Assignment details for Taxation Law and Practice A
While the assignment is largely based on material covered, you are free to research and seek advice as widely as you find necessary - there are no limitations as to sources. However, sources should be appropriately referenced.
Note that as the assignment is for assessment purposes, more is expected than just the calculations in a tax return. If there are any issues that require clarification by you, you should provide a brief discussion of the matter and justify any conclusions you may reach. Where there are figures provided without adequate justification, marks will not be awarded.
Note: There is no prescribed format for the layout of the assignment. You may wish to have the statement of income first, followed by supporting discussion and conclusions; or you may present your discussion first, and then show the statement of income following from this. Some students choose to show the workings for each section of the assignment with the relevant discussion and complete the assignment section by section in this manner. The statement to show calculation of taxable income and tax payable should correspond to the taxing formula.
The workings and taxing formula will need to be included in tables within the assignment or appendices to the assignment, preferably using tables or columns.
The assignment is to be submitted online in Moodle. Submission must consist of one (1) document only. This document must be in Word format only ie .doc or .docx.
Case Study
Jess Jones has approached you for preparation of her 2012/13 tax return, and determination of her tax liability. Jess has been meticulous in keeping records, and provides you with the following information. It should be noted that the information provided represents her understanding of what may be relevant for income tax purposes, and you will need to form your own judgement on the various matters based on your knowledge of Australian income tax law. If any doubt arises on a particular point, or further information would normally be required, you may assume such further details as are necessary to complete the return. All such assumptions, and the basis of any decisions you make in various matters, must be made clear by full discussion where appropriate.
Jess was approached by an Australian television network BTV to be a presenter on one of the network's lunchtime shows, with the aim of lifting the flagging ratings. Agreement was reached that she would host fourteen shows, and a fee of $AUD28 000 was negotiated. The contract was signed in Cuba, with payment to be made to Jess's private bank account in Switzerland. All shows were presented in Australia at studios based in Sydney, Australia. The shows were recorded over a period of fourteen weeks from July - November 2012, and payment was made as per the contract. During this time Jess necessarily resides in Sydney, with her mother and daughter.
The owner of the television network BTV also owns a newspaper. Due to the success of Jess's television appearance he offers her a column in his newspaper. This requires her to contribute 2 columns a week to the newspaper in return for payment of $1,500 per column. Jess does this from 15 August 2012 through to 30 June 2013, a period of 46 weeks.
Jess seeks advice as to the assessability of these amounts.
Business
Jess owns a retail store in Cairns which sells collectible china and antiques. The store is run by a manager.
Trading figures for the store for the year 1 July 2012 - 30 June 2013 are:
Sales: 280,000
(cash sales were $260,000, credit sales were $20,000 of which $5,000 is still outstanding at 30 June 2013.)
Expenditure:
Managers' salary
60,000
Staff wages
42,000
Lease payments on business premises
7,500
Superannuation - employees
7,750
Vehicle running expenses (30% private)
1,600
Electricity
4,000
Council rates
3,000
Accounting fees
5,000
Insurance
3,000
Advertising
2,000
Stationery and postage
1,200
Other business related expenses
17,000
Trading stock on hand at 1 July 2012:
10,000
Stock purchases during the year:
Trading stock on hand at 30 June 2013:
150,000
25,000
Jess is using the diminishing value method of calculating decline in value. All assets other than the cash registers were purchased after 10 May 2006. Jess has not elected to use any small business entity concessions.
The values for equipment represent the opening adjustable values at 1 July 2012. Effective lives have been calculated for each depreciating asset as set out in the following table:
|
Asset
|
Opening Adjustable Value
|
Effective life (in years)
|
|
Advertising billboard
|
5500
|
20
|
|
Air conditioning unit
|
3000
|
12
|
|
Alarms
|
2200
|
20
|
|
Cash registers
|
5240
|
6 2/3
|
|
Floor coverings
|
7800
|
5
|
|
Furniture and fittings
|
13000
|
13 1/3
|
Jess also purchased a new Toyota Camry on 3 January 2013 at a cost of $65,000, which included $4,000 to have the name of the shop emblazoned across the side of the car and the rear window. The vehicle is to be used to promote the shop.
Other investments which generated income for the year in Jess's investment portfolio are:
- Interest from term deposit with Australian bank - $4 000
- Dividends received from BHP - 10 cents per share, fully franked on 15 September 2012 and 15 March 2013. Jess holds 1 500 shares.
- Dividends received from Telstra - 5 cents per share, unfranked on 1 October 2012 and 1 April 2013. Jess holds 2 000 shares.
- Interest from US bank accounts - net of 10% interest withholding tax (paid in June 2013) $AUD 1 800
Jess has a loan which she used to purchase her investments. Interest paid on the loan for the 2012/2013 year was $865.
Jess also owned a vacant block of land which she bought in April 1995 for $55,000. In April 1999, she built a shed on it at a cost of $25,000 with the intention of living in it while she built a house on the block. Jess sold the block on 15 March 2013 for $85,000.
Jess's elderly mother, who lives with her, has been suffering ill health. The medical expenses that Jess has incurred for her dependant mother and daughter are:
Mother: $2 000
Daughter: $400
Jess: $50
Jess is a member of Medibank Private health fund with full cover for the family costing
$2 400 per annum.
Other expenditure for which Jess wants to claim a deduction is detailed below. She seeks your advice as to the deductibility of these amounts.
Electricity for home office
$250
Telephone calls (20% of these were work related)
$400
Newspapers
(required to make informed comment on her television show and in her newspaper column)
general papers eg The Australian etc
$350
specialist papers eg Financial Review etc
$400
magazines
$800
Stationery for home office (used to prepare commentary for television show and newspaper column)
$150
Vehicle expenses (travelling between home and the television station)
$450
Travel and accommodation expenses (for Jess and her daughter to attend a Conference for television presenters on Queensland's Gold Coast for one {1} week)
$2 500
Required
1 Set down in statement form full details of Jess's assessable income and allowable deductions for the 2012/2013 year of income and determine her taxable income for that year. You will need to discuss and justify the inclusion/non-inclusion of items of income or expenditure.
2 Determine the net amount of income tax payable by Jess for 2012/2013.