ACCG8124 Taxation Law And Law Management


Question 1 (25 Marks)

New partnership is created on 31/3/2021 per FCT v Happ Partnership profits are determined when a partnership dissolves. Therefore $266,000 net income to 31/3/2021 related to the partnership of Evans and Downing and $90,000 net income relates to the new partnership of Evans, Downing and Smith

Therefore assuming income is shared equally after a per annum salary of $80,000, under the partnership agreement, then each partner would be allocated the following share of net income on which they would be assessed.

Total $355,720

Question 2 (25 marks)

As Sam is not suffering a legal disability and is presently entitled S97 applies and Sam must include his share of net income in his taxable income ($25,000) and pay tax at ordinary marginal tax rates.

As Minnie is under 18 years of age she is suffering a legal disability and accordingly S98(1) applies so that the trustee would be required to deduct and remit the tax on her share of net income ($50,000) and then Minnie must include that income in her own tax return claiming a credit for the tax already paid by the trustee. The tax payable on Minnie’s share of net income would not be subject to Div6AA rates as Minnie is an excepted person because she is a minor who is working full time.

In relation to the other $25,000 of net trust income to which no one is presently entitled the trustee will pay tax on that amount in accordance with S99 as it is a trust created as a consequence of a will. Ordinary marginal tax rates will apply to this share of the income.

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