ACC3004 Taxation

Diploma in Accounting

July 2024 Semester

Continuous Assessment 1 (Individual Assignment: 100 marks)

30% of Final Grade

INSTRUCTIONS TO STUDENTS:

This assignment consists of ONE (1) question with three (3) parts. You are required to provide ALL workings clearly.

Type your answers in a Word document using Times New Roman, font size 12 and submit via CANVAS. Assignments submitted through other ways (e.g. through email or hardcopy to the lecturer) will not be accepted.

Open your document in CANVAS after upload to ensure that the document submitted is complete and in order.

You should receive a confirmation email from CANVAS after submission.

Your submission should include a cover page that follows the following format:

Module Code & Module Name

Diploma Name

CA 1 (Individual Assignment)

Name

SIM Student Number

Do not type the questions into your submission.

Deadline: 24 July 2024 (Wednesday)

Late submission is subject to a 20%-mark deduction. Submissions that are late by more than one day will NOT be graded.

CA1 is an individual assignment and should be worked upon independently. Any form. of plagiarism and/or collusion will be penalised.

Important Note:

Students caught for Plagiarism and/or Collusion will be subjected to heavy penalties.

Plagiarism & Collusion

(extracted from Student Handbook) 

3.7.2 Plagiarism/Collusion

Plagiarism is theft of intellectual property.  It is a form. of lying, stealing and mistreating others.  Students are reminded that plagiarism is a serious offence subject to the Institute’s disciplinary procedures.

Plagiarism can mean any one of the followings:

· direct copying of phrases and/or passages without a reference and/or quotation marks;

· paraphrasing another writer’s work in your written work without citing the reference;

· making a direct reference to an author you have not read although you may have read about him. The correct way is to reference the secondary source you have actually read rather than referencing the original which you have not read;

· copying the work of another student, in part or in whole;

· handing in assignment that has already been submitted for assessment in the same or any other course.

Please note that it is also a disciplinary offence for students to allow their work to be plagiarised by another student.

A student found guilty of any of the above offences will render the student liable for disciplinary actions which may result in the voiding and adjustments to the continuous assessment grade and may result in expulsion from the Institute.

Learning Objective:

· Understanding the tax residence rules and the application of the rules.

· Reading and comprehending information provided to prepare a tax computation for tax resident individuals in accordance with tax rules and concessions.

· Maximizing deductions of expenses, personal reliefs, etc available to individuals.

[All amounts provided in the information are in Singapore dollars]

Alex Ong is a 51-years old Singaporean.  He has been working at Software Inc in Country K after completing his studies in Country K.  In anticipation of his elder son’s National Service enlistment, he applied for and was offered the Asia regional managing director position at the Singapore subsidiary of Software Inc. He moved back to Singapore on 15 November 2022 with his elder son.  His first day of work at Software Singapore Pte Ltd was 1 January 2023.  He is married to Amanda, 49-years old and a citizen of Country K. The couple have two sons, 18-years old Christopher and 15-years old Christian. Both sons are Singapore citizens.  For the year ended 31 December 2023, Alex derived gains/benefits/income and incurred expenses as given below:

a. Monthly salary of $45,000.

b. Monthly entertainment allowance of $5,000.

c. Contractual bonus of $45,000 for employment services rendered for the year 2023 and which was paid to Alex on 2 January 2024.

d. Alex and his employer make CPF contributions within the statutory limits.

e. Alex is provided with a car by his employer effective from 1/1/2023.  The car costs $208,000 (not inclusive of COE of $80,000) and has a residual value of $60,500.  The car’s annual running expenses, like road tax, insurance, repairs and maintenance, car park at office, of $28,000 are borne by the employer while Alex will bear the daily running expenses (e.g. petrol, ERP toll charges, ad hoc car park charges).

f. Alex was granted the option to purchase 12,000 shares at $13.50 per share.  On 16 July 2023, he exercised the option and bought 8,000 shares when the market price was $14.70.

g. The company reimbursed/paid for the following expenses incurred by/on Alex during the year:

1. Air tickets costing $13,000 to Countries X, Y and Z to attend business conferences.

2. Air tickets costing $28,000 for the family to travel to Country K to attend Christopher’s high school graduation celebrations in Country K in May 2023.

3. Car hire charges of $5,000 incurred by Alex while on overseas business trips.

h. Alex rented a fully furnished house (annual value of $60,000) from 1 December 2022 to 30 November 2024.  80% of the monthly rent of $10,000 is borne by the company.

i. As Alex must attend weekly conference calls with the parent company in Country K, his residential telephone bills are paid for by the company.  He estimates that 20% of his annual telephone bill of $3,000 is for personal use.

j. Alex incurred the following expenses which were not reimbursed by his employer:

1. business entertainment expenses of $53,950;

2. taxi fares of $500 for commute between home-airport-home for business travels; and

3. car running expenses of $800 relating to travels for client meetings in Singapore.

k. Alex also has the following receipts during the year 2023

1. Singapore one-tier dividend of $2,250.

2. Interest income from OCBC Bank, an approved bank of $1,500

3. Alex remitted savings of $100,000 back to Singapore on 10 May 2023 as he intends to purchase a property for his family to live in permanently instead of rental accommodation.  The savings were from his salary earned while working in the US.

4. Alex has owned an apartment for the past 15 years for investment purposes. In year 2023, the apartment was rented out from 1 January till the current tenant moved out on 31 October 2023 and then from 1 December 2023 to another tenant under a 2-year tenancy agreement.  In November, Alex had the vacant property deep cleaned and carried out some minor repairs and replacements.  For the year ended 31/12/2023, the income and expenses from the apartment are as follows:

· Rental income for the year: $89,000

· Fire insurance and property tax (annual): $9,000

· Annual maintenance fee: $12,000

· Replacement of air-conditioners and upgraded them to energy-saving models: $15,100

· Replacement of old kitchen cabinets with cabinets of similar materials and fixtures: $30,500

· Mortgage repayment (monthly): $3,200 (comprising capital repayment of $2,000 and interest of $1,200)

Alex’s wife, Amanda, arrived in Singapore on 15 July 2023 after ensuring that Christian was comfortable living with his grandparents in Country K.  Christian will continue his studies in Country K until it is time for him to return to Singapore for National Service enlistment.  He will be taken care of by Amanda’s parents who will help to oversee Christian’s educational needs in Country K and his overall wellbeing. Amanda’s parents are in their seventies and have no income. Amanda has never lived in Singapore apart from the short visits to see her in-laws with Alex.  Amanda derived the following income in the year ended 31/12/2023:

l. Amanda secured a position as a senior relationship manager at an approved bank in Singapore at a monthly salary of $15,000. Her first day of work was on 1 September 2023.  Her employment pass issued by the Ministry of Manpower is valid for 2 years from 1 September.

m. Amanda derives rental from two Singapore properties that she had bought many years ago.  The rental derived from year 2023 are as follows:

- Property 1 derived a net rental loss of $2,000 due to replacements of old and worn furniture requested by the tenant.  

- Property 2 derived a net rental surplus of $1,500.

n. Amanda earned interest income of USD 5,000 (SGD 6,000) in 2022 from her deposit placement with Citibank in New York.  The interest was remitted to Singapore on 3/1/2024.

o. Amanda earned interest income of $6,000 from a loan made to ABC Pte Ltd, a company tax resident in Singapore.

Other information:

p. Alex and his wife hired a foreign domestic helper at a monthly salary of $1,000 to help with domestic chores.  The monthly levy of $60 is paid by Alex. The helper commenced employment with the family on 1 October 2023.

q. Christopher enlisted for National Service in August 2023.  Up till the enlistment day, Christopher was engaged in volunteer work with a youth organization in Singapore and did not derive any income.  He had completed his high school studies (the equivalent to pre-university studies or Singapore’s A-Levels) in year 2022 in Country K.

r. Alex’s parents are both in their early seventies and only his father live with the couple.  Alex’s father, a retiree, derived $10,000 in lottery winnings in 2023.  Alex’s mother who is handicapped.by Parkinson’s disease, lives in a nursing home.   Alex pays the annual nursing home fees of $60,000.

s. Alex and Amanda send S$ 10,000 each month to Amanda’s parents in Country K for the daily living needs of her parents and their younger son, Christian.

t. Alex was not called up for reservist training during the year.  He was not a key appointment holder in the army (reservist).

u. Alex and Amanda have fully claimed the parenthood tax rebate on their children in prior years.

Requirements:

Part I

Explain the tax residence status of Amanda for YA 2024 using the relevant tests of residence and administrative concession.  You should address if Amanda is able to qualify as tax resident for YA 2024 under the relevant administrative concession. In this regard, your answer should address the following:

A) Explain if Amanda has satisfied the qualitative test and state the reason(s) for your answer.   (3 marks)

B) Explain if Amanda has satisfied the quantitative test and state the reason(s) for your answer.    (8 marks)

C) Identify and explain which administrative concession can be used to determine the tax residence status of Amanda. (7 marks)

Clarity of answer. (2 marks)

(Total = 20 marks)

Part II

Determine the taxable net rental income from the property owned by Alex using the format provided in Appendix 1. (15 marks) 

Part III

Prepare the YA 2024 tax computation for Alex and Amanda in the format provided in Appendix 2 (you are to treat both individuals as tax resident in Singapore).  If benefits are to be pro-rated based on usage, please use the actual number of days to pro-rate (there are 28 days in February 2023 and 365 days in the calendar year 2023).

Where an item of receipt is not brought to tax (or conversely an item of expense is not claimed for deduction), please insert in “0” (zero) in the tax computation and state the reasons separately – e.g., not taxable as not remitted to Singapore or not deductible as capital in nature.

Alex and Amanda would like to maximise any claims for deduction to achieve an overall lower tax liability.  You are to consider all relevant personal tax relief and where it is not available, please insert in “0” (zero) in the tax computation and state the reasons why the claim is not admissible – e.g., income more than $4,000.  (65 marks)