CLWM4100 Taxation Law

CLWM4100 Taxation Law

CLWM4100
Taxation Law
Case Studies
Statement of Advice
30%
40
Via Turnitin on MyKBS
Monday of Week 13 at 19:55 AEST
Your task is to analyse client information outlined in the three different case studies below and present the findings in three Statement of Advice (approximately 2,000 words).
You are required to prepare Smart Solutions Pty Ltd’s taxation return.
1) You are required to provide advice and tax calculations to Julia and John (directors of Smart
Solutions Pty Ltd) regarding the tax payable by the company.
2) You are required to calculate the capital gains tax for Julia and Smart Solutions Pty Ltd.
3) You are required to complete the franking account and tax implications on dividend received
by Smart Solutions Pty Ltd shareholders.
For each question you are expected to:
1) identify the facts and issues for each case
2) apply the relevant legislation and/or case law.
Learning Objectives
After completing this Individual Assignment, you will be able to:
1) Research information about each question using tax cases and tax legislation. 2) Determine the main issues and make recommendations for each case.
3) Calculate taxes for an individual, a trust and a company.
Assessment Instructions
Statement of Advice 1 – Prepare a tax return for an entity (Australian private company)
(10 marks for technical and calculation accuracy and relevance and 10 marks for writing style; refer to marking rubric for more guidance.)
In your current role, you are responsible for providing taxation services to individual/business clients. You conducted an initial meeting with two (2) clients (Julia and John Smart, both Australian residents) to obtain and document all the relevant information which is required to prepare the relevant tax documentation.
Both Julia and John are directors of Smart Solutions Pty Ltd, an Australian resident private company with a corporate tax rate for imputation purposes of 30% for the 2021/22 income year.
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The clients have requested that you evaluate their tax position and provide recommendations relating to income tax liability and the optimum tax treatment.
Smart Solutions Pty Ltd sells coffee machines using accrual basis accounting for tax purposes. Receipts and payment details as at 30 June 2022 are as follows (ignore GST and small business concessions).
Receipts
Cash received for Sales (note 1) Dividend received (note 2)
Income tax refund (note 6)
Payments
Purchases of inventory (note 3)
Net wages paid to employees
PAYG withholding paid to the ATO Superannuation paid (note 4)
PAYG instalment paid the ATO (note 5) Fringe benefit tax paid to the ATO Purchase of motor vehicle (note 7) Other deductible expenses
Notes
$278,000 $8,720
$10,000
$97,000 $57,890 $12,780
$4,987
$5,210 $11,210 $52,000 $26,900
Note 1) All sales during 2022 income year were on credit. Account receivable balances were as follows.
Date 1 July 2021 30 June 2022 Accounts receivable $17,600 $19,800
Note 2) Dividend income received by Smart Solutions Pty Ltd for the year included:
• On 30/8/2021, a dividend of $3,600 received from Australian Bank Ltd (an Australian resident
public company for tax purposes) franked to 60%.
• On 28/2/2022, an unfranked dividend of $5,120 from Lowest Ltd (an Australian resident public
company for tax purposes).
Note 3) All inventory purchases during 2022 tax year were on credit. Account payable and inventory balances were as follows.
Date 1 July 2021 Accounts payable $5,280
Inventory (trading stock) on 1 July 2021 Inventory (trading stock) on 30 June 2022
30 June 2022 $5,830
$7,100
$8,400 $8,600 $8,500
– – –
at cost
at market selling at replacement
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Kaplan Business School Assessment Outline
Note 4) As per the ledger balances on 30 June 2022, Superannuation payable for June quarter was amounted to $1,727. The payment is due by 28 July 2022.
Note 5) As per the ledger balances on 30 June 2022, PAYG instalment liabilities payment and payable information are as follows.
24/8/2021 PAYG instalment paid for June quarter 2021 $ 860
25/11/2021 PAYG instalment paid for September quarter 2021 $1,450
28/2/2022 PAYG instalment paid for December quarter 2021 $1,450
26/5/2022 PAYG instalment paid for March quarter 2022 $1,450
June quarter 2022 was amounted to $1,450. The payment will be paid on 25 August 2022.
Note 6) The tax refund was received on 25 February 2022.
Note 7) The motor vehicle (Toyota Hatchback) was purchased on 1 March 2022 and used to deliver coffee machines. Bothdirectors wish to use the taxation effective life to depreciate the Motor vehicle.
Required
1) John wishes to minimise the income tax for 2021/22. Calculate Smart Solutions Pty Ltd’s net tax liability in respect of the income that it derived in the tax year 2021/22.
2) Advise assessability of receipts and deductibility of payments with explanations (Sales, Dividend income, Trading Stock, PAYG withholding, PAYG instalment, Superannuation guarantee, fringe benefits, Dividend paid and motor vehicle purchase). Include section numbers and/or cases in your explanations.
Statement of Advice 2 – Advice on company franking account and distributions (10 marks for technical and calculation accuracy; refer to marking rubric for more guidance)
Julia and John seeking your advice regarding Smart Solutions Pty Ltd’s franking account. (Please note: use all figures/information provided from Statement of Advice 1 above to construct the franking account for 2021/22. Opening balance is provided below).
Required
1)
2)
3)
1 July 2021, the balance in Smart Solutions Pty Ltd’s franking account was $18,721. Construct Smart Solutions Pty Ltd’s franking account for the 2021/22 financial year. You also need to calculate the franking account balance as at 30 June 2022.
Smart Solutions Pty Ltd wishes to pay a final fully franked dividend of $40,000 on 30 June 2022. However, Julia and John are concerned about the franking account to go into deficit. Calculate and advise the maximum frankable distribution amounts that Smart Solutions Pty Ltd can pay as fully franked dividend. What are the tax consequences if Smart Solutions Pty Ltd goes ahead and pays $40,000 fully franked dividend on 30 June 2022?
Assuming Smart Solutions Pty Ltd paid $40,000 fully franked dividend on 30 June 2022 (only dividend paid for the year), comment on the tax treatment of the dividend to the following four (4) shareholders:
• Julia and John Smart receive a dividend of $15,000 each. They are Australian residents at
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Kaplan Business School Assessment Outline
the highest marginal tax rate.
• $5,000 to Justin Smart, the son of Julia and John, who has been studying in London for
three years and is a foreign resident.
• $5,000 to Leaf Pty Ltd, an Australian private company with a 30% company income tax
rate.
Advise how each of the above four shareholders of Smart Solutions Pty Ltd would be taxed on the distribution received in 2021/22.
Statement of Advice 3 – Advice on net capital gains (10 marks for technical and calculation accuracy; refer to marking rubric for more guidance.)
Since 1997 John and Julia have invested in various Australian shares. Julia acquired the shares in her own name whereas John had his company Smart Solutions Pty Ltd acquire his share portfolio. On 29 June 2022 both Julia and John made a decision to dispose of their Australian shares and the proceeds and purchase prices information are as follows.
Julia’s share portfolio
Shares
Mega Mining Ltd Global Media Ltd Watson Tel Ltd Qantas Ltd
Purchase date
1 April 1997
10 June 2000 17 May 2013
8 January 2022
Costs
$8,000 $15,000 $34,000 $17,900
Proceeds
$12,400 $90,000 $33,500 $21,000
Proceeds
$62,000 $28,800
painting during 2018.
Smart Solutions Pty Ltd share portfolio
Shares
Xero Ltd Qantas Ltd
Other information
Purchase date
28 March 2018 26 June 2022
Costs
$45,000 $21,600
Julia has a capital loss of $600 carried forward from sale of
Required
1) Advise both Julia and John on the CGT consequences of their share sales.
2) Calculate net capital gains for the 2021/22 tax year. You must provide all methods available for her and choose the best method to minimise net capital gains for Julia and John (Smart Solutions Pty Ltd).
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Kaplan Business School Assessment Outline
Important Study Information Academic Integrity Policy
KBS values academic integrity. All students must understand the meaning and consequences of cheating, plagiarism and other academic offences under the Academic Integrity and Conduct Policy.
What is academic integrity and misconduct? What are the penalties for academic misconduct? What are the late penalties?
How can I appeal my grade?
Click here for answers to these questions:
http://www.kbs.edu.au/current-students/student-policies/.
Word Limits for Written Assessments
Submissions that exceed the word limit by more than 10% will cease to be marked from the point at which that limit is exceeded.
Study Assistance
Students may seek study assistance from their local Academic Learning Advisor or refer to the resources on the MyKBS Academic Success Centre page. Click here for this information.
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CLWM4100 Taxation Law Assessment 3
Marking Rubric /40 marks
Statement of Advice 1 (10 marks)
0–4
5 – 10
Achieved marks ( /10)
Has demonstrated limited achievement:
Correctly calculated some taxable income with assessable income and allowable deductions items.
Stated recommendations for the best outcome of taxable income in relation to credit sales, dividend received, inventory, wages, PAYG withholding/instalment, superannuation, fringe benefit, dividend paid and purchase of motor vehicle.
Struggled to articulate the correct taxable income.
Failed to address assessability and deductibility of receipts and payments.
Has achieved all or most of:
Correctly calculated the taxable income with assessable income and allowable deductions.
Stated recommendations for the best outcome of taxable income in relation to credit sales, dividend received, inventory, wages, PAYG withholding/instalment, superannuation, fringe benefit, dividend paid and purchase of motor vehicle.
Articulated the correct taxable income.
Addressed assessability and deductibility of each receipt and payment.
Statement of Advice 2 (10 marks)
0-4
5 – 10
Achieved marks ( /10)
Has demonstrated limited achievement:
Either did not prepare or only partially prepared Smart Solutions Pty Ltd franking account for 2021/22. Failed to enter correct the debit/credit entries with running balances in the franking account.
Failed to identify any consequences arising from Smart Solutions Pty Ltd franking account balance as at 30 June 2022.
Failed to correctly address tax implications of various shareholders.
Has achieved all or most of:
Correctly prepared Smart Solutions Pty Ltd franking account for 2021/22. Correctly entered the debit/credit entries with running balances in the franking account.
Correctly identified consequences arising from Smart Solutions Pty Ltd franking account balance as at 30 June 2022.
Correctly advised the taxation implications of various shareholders.
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Statement of Advice 3 (10 marks)
0–4
5 – 10
Achieved marks ( /10)
Has demonstrated limited achievement:
Did not explain or failed to explain the CGT consequences and CGT event.
Either did not correctly calculate or only partially calculated correctly capital gains/losses per item.
Failed to state various CGT methods.
Failed to calculate the best outcome of net capital gains.
Failed to advise on capital losses.
Has achieved all or most of:
Correctly explained the CGT consequences and CGT event. Calculated correct capital gains/losses per item.
Correctly advised on various CGT methods.
Correctly calculated the best outcome of net capital gains. Stated advice on capital losses.
All Statements of Advice Writing Style (10 marks overall)
0–4
5 – 10
Achieved marks ( /10)
Has demonstrated limited achievement:
Some sentences contain grammatical errors and typos, there are noticeable inconsistencies in the formatting, and the syntax makes some of the answers difficult to follow.
Has achieved all or most of:
The document does not contain any grammatical errors or typos, the formatting is consistent, and the syntax is articulate and legible.
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