FNSACC522 Taxation Assessment 2026 | 200 Practice
Questions with Answers & Explanations | Exam Prep Guide
SECTION A: INCOME TAX FUNDAMENTALS & TAX RETURNS (Questions 1–60)
1. A client earned $80,000 in salary, $5,000 in bank interest, and $2,000 in fully franked dividends with
franking credits of $857. What is the assessable income under s 6-5 ITAA97?
A. $80,000
B. $85,000
C. $87,857
D. $82,857
Answer: C
Explanation: Assessable income includes ordinary income (salary, interest) and statutory income (dividends
+ franking credits). $80,000 + $5,000 + $2,000 + $857 = $87,857.
2. Under the Australian tax system, which section of the Constitution grants the Commonwealth power to
levy taxes?
A. Section 61
B. Section 51(ii)
C. Section 90
D. Section 109
Answer: B
Explanation: Section 51(ii) of the Commonwealth Constitution empowers Parliament to make laws with
respect to taxation, provided it does not discriminate between states.
,3. A taxpayer receives a reimbursement from their employer for a work-related expense they personally
incurred and claimed as a deduction. How is this treated for tax purposes?
A. Reimbursement is assessable income; deduction is reduced
B. Reimbursement is non-assessable; deduction stands
C. Reimbursement is capital and ignored
D. Reimbursement is exempt under FBTAA
Answer: A
Explanation: Reimbursements for deductible expenses are assessable income under ordinary income
concepts, and the original deduction must be reduced by the reimbursement amount.
4. Sarah sold shares in July 2024 for $50,000 that she purchased in August 2005 for $20,000. She has no
other capital transactions. What is her net capital gain?
A. $30,000
B. $15,000
C. $10,000
D. $20,000
Answer: B
Explanation: As the asset was held for more than 12 months, Sarah is entitled to the 50% CGT discount.
Capital gain = $30,000 × 50% = $15,000.
5. A sole trader using cash accounting received $10,000 for services in June 2026 (performed in May 2026)
and issued an invoice for $15,000 for services completed in June 2026 (payment expected in July 2026).
What is assessable income for 2025-26?
A. $25,000
B. $15,000
C. $10,000
D. $0
Answer: C
,Explanation: Under cash accounting, income is derived when actually received. Only the $10,000 received
in June is assessable; invoiced amounts not yet received are excluded.
6. A client has a HELP debt. In 2025-26, their repayment income is $120,000. According to ATO rates, the
compulsory repayment rate is 6%. What is their minimum HELP repayment?
A. $6,000
B. $7,200
C. $5,400
D. $8,500
Answer: B
Explanation: HELP repayment is calculated as repayment income × applicable rate. $120,000 × 6% =
$7,200.
7. The Medicare Levy for the 2025-26 income year for a single taxpayer with taxable income of $35,000
is:
A. 0% (fully exempt)
B. 2% of taxable income with a phase-in
C. 10% of taxable income
D. 2% of taxable income with no reduction
Answer: B
Explanation: The Medicare Levy is 2% of taxable income but is reduced on a sliding scale for low-income
earners between the low-income threshold and the phase-in limit.
8. Tom (age 45) earns $95,000 PAYG salary and has no private health insurance. His taxable income is
$95,000. What is his Medicare Levy Surcharge (MLS) liability for 2025-26?
A. 0% as he has no PHI
B. 1% of $95,000
C. 1.25% of $95,000
D. 1.5% of $95,000
, Answer: C
Explanation: For a single taxpayer with income over $93,000 and no PHI, MLS is 1.25% of taxable income
(tier 2).
9. A taxpayer sells their main residence (purchased for $400,000, sold for $700,000). They lived in it for 8
years, rented it for 2 years, and then lived in it for 2 more years. What is the CGT consequence?
A. Full main residence exemption applies
B. CGT applies to 10% of the gain
C. CGT applies to 25% of the gain
D. No exemption available
Answer: A
Explanation: Under the main residence exemption, if a property is used to produce income for a period but
was the taxpayer's main residence both before and after, a partial exemption may apply, but the '6-year rule'
can fully exempt the gain if not another PPOR.
10. A client incurred a $3,000 capital loss from share trading in 2024-25 and a $10,000 capital gain from
selling an investment property in 2025-26. How is the loss applied?
A. Loss can only offset capital gains
B. Loss can offset any assessable income
C. Loss carried forward indefinitely but cannot offset non-capital income
D. Loss is deductible in the year incurred
Answer: C
Explanation: Capital losses can only offset capital gains and cannot be deducted against ordinary income.
Unused losses are carried forward indefinitely.
Questions with Answers & Explanations | Exam Prep Guide
SECTION A: INCOME TAX FUNDAMENTALS & TAX RETURNS (Questions 1–60)
1. A client earned $80,000 in salary, $5,000 in bank interest, and $2,000 in fully franked dividends with
franking credits of $857. What is the assessable income under s 6-5 ITAA97?
A. $80,000
B. $85,000
C. $87,857
D. $82,857
Answer: C
Explanation: Assessable income includes ordinary income (salary, interest) and statutory income (dividends
+ franking credits). $80,000 + $5,000 + $2,000 + $857 = $87,857.
2. Under the Australian tax system, which section of the Constitution grants the Commonwealth power to
levy taxes?
A. Section 61
B. Section 51(ii)
C. Section 90
D. Section 109
Answer: B
Explanation: Section 51(ii) of the Commonwealth Constitution empowers Parliament to make laws with
respect to taxation, provided it does not discriminate between states.
,3. A taxpayer receives a reimbursement from their employer for a work-related expense they personally
incurred and claimed as a deduction. How is this treated for tax purposes?
A. Reimbursement is assessable income; deduction is reduced
B. Reimbursement is non-assessable; deduction stands
C. Reimbursement is capital and ignored
D. Reimbursement is exempt under FBTAA
Answer: A
Explanation: Reimbursements for deductible expenses are assessable income under ordinary income
concepts, and the original deduction must be reduced by the reimbursement amount.
4. Sarah sold shares in July 2024 for $50,000 that she purchased in August 2005 for $20,000. She has no
other capital transactions. What is her net capital gain?
A. $30,000
B. $15,000
C. $10,000
D. $20,000
Answer: B
Explanation: As the asset was held for more than 12 months, Sarah is entitled to the 50% CGT discount.
Capital gain = $30,000 × 50% = $15,000.
5. A sole trader using cash accounting received $10,000 for services in June 2026 (performed in May 2026)
and issued an invoice for $15,000 for services completed in June 2026 (payment expected in July 2026).
What is assessable income for 2025-26?
A. $25,000
B. $15,000
C. $10,000
D. $0
Answer: C
,Explanation: Under cash accounting, income is derived when actually received. Only the $10,000 received
in June is assessable; invoiced amounts not yet received are excluded.
6. A client has a HELP debt. In 2025-26, their repayment income is $120,000. According to ATO rates, the
compulsory repayment rate is 6%. What is their minimum HELP repayment?
A. $6,000
B. $7,200
C. $5,400
D. $8,500
Answer: B
Explanation: HELP repayment is calculated as repayment income × applicable rate. $120,000 × 6% =
$7,200.
7. The Medicare Levy for the 2025-26 income year for a single taxpayer with taxable income of $35,000
is:
A. 0% (fully exempt)
B. 2% of taxable income with a phase-in
C. 10% of taxable income
D. 2% of taxable income with no reduction
Answer: B
Explanation: The Medicare Levy is 2% of taxable income but is reduced on a sliding scale for low-income
earners between the low-income threshold and the phase-in limit.
8. Tom (age 45) earns $95,000 PAYG salary and has no private health insurance. His taxable income is
$95,000. What is his Medicare Levy Surcharge (MLS) liability for 2025-26?
A. 0% as he has no PHI
B. 1% of $95,000
C. 1.25% of $95,000
D. 1.5% of $95,000
, Answer: C
Explanation: For a single taxpayer with income over $93,000 and no PHI, MLS is 1.25% of taxable income
(tier 2).
9. A taxpayer sells their main residence (purchased for $400,000, sold for $700,000). They lived in it for 8
years, rented it for 2 years, and then lived in it for 2 more years. What is the CGT consequence?
A. Full main residence exemption applies
B. CGT applies to 10% of the gain
C. CGT applies to 25% of the gain
D. No exemption available
Answer: A
Explanation: Under the main residence exemption, if a property is used to produce income for a period but
was the taxpayer's main residence both before and after, a partial exemption may apply, but the '6-year rule'
can fully exempt the gain if not another PPOR.
10. A client incurred a $3,000 capital loss from share trading in 2024-25 and a $10,000 capital gain from
selling an investment property in 2025-26. How is the loss applied?
A. Loss can only offset capital gains
B. Loss can offset any assessable income
C. Loss carried forward indefinitely but cannot offset non-capital income
D. Loss is deductible in the year incurred
Answer: C
Explanation: Capital losses can only offset capital gains and cannot be deducted against ordinary income.
Unused losses are carried forward indefinitely.
