Client #3 is a resident of Australia for tax purposes. He served in the navy of a foreign

Client #3 is a resident of Australia for tax purposes

Client #3 is a resident of Australia for tax purposes. He served in the navy of a foreign country during the First Iraq War (1990-1991). Your client receives a $30,000 ex gratia lumpsum payment from the foreign country on 26 February 2016. This payment is exempt from taxation in that foreign country. Members of the armed forces of the foreign country were entitled to certain war service benefits after the war but your client did not receive any of these benefits as he was residing in Australia after the war. The lump sum received by your client was paid in recognition that significant war service benefits were not available to your client. The amount of the payment was based on the time your client served in the foreign country’s navy during the Iraq War.

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Your client seeks your advice as to whether he has to include the $30,000 as assessable income on his 2016 income tax return.

Question 2

Client #4 provides you with information relating to the sale of two assets during the yearended 30 June 2016. He is seeking advice as to what amount(s), if any, must be returned as assessable income for the year ended 30 June 2016. In particular, you are required to determine your client’s net capital gain or net capital loss, if any, for the year ended 30 June 2016. Ensure your answer includes all calculations and references to applicable sections of the Income Tax Assessment Act 1997 and or rulings of the Australian Taxation Office.Grand Piano | Your client is an accomplished piano player, who also considers high quality pianos to be a very good, long term investment. In January 2003 he acquired a SteinwayK125 piano for $24,000. He keeps the piano at his place of residence and plays it on a regular basis. In May 2016 he sells the Steinway piano for $45,000 to fund the acquisition of a new Grotrain Chambre grand piano which costs $62,000. During your client’s period of ownership your client incurs the following costs:a. $2,000 in February each year, to insure the Steinway piano against loss or damage.b. $500 in March each year, to have the piano professionally tuned.c. $1,000 to have the piano professionally valued before its sale in May 2016.Vintage Car | Your client also has an interest in vintage cars. When he retired from the Commonwealth Bank in 2004, he purchased a vintage 1913 Cadillac 5 Passenger Touring car for $35,000. The car was only partially restored at the time and your client spent an additional $20,000 completing the restoration works. The car was stored in the garage of his home at St Lucia and he drove it around the streets of Brisbane on weekends. In May 2015 your client sells his house at St Lucia and purchases a small inner city apartment.Unfortunately, there is insufficient under cover parking space at the apartment complex, so your client has decided to sell the vintage car. See below for photo of car just before sale.

The car was sold at a prestige car auction on 31 July 2015 for $75,000. Your client incurred $2,000 in advertising and auction costs, relating to the sale of the car.

Your client also has unapplied capital losses of $5,000 being carried forward from the year ended 30 June 2015. These losses are quarantined, as they are associated with a capital loss from the sale of a painting in 2013.