Tax assignment Essay

Decent Essays
110.289 TAXATION


Name : Student ID : Delivery Mode : External – Distance


The best answer is (C).

An individual’s marginal tax rate is the rate of tax he/she pays on the last dollar of income earned assuming there is nothing else affecting the individual. In this question, Sandra has no dependants or other sources of income so there is nothing else affecting her.

An effective marginal tax rate of 40% applies to Sandra. This includes the top tax rate of 30% applicable to taxable income of $56,000 and the student loan standard rate of 10%.

(A) - The 30% rate would be Sandra’s base marginal tax rate without the student loan
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(B) - Running your second hand furniture business through Trade-me is a taxable activity. Businesses will always be taxable activities unless they make only exempt supplies.

(C) - A golf club collecting annual subscriptions from its members is a taxable activity. Although a club may not operate with a profit motive, raising funds regularly is a taxable activity.

(D) - Running a small business accounting service is a taxable activity as businesses will always be taxable activities unless they make only exempt supplies.

(Ref: NZT 21.3)


The best answer is (B).

The GST apportionment test for assets purchased by a GST registered person from 1 April 2011 allows an input tax credit at purchase in proportion to intended business use.

A purchaser can deduct input tax on the acquisition of goods and services to the extent to which goods or services are used or are available for use in making taxable supplies. An estimate of use can be done at acquisition using a method that provides a fair and reasonable result.

(A) - Full input tax credit can be claimed if GST registered persons acquire the asset for the principal purpose of making taxable supplies. (C) - No immediate deduction is allowed for input tax credit where goods and services are acquired principally for a non-taxable purpose.
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