Trading Stock, Capital Allowances and PSI — Questions
These are the current seminar problems supplied for this chapter. Attempt them before opening the answer page.
Seminar Question 1 — Jacob's Kitchen Warehouse — closing stock
Jacob's Kitchen Warehouse Pty Ltd commenced trading on 1 January 2027. Sales revenue for the six months was $75,000 and stock purchases cost $62,500. At 30 June 2027: air fryers 20 units (cost $220; replacement $200; market selling value $180); coffee machines 15 units ($300; $250; $360); vacuum sealers 10 units ($450; $520; $500). (a) Calculate closing stock if the company wants to minimise taxable income. (b) How does the answer change if it wants to utilise a $26,000 carried-forward tax loss as fully as possible?
Seminar Question 2 — Megan — stock sales, market decline, barter and gift
Megan sells outdoor furniture. Analyse: (a) 12 dining sets cost $1,200 each; 8 sold at $1,800; 4 remain and replacement cost is now $1,050. (b) Six heaters cost $900; selling price falls to $700; five sold and one remains. (c) A supplier forgives an $8,000 debt in exchange for a barbecue costing Megan $5,000 with market value $9,500. (d) Megan gives her parents a patio set costing $2,300 with market value $4,100.
Seminar Question 3 — Samuel the plumber — what is trading stock?
At 30 June Samuel holds two hot-water systems costing $14,000 each and separately charged to customers; copper piping costing $5,500 incorporated into jobs; a drain camera costing $6,400 used for diagnostic services; three pots of special glue costing $100 each; and connectors/clips/screws costing $950 used during jobs. Assuming trading stock is valued at cost, identify Samuel's closing stock.
Seminar Question 4 — Neil — luxury car, prime cost and disposal
Neil bought a luxury motor vehicle on 1 July 2023 for $145,000, uses it 80% for business and 20% privately, uses a compliant logbook and the prime-cost method, effective life 5 years, and sells it on 31 March 2026 for $55,000. Explain the effect on taxable income for 2025–26, ignoring instant write-offs.
Seminar Question 5 — Sunshine Printing — DVM, private use and sale
Sunshine Printing Pty Ltd bought a specialised printing machine on 1 July 2025 for $28,000, effective life 4 years, uses DVM, has 15% non-taxable/private use as stated in the problem, and sells the machine on 31 January 2027 for $8,000. Calculate the 2026–27 consequences, ignoring instant write-offs.
Seminar Question 6 — Amelia — low-value pool
Amelia's low-value pool opening balance on 1 July 2026 is $4,800. She disposes of a pooled security camera for $300, buys a replacement camera for $900 used 90% for income-producing purposes, and buys a $2,400 laptop used 75% for income-producing purposes. She is not GST registered and is not carrying on a business. Calculate the pool deduction and closing balance, and explain the laptop issue.
Seminar Question 7 — Oscar — website expenditure
Oscar's company pays $4,000 to establish a website (domain, design/build, hosting and online promotional presence) operational on 1 March 2026. It later pays to update photos/content. One year later it pays $3,000 to add inventory software, customer databases, shopping cart and payment processing, and $250 per month for maintenance/support/security. Apply TR 2016/3.
Seminar Question 8 — Charlotte — commercial buildings
Charlotte constructs three office buildings: Southport $2m, commenced 1 March 1995 and completed 1 February 1996; Robina $3m, commenced 1 October 2000 and completed 1 August 2001; Coomera $4.5m, commenced 1 September 2026 and completed 1 April 2027. Calculate the Division 43 deductions for year ended 30 June 2027.
Seminar Question 9 — Lucas and Mia — rental apartment assets
Lucas and Mia jointly buy a new-to-them apartment on 1 January 2027 for $1.2m. It was completed and first bought from the developer on 1 January 2023; construction cost attributable to it was $900,000 and it has been continuously rented. They then buy new furniture $15,000 (each item under $1,000), a new TV $4,000, a second-hand dining suite $1,200, kitchen utensils $280 and microwave $290. Advise on the tax treatment.
Seminar Question 10 — Brian — PSI / PSB
Brian is an accountant operating through a company he solely owns/directs. No employees. The company rents the house in which he lives and he uses a bedroom opening onto a veranda as an office plus a small stationery/printer room. Three clients generate $23,000, $31,000 and $4,200. Does the PSI regime apply and what facts/consequences matter?