Reference no: EM13170127

Question

Alex is a tax resident of Australia. He is employed as a mechanic at Fix-A-Car Pty Ltd with a salary of $60,000 pa. In the course of his employment the company Alex received a car allowance of $5,000 and reimbursed him $200 for his parking expenses for the year ended 30 June 2012.

In the weekends Alex repairs automobiles in his workshop in his house backyard to supplement his income. His close relative Tony usually brings his car to Alex's home for servicing every month. Being a close relative to Alex, he did not to charge Tony for all the work done. Tony who loves gardening in return does Alex a favor by maintaining Alex's garden every weekend.

The recent economic downturn the Fix-A-Car Pty Ltd has to downsize. As a result Alex was made redundant and was offered a redundancy payment of $40,000. Alex has worked in that company for 5 years.

Required

Advise Alex on his tax implication on the income that he received. Discuss if Tony has any tax implication?

Rationale

This assignment has been designed so that you can:  

• gather and integrate your knowledge on the topics covered thus far; 
• investigate in depth the cases, rulings and legislation that are fundamental to taxation law; 
• demonstrate your ability to apply that knowledge to a hypothetical, practical situation; 
• exercise critical and reflective judgments; 
• demonstrate your ability to conduct research using provided materials as well as other legal resources; 
• develop your written skills; and 
• Demonstrate time management skills.

 Students should be able to identify and apply legislation and case law to the issues identified as well as demonstrates the ability to analyses the issues fully and discusses the application of taxation principles