Deck 18: Managing a Business: Insurance and Taxes

Question 1

The duty to disclose facts under the Insurance Contracts Act 1984 extends to facts that are:

A)material.
B)known.
C)novel.
D)new.

Answer 1

A

Question 2

Which of the following does not represent a usual way to measure the amount recoverable when there has been a successful claim on an insurance policy?

A)The market value of the subject matter of the insurance at the time of the loss or destruction.
B)The amount required to replace the subject matter of the insurance.
C)The amount required to repair the subject matter of the insurance.
D)The amount it would cost to buy the subject matter of the insurance at the time the claim is resolved.

Answer 2

D

Question 3

Which of the following does not represent the position of the Insurance Contracts Act 1984 in relation to the nature of the interest the insured must have in the subject matter of insurance?

A)The insured must have an insurable interest as defined at common law at the time the contract is made.
B)It is not necessary to have a property interest in the subject matter at the time a contract is made.
C)A person can take out life insurance without having an insurable interest in the life insured at the time the contract was made.
D)An insurance contract will not be void only because the insured did not have an insurable interest at the time the contract was made.

Answer 3

A

Question 4

A contract uberrimae fidei is a contract:

A)of the utmost good faith.
B)at arm's length.
C)between strangers.
D)of insurance.

Question 5

Which of the following is not a form of general insurance?

A)Property insurance
B)Life insurance
C)Liability insurance
D)Motor vehicle insurance

Question 6

When Rochelle is paid by her employer, the amount she receives already has the tax deducted from it.This tax is:

A)goods and services tax.
B)capital gains tax.
C)income tax.
D)benefits tax.

Question 7

Whether a trust has an income tax liability does not depend on which of the following?

A)Whether the income earned by the trust is distributed to its beneficiaries.
B)The wording of the trust deed.
C)The type of trust.
D)Whether the trust has a TFN.

Question 8

If the insured's circumstances change during the term of an insurance contract:

A)they have no obligation to notify the insurer unless the risk under the insurance contract is dramatically changed.
B)they must tell the insurer if the change minimises the insurance risk.
C)they must tell the insurer if the change increases the insurance risk.
D)they must tell the insurer on request even if the change is unlikely to affect the risk.

Question 9

Which of the following is not a type of life insurance policy?

A)A whole of life policy
B)A termination policy
C)An endowment policy
D)An annuity policy

Question 10

When Zack Simmons insured 'Xanadu' bowling alley with Clayton's Insurance Co, he completed the proposal forms on his kitchen table before dashing out the door to attend a State of Origin football game.Because he answered the questions on the proposal in a rush, he described Xanadu as being constructed of brick and iron.However in truth, two of the walls were brick and the other two were made of wood, with an iron roof, and Xanadu was in a very derelict state.When Xanadu was damaged in a storm, the insurer refused to pay the claim because of the misrepresentation.Is the insurer entitled to refuse the claim?

A)Yes, if it can prove that if it had correct information about Xanadu at the time it would have declined to provide insurance.
B)Yes, if it can prove that the misrepresentation was innocent.
C)No.The insurer should have checked the construction materials itself.
D)No.To do so it must be proven that the misrepresentation was fraudulent.

Question 11

If an insured has fully insured the property with two different insurers:

A)the insurer with which the policy was first taken out must cover the claim.
B)the insurer with which the policy was last taken out must cover the claim.
C)the insurer must make an election as to which insurer to bring the claim with and that insurer can seek a pro rata contribution from the other insurer.
D)the insured can recover the full amount of the loss from both insurers.

Question 12

In order to insure property, a person must:

A)be the owner of the property.
B)be the trustee of the property.
C)be in possession of the property.
D)be someone who would suffer financial loss in the event of damage to or destruction of the property.

Question 13

The insurer will be deemed to have waived compliance with the duty of disclosure in a contract of insurance if before the contract is entered it does not:

A)request that the insured disclose information relevant to the insurer's decision to accept the risk.
B)verbally notify the insured of the consequences of a breach of the duty.
C)provide a cover note of insurance.
D)arrange for an insurance agent to explain to the insured their duties under the insurance contract.

Question 14

What is a 'pure endowment' policy?

A)A life insurance policy that provides for the payment of a specific sum when the insured dies or reaches a certain age.
B)An endowment policy in which there is a provision that if the insured dies before a specified date the insurer is only required to refund the premiums.
C)A policy that provides for the payment of a specific sum upon the insured's death within a specified period.
D)A type of indemnity insurance contract that provides for the payment of money on the happening of a particular contingency.

Question 15

Which of the following need not occur in order for an insurance contract to be formed?

A)The engagement of an insurance broker by the insured.
B)The completion of a proposal by the insured.
C)The payment of a premium by the insured.
D)The acceptance of the risk by the insurer.

Question 16

Which of the following statements about insurance is true?

A)The 'cover note' is the proposal form completed by the insured.
B)A proposal form is an offer of insurance which the insured can choose to accept by completing it.
C)The provision by the insurer of the proposal form for completion by the insured is acceptance of the insured's verbal offer.
D)An 'insurance agent' acts on behalf of the insurance company.

Question 17

Which of the following terms are not always included in an insurance contract?

A)Terms regarding payment of the premium.
B)Terms obliging the insurer to indemnify the insured based on the loss actually suffered.
C)Terms identifying the particular risk or happening to which the policy will respond.
D)Terms creating an obligation to indemnify or pay money on the happening of a particular event.

Question 18

Which of the following persons/parties do not have a TFN for the purposes of taxation?

A)A director of a company
B)A partnership
C)A trust
D)A sole trader

Question 19

If on paying an insurance claim the insurer assumes all of the insured's rights in relation to the subject of matter of the insurance:

A)the insurer is exercising its right of subrogation.
B)the insurer is likely to be related to the insured or is the insured's employee.
C)the insurer cannot sue a third party who caused the loss.
D)the insured person's admission of liability will not prejudice the insured's claim.

Question 20

The insurer will not be deemed to have waived compliance with the duty of disclosure in relation to a question included in a proposal form about a matter when:

A)the insured fails to answer a question.
B)the insured gives an incomplete answer.
C)the insured gives an irrelevant answer.
D)the insured gives an untrue answer.

Question 21

Which of the following is not one of the tax implications for a business of having a company structure?

A)A company is a separate legal entity and has its own TFN.
B)A company pays tax at the corporate rate.
C)A self-assessment scheme applies.
D)A company is not obliged to pay PAYG instalments.

Question 22

What is the 'PAYG withholding scheme'?

A)A scheme whereby partners and sole traders pay instalments of tax based on the previous year's tax assessment.
B)A scheme in which a business withholds and periodically pays to the Australian Tax Office income tax payable on payments to employees.
C)A scheme whereby corporations pay instalments of tax for a year, based on the previous year's tax assessment.
D)A scheme in which a business withholds and periodically pays to the Australian Tax office a sum representing its estimated yearly tax liability.

Question 23

Sale of which of the following products will not attract an excise duty?

A)Tobacco
B)Bread
C)Petrol
D)Coal

Question 24

Income tax is:

A)a Federal tax payable by an employer on the benefits it gives to employees.
B)a Federal tax levied on the taxable income of a person or business in a given year.
C)a State tax levied on the income and capital gain of a person or a business in a given year.
D)a State tax levied on the income of a person or business in a given year.

Question 25

Which of the following statements about stamp duty is not true?

A)It is a tax paid on the value of transactions.
B)It is also known as a general duty.
C)It is a federal tax.
D)It is also known as a transfer duty.

Question 26

A company must pay superannuation to which of the following parties?

A)Non-eligible employees
B)Directors
C)Shareholders
D)Suppliers

Question 27

Which of the following propositions is not true of capital gains tax?

A)It is not payable on the sale of a primary place of residence.
B)It is not payable on the sale of a motor vehicle.
C)It is not payable by corporations.
D)It is payable at the same rate as income tax.

Question 28

Which of the following legal requirements is not a prerequisite for the collection of GST from a business?

A)A business must register for GST.
B)A business must withhold PAYG instalments of 10%.
C)A business must have an Australian Business Number or 'ABN'.
D)A business must lodge activity statements with the ATO.

Question 29

Which of the following is a form of tax payable to local authorities?

A)Stamp duty
B)Pay-roll tax
C)Land tax
D)Rates

Question 30

Which of the following is not a form of tax payable to the Federal government?

A)Income tax
B)Capital gains tax
C)Fringe benefits tax
D)Payroll tax

Question 31

GST is payable on the sale of:

A)luxury vehicles.
B)fringe benefits.
C)medical care.
D)bread, milk and eggs.

Question 32

Johnny is a sole trader.He will pay income tax at the relevant:

A)sole trader rate.
B)individual rate.
C)corporate rate.
D)business rate.

Question 33

Which of the following is not one of the tax implications of being in a partnership?

A)The partnership has to lodge an annual partnership return.
B)The partnership must be registered under the PAYG instalments scheme.
C)The partnership has its own TFN and can apply for an ABN.
D)The partnership pays tax in its own name.

Question 34

What is 'land tax'?

A)A state tax payable on the unimproved value of land.
B)A federal tax payable on the gain made on the sale of land.
C)A local government tax on land paid to fund the provision of basic services to that land.
D)An archaic form of tax paid to the monarch.

Question 35

Which of the following business expenses is not a deduction for the purposes of income tax?

A)Employees' wages
B)Cost of trading stock
C)Motor vehicle expenses
D)Purchase price of business premises

Question 36

If an employee is allowed to use the business's holiday resort in New Zealand for free during her holiday, the business may be required to pay:

A)fringe benefits tax.
B)capital gains tax.
C)land tax.
D)GST.