FNSACC502 Prepare Tax Documentation For Individuals: Assessment Task 2

Assessment Task 2 Instructions 

Case study 1

Maria is an Australian resident. She works for Melbourne Accounts, a small Chartered Accounting firm in the Melbourne CBD. She has the following details for the year ended 30 June 2017:

• Salary of $100,000 plus super @ 9%
• Bonus for good performance on key performance indicators (KPIs) $8,000
• Bank Interest of $240 received on 3 July 2017
• Car allowance (for fuel, repairs and maintenance) $1,100 per month 
• Car provided by employer valued at $24,000 
• On 1 September 2012, Melbourne Accounts provided Maria with a mobile phone worth $800, and a laptop worth $2,000 to be used primarily for work related purposes.
• Super contribution from savings $8,000
• On 1 Feb 2017 Maria was injured in a car accident and her injuries prevented her from working for several months. Fortunately, she had personal disability insurance cover, and under this policy she received payments totalling $15,000 until 30 June 2017. 
• Professional membership $1,200
• Private health insurance for the year $1,140

Complete the following activities: 

1. List the source documents you would request from Maria during your meeting with her in order to file her return.

Record your responses in the AT2 Written Answers Template

1. Create an Excel spreadsheet that calculates the tax payable by Maria for the year ending 30 June 2017. 

Save the document as Spreadsheet.

Case study 2

Ralf was employed by Central Coast Consultants (NSW) Pty Ltd (‘Central’) as their General Manager on 02 June 2016. Central provided Jason with an executive car, which was purchased and delivered on the day Ralf commenced his employment. The car was purchased for $62,000, including $2,200 stamp duty.

Jason drove a total of 18,200 km from 02 June 2016 to 31 March 2017. He has a logbook showing business use of 20%. Part of Jason’s employment contract required Jason to pay all of the running costs on his car. The total value of all running costs for the FBT year ended 31 March 2015 was $5,200.

Complete the following activities:

Record your responses in the AT2 Written Answers Template

1. Calculate the Fringe Benefits Tax consequences for Jason’s vehicle, showing all of your calculations, using: 
2. The statutory formula method
3. The operating cost method
4. Which method would Unique prefer?

Case study 3

Radical Investments is the subject of a takeover by Conservative Investments. As a result, Radical Investments terminated the contract of its employee Mark, who receives a ‘golden handshake’ payment (an employment termination payment, or ETP). 

Mark is 45 years old and his taxable income for the year ended 30 June 2017 is $150,000 (excluding any ETP).

Mark receives an ETP of $25,000 on 30 June 2017. The ETP has no tax-free component.

Complete the following activities:

1. Calculate tax payable on the ETP. Show your workings, including what cap is appropriate.

Case study 4

Heidi runs a small retail business that specialises in custom-made bicycles for adults. It is registered for GST. She seeks your advice on the following items and the GST claimable or payable as recorded in her accounts book.

Complete the following activities:

1. Calculate the GST treatment of each of the following:
2. Stock purchased for $6,600 including GST
3. A bicycle sold to Mr Venlo for $3,300 excluding GST
4. A lycra cycling outfit Heidi purchased for herself for $660 (including GST)
5. A machine that cost $4,400 (including GST) used 80% for business. Show calculations.
6. Beef and vegetables for the office BBQ $230

Case study 5

Ted is the financial accountant of a large trading company Silver Stuff Ltd.

During the year ended 30 June 2017, the following assets were purchased

1. Calculate the maximum decline in value for each item for the year ended 30 June 2017. Give your reasons for each.

Case study 6

Daisy is the CEO of Silver Stuff Ltd. She has approached you for some tax advice on her personal income. The Board has approved an increase of $150,000 to her annual salary. She wants to know whether she can avoid tax by taking it in another form. For example, she could set up a company named Gold Stuff Ltd. She would then make annual loans to Gold Stuff, which she could then withdraw but not repay.

She promises you a week on her luxury yacht if you keep this information to yourself.

1. What are the implications for the following? Provide the relevant legislation code where applicable.
2. You as a tax agent
3. Daisy as a taxpayer
4. Silver Stuff Ltd. as a taxpayer
5. A week later you become aware that Daisy has gone ahead with her initial plan in collaboration with one of your colleagues. What process would you now take to report this to the relevant authorities?

Case study 7

Mohammad and Selina own a neighbourhood milk bar. 

Most of the milk bar’s sales involve small amounts of cash, except for some regular customers who have monthly accounts. They have a cash register through which they record all cash sales, including the monthly accounts. Any cash removed from the cash register for personal drawings, refunds, minor purchases, etc., is noted in a separate record used for this purpose.

The milk bar makes its trade purchases through a small number of established distributors. These operate on monthly invoice arrangements. They provide a delivery docket with each delivery and Selina reconciles this with the items delivered. Mohammad and Selina pay the invoices once a month by cheque after they have reconciled them with the relevant delivery docket.

At the end of each business day, Selina reconciles the contents of the cash register with the cash register tape, taking into consideration any cash removed from the cash register for personal drawings, refunds, minor purchases, etc. After the reconciliation, Selina tears off the 'Z-totals' at the bottom of the cash register tape and glues them into a book in chronological order, noting any discrepancies between the 'Z-total' and the cash contained in the register. She then banks the cash.

Once a month, Selina receives a statement from the bank containing details of her cash deposits. She reconciles this statement with the 'Z-totals' and other records which she has kept. Selina retains the rolls of tape produced by the cash register for one month after she has reconciled the bank statement with the 'Z-totals' and other records. She then disposes of the rolls of tape. However, Selina retains the 'Z-totals', bank statements and other records for the statutory period.

At the end of each month, Selina also reconciles the newsagency's sales, purchases and other expenses for that month, e.g., rent, wages, motor vehicle costs, etc., to determine whether the newsagency made a profit or a loss during that month. She summarises this information on a personal computer. This forms the basis of the information used to prepare the newsagency's income tax return at the end of the year of income.

Complete the following activities:

1. You work as the accountant for Mohammad and Selina and you have been contacted by the tax office to assist them with an auditing requirement. 
2. What would be classified as appropriate evidence of all cash transactions? 
3. How would you verify that the ‘Z-totals’ are an accurate record of the cash sales made by the business? 
4. What would be classified as appropriate evidence of all purchases? 
5. What other documentation may be provided to support any auditing requests? 

The monthly summary on the computer reconciling the newsagency’s account every month