Tax Planning Exam Preparation Guide
Course Introduction
Tax Planning is a comprehensive course designed to equip students with the knowledge and skills necessary to effectively manage and optimize tax liabilities for individuals and businesses. The course covers foundational tax concepts, principles of tax law, and strategic approaches to minimize tax burdens through timing, income shifting, and taking advantage of various deductions, exemptions, and credits as allowed by legislation. Students will analyze case studies and participate in practical exercises to apply tax planning strategies in real-world scenarios, ensuring compliance while maximizing financial outcomes. Emphasis is placed on current tax regulations, ethical considerations, and the impact of tax planning on financial decision-making.
Recommended Textbook
Financial Planning 2nd Edition by Warren McKeown
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15 Chapters
443 Verified Questions
443 Flashcards
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Chapter 1: Personal Financial Planning
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30 Verified Questions
30 Flashcards
Source URL: https://quizplus.com/quiz/70601
Sample Questions
Q1) The role of ASIC is to:
A) draft legislation governing the financial planning industry
B) monitor competition policy within the financial services sector
C) ensure compliance by practitioners with legal requirements governing the financial planning industry
D) establish and monitor compliance of the prudential regulations that govern the operations of financial institutions within Australia
Answer: C
Q2) A managed fund investing in subprime mortgages will be holding assets of:
A) low quality with a low possibility of default by borrowers
B) low quality with a high possibility of default by borrowers
C) high quality with a low possibility of default by borrowers
D) high quality with a high possibility of default by borrowers
Answer: B
Q3) The term personal financial planning generally implies:
A) the achievement of a financial outcome within a specified time period
B) successfully gaining a job promotion
C) winning the lottery within a specified time period
D) both a and b
Answer: A
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Chapter 2: Financial Planning Skills
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31 Verified Questions
31 Flashcards
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Sample Questions
Q1) The relationship of the effects of taxation and positive rates of inflation on investment returns for a fixed interest security will be:
A) positive for both taxation and positive rates of inflation.
B) inverse for taxation and positive for positive rates of inflation.
C) inverse for both taxation and positive rates of inflation.
D) none of the above.
Answer: C
Q2) A personal balance sheet would not generally include:
A) dividends received during a period.
B) a motor vehicle.
C) a collection of rare banknotes.
D) both a and b
Answer: A
Q3) The debt-service ratio shows monthly debt commitments as a percentage of:
A) before-tax monthly income.
B) total liabilities.
C) after-tax monthly income.
D) none of the above.
Answer: C
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Page 4
Chapter 3: Taxation Planning
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26 Verified Questions
26 Flashcards
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Sample Questions
Q1) Where a shareholder is entitled to receive a dividend it will be included as part of their assessable income for the relevant financial year unless it is:
A) a fully franked dividend.
B) an unfranked dividend.
C) subject to a dividend reinvestment scheme.
D) none of the above.
Answer: D
Q2) Marginal income tax rates for individuals in Australia are best described as: A) regressive.
B) progressive.
C) constant.
D) none of the above.
Answer: B
Q3) Income tax is imposed on a taxpayer's:
A) assessable income.
B) taxable income.
C) tax offsets.
D) taxable income less tax offsets.
Answer: B
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Page 5
Chapter 4: Investment Choices
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29 Flashcards
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Sample Questions
Q1) The importance of the efficient frontier lies in the fact that it:
A) identifies where the most efficient portfolios are.
B) is a curve and shows how diversification lets investors improve their efficient risk / return ratio.
C) represents the optimal mix of return and risk for a portfolio of investments given a required level of risk.
D) all of the above.
Q2) Cash investments aim to provide:
A) a capital guarantee.
B) returns that fully offset the investor from the impacts of inflation.
C) income, liquidity and stable returns.
D) both b and c
Q3) To be _ _% confident that the actual returns will lie in a given range, we simply determine the values of the expected return plus two standard deviations and the expected return minus two standard deviations, assuming the returns are normally distributed.
A) 42
B) 68
C) 95
D) 99
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Chapter 5: Direct Investment Fixed Interest and Shares
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) The yield curve:
A) typically has a normal shape which slopes downward to the right.
B) is a graph of interest rates relative to their risk.
C) may be flat when short-term and long-term rates are virtually the same, and a humped yield curve may occur when medium-term rates are higher.
D) all of the above.
Q2) The relationship between nominal rates and real rates of return in times of rising inflationary levels results in:
A) real rates exceeding nominal rates of return.
B) nominal rates exceeding real rates of return.
C) both nominal and real rates of return being equal.
D) real rates being positively related to inflationary levels.
Q3) Investing in precious metals:
A) is often undertaken as a hedge against inflation.
B) provides both income and capital returns to investors.
C) is subject to significant supply and demand pressures.
D) both a and c
Q4) What characteristics are typically associated with ethical investments?
Q5) Outline the general characteristics of the Securities Market Line (SML).
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Chapter 6: Direct Investment - Property
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29 Verified Questions
29 Flashcards
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Sample Questions
Q1) When providing advice to a client on whether it is best for them to rent or buy a family home based only on financial grounds, the advice:
A) will favour the buying option in times of relatively low interest rates and current flat housing prices.
B) will favour the buying option in times of relatively tight rental markets.
C) both a and D) none of the above.
Q2) As compared to an A-REIT, an unlisted property trust is likely to:
A) be smaller in size holding less properties.
B) have relatively more debt as a proportion of the total trust assets.
C) both a and D) both a and b
Q3) Discuss the range of factors that you would consider when considering the purchase of a commercial property.
Q4) Outline six of the positive characteristics that are associated with an investment in the property market.
Q5) Outline the taxation advantages of investing in a property trust.
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Page 8
Chapter 7: Managed Funds
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) The indirect cost ratio (ICR):
A) measures management costs not deducted directly from investors' account balances to the average net assets of the fund.
B) measures the average net assets of the fund divided by the management costs deducted directly from investors' account balances.
C) approximates current performance bonuses.
D) all of the above.
Q2) The four main types of listed managed fund structures operating through the ASX are:
A) LICs, LITs, REITs and ETFs.
B) LIRs, LITs, RDITs and ETFs.
C) LICs, LITs, RDITs and ETAs.
D) none of the above.
Q3) The relationship that exists between unsystematic risk and the number of securities held in an investment portfolio is:
A) non applicable as no relationship exists.
B) inverse until unsystematic risk is removed.
C) positive until unsystematic risk is removed.
D) inverse up to a maximum of 10 securities and then positive.
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Page 9
Chapter 8: Leveraged Investments
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Sample Questions
Q1) Assume that Manfred undertook the share investments as shown in Question 27 using the margin loan facility and that after a period of 12 months the share portfolio was valued as follows:
\[\begin{array} { | l | c | c | }
\hline \text { Details } & \text { Purchase Value (\$) } & \text { LVR (\%) } \\
\hline \text { Amber Mining } & 12500 & 60 \% \\
\hline \text { Hardly Normal Electrical } & 30700 & 60 \% \\
\hline \text { Newstart Carparation } & 23800 & 70 \% \\
\hline \text { Reglan Trading } & 22000 & 70 \% \\
\hline
\end{array}\] a) What is the maximum margin lending loan now available to Manfred?
b) Assuming that the current margin loan from Come in Spinner Financing was that previously calculated in Question 27, what are the implications for Manfred of the reassessed maximum margin lending loan? Show all calculations.
c) What options are available to Manfred given your discussion in part (b) of this question?
Q2) What are the main considerations to be assessed when selecting a suitable investment asset to negatively gear?
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Chapter 9: Risk Management and Insurance
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30 Verified Questions
30 Flashcards
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Sample Questions
Q1) Comment on the factors that are relevant in selecting the type of motor vehicle insurance that would be most appropriate following a recent vehicle purchase.
Q2) When assessing how personal risk losses can be financed, which of the following alternatives are not possible in Australia?
A) Meeting losses from personal financial resources.
B) Transferring risks to a third party.
C) Applying for assistance from the personal risk loss relief fund.
D) None of the above.
Q3) Consumer credit insurance policies will exclude claims by the insured in which of the following circumstances?
A) The insured has a drug or alcohol addiction.
B) The death of the insured.
C) Sickness of the insured extending beyond a period of 12 months.
D) Both a and c
Q4) Gambling from the gambler's perspective is a good example of what type of risk?
A) Pure risk.
B) Speculative risk.
C) Arbitrage risk.
D) Property risk.
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Chapter 10: Superannuation
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30 Flashcards
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Sample Questions
Q1) Ms. Rachel Davidenko is a 42 year-old self-employed hairdresser and operates a business called Short Cutz at the local shopping centre. She has sought your advice prior to the end of the 2015 financial year as to how she can reduce her tax payable via maximising superannuation contributions given that her accountant has advised that her net business income for the 2015 financial year will be $100,000. Rachel has no other assessable income or tax deductible amounts in the 2015 year.
a) What is Rachel's maximum tax-deductible superannuation limit in the 2015 financial year?
b) Suppose Rachel plans to contribute $35,000 to her superannuation fund by the end of June 2015. Explain the effect on her tax situation.
Q2) a) Given the information for the AEU Superannuation Fund as stated in the previous question, calculate the fund's 2015 before-tax return as a percentage on an average fund investment of $42,450.
b) Given the information for the AEU Superannuation Fund in the previous question, calculate the fund's 2015 after-tax net cash flows.
Q3) Briefly discuss why a superannuation fund member's benefit balance is subject to the preservation rules.
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Chapter 11: Retirement Planning
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Sample Questions
Q1) For death benefit termination payments (DBTP):
A) the tax payable depends on who is the recipient of the DBTP and tax will not be payable by the deceased's estate if distributed to a beneficiary.
B) tax will be payable by the deceased's estate regardless whether the DBTP is distributed to a beneficiary.
C) the payment may include both a tax-free and taxable component.
D) both a and c
Q2) Nadia Seffener, aged 57, immediately withdrew $250,000 from a taxed superannuation fund upon her retirement in May 2014. Nadia's accumulated superannuation balance on retirement has a tax-free component of 30%. Ignoring the Medicare levy, advise Nadia how much tax will be payable.
A) $37,500
B) $11,250
C) $26,250
D) Nil
Q3) The issue of longevity risk has been identified as an increasing problem in more recent times, particularly in a relatively low-inflationary environment. Comment on this statement.
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Chapter 12: Self-Managed Superannuation Funds
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Sample Questions
Q1) Commercial terms regarding property acquisitions for a SMSF include:
A) acquiring assets on an arms-length basis.
B) paying rentals at above or below market rates.
C) both a and b
D) none of the above.
Q2) Business real property for a SMSF:
A) can be acquired from a related party on commercial terms without being subject to the 'in-house asset' test.
B) includes property used for primary production.
C) can comprise 100% of the total SMSF assets.
D) all of the above.
Q3) The purchase of an asset by a SMSF from a member will be regarded as being on an arm's length basis when it is purchased at:
A) not more than market value.
B) not less than market value.
C) market value.
D) none of the above.
Q4) Why are there likely economies of scale in operating a SMSF?
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Page 14
Chapter 13: Social Security
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Sample Questions
Q1) Recipients of government allowances:
A) have the same upper assets test threshold limits as pension payment recipients.
B) have a higher income test threshold than pension payment recipients.
C) both a and b
D) none of the above.
Q2) The general asset valuation methodology used for assessing eligibility for government benefits and allowances under the assets test is:
A) net market value.
B) fair market value.
C) fair market value less debts owing on the asset.
D) both a and c
Q3) Ms. Gladys Knight was a resident of a government supplied hostel accommodation facility in Adelaide until 20 June 2014 when she was relocated to a higher-level care nursing home. Gladys had originally paid $65,000 on 20 September 2010 as an accommodation bond when she moved to the hostel accommodation facility. Assuming the hostel retained the maximum monthly amount from the accommodation bond, how much is Gladys entitled to be refunded from the accommodation bond when she moves to the nursing home?
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Chapter 14: Estate Planning
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30 Verified Questions
30 Flashcards
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Sample
Questions
Q1) A generally accepted rule of law is that where both parties to a marriage die simultaneously and it is of relevance to determine which person died first, it is assumed that:
A) the person with the largest amount of net assets died first.
B) the wife died first.
C) the older person died first.
D) the husband died first.
Q2) The principal residence of the deceased is normally exempt from the CGT where the residence:
A) is sold within 3 years of the date of death.
B) is sold within 5 years of the date of death.
C) becomes the principal residence of the deceased's spouse from the date of death.
D) is sold by the executor with the proceeds distributed to the deceased's children within 5 years of the date of death.
Q3) In Australia, probate:
A) is granted by the Supreme Court.
B) means 'proof of the will'.
C) is required for all estates.
D) both a and b
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Page 16
Chapter 15: Development of a Statement of Advice
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Sample Questions
Q1) In relation to which document supplied by the financial adviser does the ASIC apply the test of what a person would reasonably require for the purpose of making a financial decision?
A) FSG
B) SOA
C) Limited financial plan
D) All of the above
Q2) Acting in the best interests of the client is required of the financial planner by the:
A) Corporations Act for all financial product recommendations to clients over a minimum value of $25,000.
B) Financial Planning Act for all financial advice recommendations to clients over a minimum value of $25,000.
C) Financial Planning Association for all financial advice recommendations to clients where practical to do so.
D) none of the above.
Q3) Discuss the importance of maintaining security over client records and what levels of internal controls a financial planning firm could maintain to ensure such levels of security.
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