Question

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 s25-5
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
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 s25-5
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

Answer 1

Required 6

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.

This is because, GST free supply means supply on which no GST is to be levied. This generally includes, essential goods. The input credit on the products used to supply tax exempt goods are not allowed as credit.

Required 7

B. $454.55

Total purchase price = 5,000

Rate of GST 10%

Since the GST amount is included,

GST = 5,000 /110%*10% = 454.55

Required 8

D. All of the above statements are false
This is becuase, fringe benefits are benefits paid by an employer to his or her employees.

Required 9

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

This is because, Ordinary income is an income earned in the ordinary course of business.

Required 10

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

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