LAWS19033 Assignment Term 2 2012
Due Date: Tuesday 28 August 2012
Weighting: 30%
Word Limit: 1 500 words + calculations

Text book:
Author/s    :    Barcoczy, S    Year    :    2012
Edition    :    4th edn    Publisher    :    CCH Australia Limited
City    :    Sydney    State    :    New South Wales
Country    :    Australia

This assignment is to be submitted in hard copy to your local campus.  For Distance students the assignment should be posted to The Student Contact Centre, Building 5,  CQUniversity, Rockhampton QLD 4702.
The preferred referencing style for this assignment is Australian Guide to Legal Citations €“ a link to which is provided on the Moodle site.
Refer to the Course Profile for details regarding the assessment criteria.

Assignment detail

Ken, aged 42, works at the local take-away shop in his home town of Daintree.  Ken is living at home with his parents in Daintree in Queensland.  He wants to start saving for his future so he purchases a house as a rental property on 1 September 1997 for $85 000 with purchase costs of $5 000.    The tenants have trouble with the roof leaking in January 2012 and Ken has the roof fixed for a cost of
$4 000.

Ken is moving out of home in 2012 and he wants to sell the property to free up some money for the move.  He puts the house on the market for $300 000 in March 2012.  The house sells for $280 000 on 1 May 2012, with the contract settling on 1 June 2012.  Agents commission on the sale amounts to
$5 000 and legal costs amount to $500.
The house is rented up to 1 June 2012 with $8 500 in rent received for the year.  The following costs were incurred in relation to the house in the current income year.

Management commissions throughout the year            $  600
Interest on loan     paid throughout the year            $8 000
1 August  2011        Replacement of front stairs where they were rotted out        $2 500
15 September 2011    Replacement of broken windows smashed by vandals        $1 800
30 September 2011    Replacement of the gas hot water system with a solar system    $4 500
due to leakages in the gas system rendering it unsafe
30 September 2011    New airconditioner installed in master bedroom            $    900

The gas hot water system was sold to a scrap metal dealer for $150 when it was removed on 29 September 2011.
A number of assets in the house were subject to decline in value using the diminishing value method.  These assets were all purchased after 10 May 2006.

Asset    Cost

$    ing adjustable value
$    Effective life
(years)
Curtains and drapes    2 000    970    6
Air conditioners    4 000    1 450    10
Floor coverings    5 600    4 588    10
Gas hot water system    4 000    700    12
Stove     1 200    900    12

During the 2011/2012 income year Ken earns $45 000 in wages from his job.  Ken purchases the Woman’s Day magazine every week at a cost of $4.95 but he doesn’t keep receipts for the purchase.  He purchases this magazine so that he can talk to his customers about the events happening around the world.  Ken also buys board shorts with an Hawaii floral print to wear to work.  These cost $45 each and he purchases 6 pairs throughout the year.  He wears the board shorts with an embroidered shirt that is supplied by the owners of the take-away shop.
Ken has private health insurance cover with Westfund at a cost of $2 500 for the year.  This cover includes cover for both hospital expenses and ancillary expenses.   He does not claim a rebate to reduce his monthly premiums through Westfund,  preferring to claim this through his tax.  Ken has had trouble with his shoulders due to a surfing injury during the year and has paid physiotherapist fees of $2 000 in relation to his injury.  He was referred to the physiotherapist by his doctor.  Rebates from Westfund in relation to those fees amounted to $500.  Ken also claimed for some dental work costing $1 000, with rebates being paid of $200.  General visits to his GP during the year amounted to $550.  Ken claimed Medicare rebates in relation to these visits of $250.
Required:
a)    Determine Ken’s taxable income for the year ended 30 June 2012.
b)    Calculate Ken’s tax payable for the 2011/12 income year.  In calculating the tax payable amount, do not take the effect of PAYG withholding payments into account.

In your answer you are expected to justify what amounts should be included or excluded from your calculations with an accompanying discussion.  In your discussion you must provide references to the relevant sections of the ITAA36 and ITAA97 and any relevant case law.

While the assignment is based on material covered in the course, you are free to research as widely as you need to in order to complete this assignment as long as all materials so referred to are appropriately referenced in the assignment.