What you have to do

This assessment consists of 9 tasks. All tasks are compulsory.

The recommended textbook, OLS learning resource and web tutorials will assist you with this assessment.

Competency requirements

Students must achieve a satisfactory result in each element to pass this assessment.

If you do not satisfactorily complete any of the questions (i.e. you do not achieve the nominated passing mark for that question) then you will be required to do a gap assessment or a resubmit of the entire assessment. Please note you will not be able to attempt the assessment more than twice.

To achieve a satisfactory result in these topics you must achieve the following results for each task:

Task	Topics	Satisfactory/Not satisfactory
1	Tax Avoidance
2	Organisational policies and procedures
3	Superannuation contributions
4	Partnerships
5	Administration of tax
6	Foreign source income
7	Trusts
8	Company Reconciliations
9	Company Franking Accounts
Result	Assessment result: Satisfactory (S) / Unsatisfactory (U)

Task 1 – Tax avoidance

Robert is a registered tax agent who has been providing tax-planning advice to David, a plumber with his own business, for many years and who has an appetite for high-risk arrangements. This year, Robert tells David that he has identified an area of the law where there is room to maneuver and that he can design a structure for David, as a way to minimise his tax, for an extra fee.

Required

This task requires you to recognise tax avoidance by critically evaluating and researching the relevant concepts such as promoter penalty laws.

1. Discuss whether Robert’s tax planning arrangement is a tax avoidance scheme or
2. Explain Robert how promoter penalty laws operate and the maximum penalties that the Federal Court can impose on

Note: Your answers should be at least two paragraphs in length for each part and you may search the ATO’s website for tax planning.

Task 2 – Organisational policies and procedures

Antonio has been operating as a sole trader and has been making all business decisions both operational and financial. Over the years, Antonio’s business has grown extensively in size and needs. He now has to rent a warehouse to keep a large inventory and must put in a system to monitor the inventory items. He is also planning to acquire another business to extend his business opportunities. Consequently, Antonio has decided to change his business structure to a company so that the business could get injection of new capital through the shareholders.

Required

Considering the needs of the business, explain how the new company should adopt good tax governance practices. Your answers should address:

1. Decision making processes
2. Getting proper advice
3. Record keeping and documentation

Note: Your answers should be at least two paragraphs in length for each part and you may search the ATO’s website for effective tax governance.

Task 3 - Superannuation Contributions

During the 2017/18 tax year, Karen salary sacrificed $24,000 in her complying superannuation fund. Her employer also paid $3,515 in Superannuation Guarantee payments to her superannuation fund. Her taxable income is $37,000 for the 2017/18 tax year.

Required

1. Calculate the employer’s (1 mark)
2. Calculate the superannuation fund’s assessable amount and identify the type of (1 mark)
3. Calculate the tax payable on the contribution by the superannuation (1 mark)
4. Calculate Karen’s cap amount and determine how the excess contribution, if any, will be taxed and indicate how Karen can pay her tax (4 marks)
5. Explain if Karen is eligible for any of the tax offsets available in the superannuation (3 marks)

Note: You should refer the ATO’s website and may need to conduct a research for part e.

Task 4 – Partnerships

Mary and Ted are partners in a delivery business. Their partnership agreement specifies that they are to share all profits and losses equally after allowing for partner’s salaries, and interest on capital. All partnership assets are owned equally. During the 2017/18 year, the partnership has recorded the following transactions.

Receipts	$
Sales	1,780,000
Interest on advance to Mary (note 1)	5,000
Proceeds from sale of delivery van (note 2)	20,000
Proceeds from sale of shares held as investments (note 3)	11,000
Payments	$
Operating expenses	1,420,000
Salary – Ted	90,000
Superannuation – Ted	10,000
Interest on bank overdraft	15,000
Interest on loan from Ted	35,000
Interest on capital – Ted	55,000

Note 1: Interest received by the partnership on loan (advance) to Mary.

Note 2: The delivery van was sold on 1 July 2017 with an adjustable value of $12,000. All other capital assets are leased by the partnership.

Note 3: The shares were originally acquired in 2014/15 for $5,000. Neither partner has disposed of any other CGT assets during the 2017/18 year.

Note 4: Neither partner had any other assessable income or deductions during the year.

Required

• Calculate the partnership’s net income or loss for the year ended 30 June
• Prepare a worksheet showing the allocation of income or loss between
• Calculate Mary’s taxable income for the year ended 30 June

Task 5 – Administration of tax – penalties

1. During 2017/18 income year, Paul has worked for two different employers for one month and 11 months long

Paul included his income of $40,000 from the longer period but inadvertently forgot to include his other income of $4,000 from the shorter period in his tax return form.

Required:

1. Explain what the ATO would deem of Paul’s conduct of failing to pay the shortfall
2. Indicate the base penalty rate that would Paul be liable for the shortfall
3. When lodging its company tax return for the 2017/18 income year, ABC Pty Ltd did not include a sales income of $95,000. The Commissioner of Taxation had previously examined its activity statements and had advised the company about disclosing sales amounts in its income tax

Required:

1. Explain what the ATO would deem of company’s’ conduct of failing to disclose a sales income and calculate the shortfall
2. Indicate the base penalty rate that the company would be liable for the shortfall amount.

Note: You should refer the ATO’s website and conduct a research on penalties.

Task 6 - Foreign Source Income of Entities

John Pty Ltd, a resident Australian company had the following receipts for the year ended 30 June 2018. Note: the company is eligible as a small business.

RECEIPTS	$
Gross Interest from Italy (foreign tax $10,000)	30,000
Fully franked dividend	14,000
20% Partly franked dividends	7,000
Unfranked dividends	15,000
Interest (net of TFN tax of $4,700)	5,300

Required

2018. Calculate John Pty ’s taxable income for year ended 30 June 2018.
2019. Calculate John Pty ’s net tax payable or refundable for the year ended 30 June 2018.

Task 7 - Trusts

Harry Wilson died on 15 December 2017. His will provides that the net income of his estate is to be distributed to the following beneficiaries.

Beneficiary	Relationship	Distribution amount $
Samantha	His wife	$50,000
Fran	His daughter, age 25, bankrupt	$14,000
Tony	His son, age 17, paid $30,000 in gross wages for full time work – PAYG tax $4,500 withheld and received $4,000 from an inter vivos trust	$8,000
Steve	His son, age 15, paid $5,000 in wages for part time work which did not have PAYG tax withheld	$25,400

In addition to the distributions in the table above, the trustee also paid the following amounts during the year:

• $5,000 to Tony for a car to drive to work.
• $10,000 to a registered charity as a
• For the 2017/18 tax year, assessable income received by the trust amounted to

$120,000.

Required

1. Prepare a schedule nominating (5 marks).

• Beneficiary
• Whether or not the beneficiary is presently entitled
• Whether or not the beneficiary is under a legal disability
• Which sections of the act apply to make the income assessable
• Who is assessed on each amount
• The amount distributed or retained

1. Calculate the s95 net trust income and the tax payable by the trustee (5 marks).
2. Calculate tax payable by Tony and Steve (5 marks).

Task 8 - Company Reconciliation

Click Pty Ltd is a resident private company and is a base rate entity. Its income statement for the year ended 30 June 2018 reveals the following information.

Required

1. Prepare a statement reconciling the accounting net profit to taxable income for the year ended 30 June
2. Calculate the company tax payable for the year ended 30 June

Task 9 Company Franking Accounts

Russell Pty Ltd is a small business taxpayer and paid tax at 27.5% and has provided the following information for the year ended 30 June 2018.

The benchmark franking percentage is 60%.

Date	Item	$
30/6/2017	Debit balance	549
30/7/2017	PAYG instalment paid	12,500
31/7/2017	Paid franking deficit tax	549
3/9/2017	Received a dividend from Dutchy Ltd, an American company	7,000
1/10/2017	Received unfranked dividend from Bronko Ltd	5,900
29/10/2017	PAYG instalment paid	13,000
30/10/2017	Paid 60% franked dividend	14,000
3/12/2017	Paid balance of company tax for 2014/2015 ($7,500 less franking deficit tax $549)	6,951
4/2/2018	Received partly franked dividend (franking credit $1,281)	5,980
28/2/2018	PAYG instalment paid	12,500
28/4/2018	PAYG instalment paid	12,900
16/6/2018	Paid 60% franked dividend	250,000

Required

1. Prepare the franking account for the year ended 30 June
2. Calculate any additional taxes
3. What is the effect of the additional taxes payable on any future taxation