification supplyd and inflated XYZ Ltd had a heave impertinent principal dropping of $30,000 at 30 June 2016, illustrate and apparticipation the net principal frame or principal dropping to be moderate in XYZ Ltd’s assessable proceeds for 2016/17 as a product of the sale of the affair ground (7 notes). 2. Illustrate whether the attention on the mortgage and the science fee are deductible for XYZ Ltd (2 notes). 3. Illustrate and apparticipation the tax consequences for XYZ Ltd when the equipment used to stir product encircling the repository is sold for $12,000 on 1 July 2016 (3 notes). You must remain your answers succeeding a while juridical sources (legislation, rulings or circumstances). If you entertain inadequate notification and deficiency to create assumptions, those assumptions must be culm and must be orderly. Part B (7 notes) Kate incurred a calculate of expenses in 2016/17 and is hoping for a tax inference to subdue her tax burden. She accepted a allowance of $120,000 from XYZ Ltd during the year. Kate’s outlay during 2016/17 was as follows: 1. $2,500 on fees and materials for a university order con-overing Indonesian – she thinks this obtain be advantageous for expanding the XYZ Ltd affair 2. $1,300 proceeds tax for the 2015/16 proceeds year – she accepted her give-heed-to of tribute on 1 December 2016 and was qualified to pay $1,300 succeeding a whilein 30 days 3. $230 attention hired to the bank when she had to attribute currency to pay her proceeds tax beak 4. $280 on a briefcircumstance that she uses when she is agoing for XYZ Ltd 5. $800 on a allowance to the Labor Party antecedently the State preference 6. $698 expenses associated succeeding a while an service that she sets separately in her settlement for heaveing out toil activities in the late and at the weekend (on toil days she toils in her service at the XYZ Ltd ground) – the expenses rehearse to a participation of the attention on her settlement mortgage, electricity and derogation of movables and service equipment 7. $650 for meals when she goes to university classes in the late Required: For each of these aces of outlay overhead, illustrate whether a inference would be undisputed. (1 note for each ace) You must remain your answers succeeding a while juridical sources (legislation, rulings or circumstances). If you entertain inadequate notification and deficiency to create assumptions, those assumptions must be culm and must be orderly. Part C (6 notes) Kate and John stird to New Zealand on 1 July 2017 when the XYZ Ltd affair was relocated and their intent was to remain there indefinitely. The effects that they tranquil owned when they stird on 1 July 2017 were their divides in XYZ Ltd, 2,000 Commonwealth Bank divides, their nobility settlement in Sydney and two cars. The guile was that they would chiefly be grounded in New Zealand and would each be hired a allowance as employees of XYZ Ltd. Kate would, notwithstanding, toil for XYZ Ltd for filthy months each year in Sydney accordingly of the deficiency to conduct bar links succeeding a while customers and to create new affair contacts. Required: 1. Illustrate the principal frames tax consequences for Kate and John when they stir to New Zealand. Include in your sense any choices Kate and John can create that would fluctuate the CGT consequences of their stir. (4 notes) 2. Illustrate how the salaries earned by Kate and John would be taxed succeeding they stir to New Zealand. (2 notes) You must remain your answers succeeding a while juridical sources (legislation, rulings or circumstances). If you entertain inadequate notification and deficiency to create assumptions, those assumptions must be culm and must be orderly.

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