Question

Which is the following is not a method under Section 70-45(1) ITAA97 by which a taxpayer can choose to value each item of stock on hand at the end of the income year based on its;

Select one:

a. ‘Replacement Value’ (ie the amount the taxpayer would have to pay to replace the stock)

b. Cost’ (ie the amount incurred in acquiring the item or bringing it into existence)

c.  ‘Market Selling Value’ (ie the amount for which the stock could be sold in the ordinary course of the taxpayer’s business)

d. A reasonable lower value for trading stock, where the trading stock is ‘obsolete’ or there are ‘other special circumstances’

Which of the following is incorrect:

Select one:

a. A school buys a chair, it can claim an input tax credit on the chair.

b. A café sells a bottle of water with a dine in meal, the water is a GST free supply. A dentist fixes a tooth, this is a GST free supply.

c. A supermarket sells a cake with a value of $5.50 the GST on the cake is 55 cents.

d. A car yard buys a new car, it can claim an input tax credit on the car.

Answer 1

Ques 1. The correct answer is D " A reasonable lower value for trading stock, where the trading stock is ‘obsolete’ or there are ‘other special circumstances’"

As per section 70-45(1) ITAA97 closing stock can be valued by only 3 methods:

1. Cost

2. Market Selling price

3. Replacement value

Ques 2. The correct answer is C " A supermarket sells a cake with a value of $5.50 the GST on the cake is 55 cents."

Cake, being a luxury item, will be taxed at 18%.

Input can be claimed on furniture (chair, in the given case)

Bottled drinking water and service performed by Dentist are GST free supply.

Although ITC is not allowed on car, however as the car yard is in the business of supplying cars, ITC will be available.