Assignment Detail:- CLWM4100 Taxation Law - Kaplan Business School
Assessment - Statement of Advice
Learning Objective 1: Research information about each question using tax cases and tax legislation-
Learning Objective 2: Determine the main issues and make recommendations for each case-
Learning Objective 3: Calculate taxes for an individual, a trust and a company-
Your Part
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 Border Pty Ltd's taxation return-
1- You are required to provide advice and tax calculations to Cynthia and Andreas -directors of Border Pty Ltd- regarding the tax payable by the company-2- You are required to calculate the capital gains tax for Cynthia and Border Pty Ltd-3- You are required to complete the franking account and tax implications on dividend received by Border Pty Ltd shareholders-
For each question you are expected to:1- identify the facts and issues for each case2- apply the relevant legislation and/or case law-
Assessment Instructions
Statement of Advice 1 - Prepare a tax return for an entity -Australian private company-
In your current role, you are responsible for providing taxation services to individual/business clients- You conducted an initial meeting with two -2- clients -Cynthia and Andreas Rafter, both Australian residents- to obtain and document all the relevant information which is required to prepare the relevant tax documentation-
Both Andreas and Cynthia are directors of Border Pty Ltd, an Australian resident private company with a corporate tax rate for imputation purposes of 30% for the 2020/21 income year-
The clients have requested that you evaluate their tax position and provide recommendations relating to income tax liability and the optimum tax treatment-
Border Pty Ltd sells coffee machines using accrual basis accounting for tax purposes- Receipts and payment details as at 30 June 2021 are as follows -ignore GST and small business concessions--
Receipts
Cash received for Sales -note 1-
$278,000
Dividend received -note 2-
$8,720
Payments
Purchases of inventory -note 3-
$97,000
Net wages paid to employees
$57,890
PAYG withholding paid to the ATO
$12,780
Superannuation paid -note 4-
$4,987
PAYG instalment paid the ATO -note 5-
$5,210
Fringe benefit tax paid to the ATO
$11,210
Fully franked Dividend paid -note 6-
$30,000
Purchase of motor vehicle -note 7-
$52,000
Other deductible expenses
$26,900
Notes
Note 1- All sales during 2021 income year were on credit- Account receivable balances were as follows-
Date 1 July 2020 30 June 2021
Accounts receivable $17,600 $19,800
Note 2- Dividend income received by Border Pty Ltd for the year included:
• On 30/8/2020, a dividend of $3,600 received from Australian Bank Ltd -an Australian resident public company for tax purposes- franked to 60%-• On 28/2/2021, an unfranked dividend of $5,120 from Lowest Ltd -an Australian resident public company for tax purposes--
Note 3- All inventory purchases during 2021 tax year were on credit- Account payable and inventory balances were as follows-
Date
1 July 2020
30 June 2021
Accounts payable
$5,280
$5,830
Inventory -trading stock- on 1 July 2020
$7,100
Inventory -trading stock- on 30 June 2021
- at cost
$8,400
- at market selling
$8,600
- at replacement
$8,500
Note 4- As per the ledger balances on 30 June 2021, Superannuation payable for June quarter was amounted to $1,727- The payment is due by 28 July 2021-
Note 5- As per the ledger balances on 30 June 2021, PAYG instalment liabilities payment and payable information are as follows-
24/8/2020 PAYG instalment paid for June quarter 2020
$ 860
25/11/2020 PAYG instalment paid for September quarter 2020
$1,450
28/2/2021 PAYG instalment paid for December quarter 2020
$1,450
26/5/2021 PAYG instalment paid for March quarter 2021
$1,450
June quarter 2021 was amounted to $1,450- The payment will be paid on 25 August 2021- Note 6- The fully franked dividend was paid on 25 February 2021-
Note 7- The motor vehicle was purchased on 1 March 2021 and used to deliver coffee machines- Andreas wishes to use the taxation effective life to depreciate the machine-
Required
1- Andreas wishes to minimise the income tax for 2020/21- Calculate Border Pty Ltd's net tax liability in respect of the income that it derived in the tax year 2020-2021-
2- Advise assessability of receipts and deductibility of payments with explanations -Sales, Dividend income, Trading Stock, PAYG withholding, PAYG instalment, Superannuation guarantee, fringe benefit tax, 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
Cynthia and Andreas seeking your advice regarding Border Pty Ltd's franking account- -Please note: use all figures/information provided from Statement of Advice 1 above to construct the franking account for 2020/21- Opening balance is provided below--
Required1- 1 July 2020, the balance in Border Pty Ltd's franking account was $7,158- Construct Border Pty Ltd's franking account for the 2020/21 financial year- You also need to calculate the franking account balance as at 30 June 2021-
2- Border Pty Ltd wishes to pay a final fully franked dividend of $40,000 on 30 June 2021- However, Andreas and Cynthia are concerned about the franking account to go into deficit- Calculate and advise the maximum frankable distribution amounts that Border Pty Ltd can pay as fully franked dividend- What are the tax consequences if Border Pty Ltd goes ahead and pays $40,000 fully franked dividend on 30 June 2021????
3- Assuming Border 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:• Cynthia & Andreas Rafter receive a dividend of $15,000 each- They are Australian residents at the highest marginal tax rate-• $5,000 to Justin Rafter, the son of Cynthia & Andreas, 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 Border Pty Ltd would be taxed on the distribution received in 2021/22-
Statement of Advice 3 - Advice on net capital gains
Since 1997 Andreas and Cynthia have invested in various Australian shares- Cynthia acquired the shares in her own name whereas Andreas had his company Border Pty Ltd acquire his share portfolio- On 20 August 2021 both Cynthia and Andreas made a decision to dispose of their Australian shares and the proceeds and purchase prices information are as follows-
Cynthia's share portfolio
Shares
Purchase date
Costs
Proceeds
Mega Mining Ltd
1 April 1997
$8,000
$12,400
Global Media Ltd
10 June 2000
$15,000
$90,000
Watson Tel Ltd
17 May 2013
$34,000
$33,500
Qantas Ltd
8 January 2021
$17,900
$21,000
Border Ptv Ltd share aortfolio
Shares
Purchase date
Costs
Proceeds
Xero Ltd
28 March 2018
$45,000
$62,000
Qantas Ltd
26 June 2021
$21,600
$28,800
Other informationCynthia has a capital loss of $600 carried forward from sale of painting during 2018-
Required
1- Advise both Cynthia and Andreas on the CGT consequences of their share sales-
2- Calculate net capital gains for both Cynthia and Border Pty Ltd the 2021/22 tax year- You must provide all methods available for her and choose the best method to minimise net capital gains-
Note: Use harvard refrencing style
Attachment:- Taxation Law-rar
Most Recent Questions