Assessment description

1ASSIGNMENT 2 SESSION 1 2020Assessment description: Case Study requiring preparation of workpapers,calculation of taxable income and income tax payable, preparation of an individualtax return, and a letter of advice.Weighting: 35% of the total marks for semesterTopic Content: Focus on Topics 5 to 10, with knowledge of previous topics expectedDue: 5pm DST Friday of Week 11Submission: ONE (1) EXCEL FILE using TEMPLATE provided, only to be submitted via the link onMySCU, PLUS ONE (1) PDF FILE containing Handitax ITR and all attendant schedules andestimates.EXCEL File Name:SURNAME.FirstName.StudentID.Tax Assignment.xls/xlsxPDF File Name:SURNAME.FirstName.StudentID.Tax Assignment.pdfONLY EXCEL FILES USING THE TEMPLATE PROVIDED WILL BE MARKED.OBJECTS AND FILES INSERTED INTO WORKSHEETS WILL NOT BE MARKED.ONLY SUBMIT THE ITR AS A PDF FILE Other work in PDF files will not be marked.Remember: The purpose of an assignment is for you to demonstrate yourknowledge and understanding of the topics. Make sure your answers arecomprehensive enough to achieve this.NOTE: THIS IS AN INDIVIDUAL ASSIGNMENTYOU SHOULD WRITE ALL WORK SUBMITTED YOURSELF AND IT SHOULD BE BASEDON YOUR OWN RESEARCH. EVIDENCE OF COPYING FROM OTHER STUDENTS WILLBE TAKEN SERIOUSLY AND REPORTED.2ASSIGNMENT INSTRUCTIONSEMPLOYMENT:Your client (use your own name as the client name) is the sole director of Purple Rain Pty Ltd.The business employs five staff members, including your client who holds the position ofmanaging director. Purple Rain analyses financial information and provides investmentadvice to registered clients.The payment summary from Purple Rain Pty Ltd shows the following: ABN 84 111 122 223 Gross Payments $148,200 Tax Withheld $45,344Purple Rain also paid $94 a month for your clients mobile phone account and additionalsuperannuation contributions of $5,200 under a salary sacrifice arrangement. This amount isin addition to superannuation guarantee requirements. The phone payments related to afixed monthly contract in the employees name and payments were made directly to thephone company by the employer.Your client owns an BMW X5. They purchased the car on 1 June 2018 for $99,000. The cartravelled 36,500 kms during the year and your client has indicated that about 70% is workrelated but they have not kept a log book. Your client pays for all the running costs for thevehicle. During the year these costs included: Fuel & oil$6,950Servicing$1,200Registration$ 760Insurance$1,800Tyres$1,400Excess on insurance claim.The insurance company paid for the balance of the cost of repairs.$750Car washing$1,200 3DIVIDENDS & INVESTMENTS:Purple Rain Pty Ltd is a large company with two (2) shareholders, your client and theirspouse. Your client owns 45% of the issued shares in the company. The shareholders werepaid a lump sum of $140,000 in April. They explained that the company had been verysuccessful over the last couple of years and had accumulated significant cash reserves. Theydescribed this payment as a fully franked dividend. The proceeds were used to reduce theline of credit that was taken out to purchase the home in which they live. Interest paid on thehome loan for the year was $36,000.The client also has a portfolio of shares that were inherited from their father. The fatherpassed away on July 15, 2018. On finalisation of the estate the following shares weretransferred to your client and the client received notification that all the shares had beentransferred on 1 December 2018. ShareDate Purchasedby FatherNumber ofSharesPurchasedPrice Paid perShare at timeof purchaseMarket Valueat Date ofDeathBHP4 Jan 19852,300$5.00$21.30CBA12 Sept 19912,000$5.40$75.94COH4 Dec 19951,000$2.90$124.77FLT1 Dec 19951,000$0.95$32.29MYR7 Nov 20099,500$4.10$1.21TLS3 Nov 19972,000$3.30$5.75 The following fully franked dividends were received by your client during the year: CBA $ 880.00 COH $ 540.00The taxpayer sold the BHP shares on 5 January 2019 to raise the deposit for the propertypurchase discussed below. The BHP Shares sold for $26.54 each. The brokerage fee was basedon a percentage of the sale proceeds for each parcel of shares and amounted to $120 for theBHP Shares. These amounts include GST where appropriate.4RENTAL PROPERTY: 4/285 Pacific Parade, Bilinga, 4225The taxpayer owns a unit on the Gold Coast which is rented to their daughter. A contract wasentered into to purchase the property on 22 January 2019 for $600,000 and settlement tookplace on 1 March 2019. The taxpayers daughter moved in immediately. She pays rent inadvance of $420 each week. The first payment was made on the day she moved in. (HINT:You need to research the issues around renting properties to relatives and include yourfindings in your workpapers and letter of advice.)The building was originally constructed in 2005. A quantity surveyors report commissioned atthe time of purchase shows the construction cost of the unit was $180,000.The taxpayer purchased a refrigerator for $1,180 and a washing machine for $1,600. Thesewere installed in the unit for use by the tenant on settlement date. The taxpayer elects NOTto use a low value pool for depreciating assets and chooses the diminishing value method ofdepreciation where applicable.Other costs paid in relation to the property before 30 June 2019 include: Stamp duty on property purchase$15,750Legal fees, searches, and reports on property purchase$ 1,340Body corporate fees$ 1,450Council rates$ 950Water Rates$ 370Insurance$ 685Loan repayments (interest only)$ 6,300 5OTHER INFORMATION: Purchase of work suits $900 Donations were made to:o Sea Shepherd $1,500 Association of Financial Advisors Membership Fees $1200 Vegan Living magazine subscription $240 Fees paid to the bank in January 2019 to establish the loan to purchase the unit were$860. The loan is for 25 years. The taxpayer also has an insurance policy that covers their income in the event of anaccident or death. The premium is paid directly from their bank account each month.The total for 2018/9 was $8,000 of which 75% relates to the replacement of income inthe event of an accident. In 2015 the taxpayer was involved in a car accident and sustained injuries that requiredmedical attention and rehabilitation therapy. In December 2015 the court awardedthe taxpayer $60,000 as compensation for medical expenses incurred because of theinjuries from the accident. Payment was received in December 2018. The family is covered by private health insurance with BUPA. The policy was taken outon 1 May 2019. The premium paid to the end of the year was $730 after they claimeda rebate of $73. The policy number is RDA1465 and the health fund has notified themthat the Benefit Code is 30. Preparation and lodgement of 2018 tax return by Diagno Accountants was $3800. The taxpayers date of birth is 14 February, 1964, and they are married. You can makeup the name & date of birth of the spouse. The spouse earned a salary of $84,000 forthe 2018/19 year and was entitled to deductions of $2,400.6REQUIRED:1.Using the EXCEL template provided, prepare a set of work papers separate sheetswithin you EXCEL document as indicated. Include detailed explanations about whethereach item is assessable income or gives rise to an allowable deduction. Show allworkings, explain why you have treated items as you have, and provide appropriateauthority for your decisions by referencing sections of the legislation, case law and/orincome tax rulings. Your work papers need to be complete so that they can bereviewed by your supervisor and relied upon in the event of any future audit. Theyshould also be reconciled and cross-referenced to reporting labels on the income taxreturn.2.The TEMPLATE includes separate sheets for:a. Salary & Wages Incomeb. Other Income (e.g., interest and dividends)c. Capital Gainsd. Deductionse. Rental Propertyf. Tax calculationg. Letter of advice3.Tax Payable, Offsets, & Levies: Include all levies and offsets considered (Medicare,Medicare surcharge, franking credits, tax paid, low income rebate, private healthrebate) and explain why they are or are not applicable and reconcile to the tax returncalculation).4.Organise your work papers so that amounts are directly transferrable to items on theIncome Tax Return and provide cross references to the tax return label where theamount is reported. Make sure that all calculation steps are visible in your workpapersto ensure your full work is markable and marked.5.Depreciation calculations can be done using Handitax with the total transferred back tothe rental property section of your workpapers for reconciliation purposes.6.Use Handitax to prepare the income tax return, including any relevant schedules, for theyear ended 30 June 2019. Use your own name, and the Dummy TFN from the client setup sheet. All other details are to come from the assignment instructions.7.Write a professional letter of advice to your client summarising their tax situation andexplaining the important aspects of the items that are included in their tax return andthose that have been disregarded. You should include advice to the client aboutpotential improvements to their record keeping and other information that is relevantfor future tax planning. It is recommended that you seek help from Student LearningSupport to ensure that you have used professional language and your letter is errorfree. Your letter should be about 2 pages long comprehensive but concise. If it is toolong your client wont bother reading it (and it will NOT be marked). It should bewritten in language and pitched at a level your client will understand. It should not betoo technical; your client is unlikely to be interested in which sections of the legislationform the basis of your decisions. Do you need to provide your client with anyinstructions?7SUGGESTED SCHEDULE FOR COMPLETION:1. Weeks 1-5: You will have downloaded the HandiTax software and familiarisedyourself with navigation and client set up.2. Week 6:a. Set up your client as per Assignment instructions.b. Set up your EXCEL worksheet file from the TEMPLATE.c. Read through the whole assignment. Begin to create heading and formulasand fill in your worksheet(s) with ALL INCOME information, notes, andcalculations.3. Week 7: Do the CAPITAL GAINS worksheet and calculations.4. Weeks 8 & 9: Catch up over Study Break AND complete the DEDUCTIONSworksheet with information, notes, and calculations.5. Weeks 10 & 11:a. First complete your worksheet TAX CALCULATION and next your HANDITAX IForm and ALL schedules.b. Cross reference and correct where necessary.6. Friday end of Week 11: SUBMIT 2 files in format required.NB: DO NOT LEAVE HANDITAX UNTIL THE END OF WEEK 11 AS IT WILLTAKE THIS LAST WEEK TO COMPLETE ALL SCHEDULES CORRECTLY.8SUBMISSION INSTRUCTIONS:7. One (1) EXCEL file using the TEMPLATE provided, containing your work papers andassociated explanations should be submitted via the link on MySCU. Your letter ofadvice should be in as a separate sheet in the same EXCEL workbook NOT as anembedded document.8. ONE (1) PDF FILE containing Handitax ITR and all attendant schedules and estimates.BOTH THE ABOVE FILES MUST BE INCLUDED IN A SINGLE SUBMISSION.DO NOT WAIT TO START YOUR ASSIGNMENT IT SHOULD BE ALMOST COMPLETE BY THEBEGINNING OF WEEK 10. THIS WILL ALLOW YOU TO FOCUS ON COMPLETING THE TAXRETURN COMPONENT IN WEEKS 10 AND 11.9WORKPAPERS:Presentation: Use of Excel with tabs 5Explanations: 10Excellent extremely thoroughGood comprehensive but could be more detailed in sectionsReasonable attempt but more detail to support decisions requiredReasonable in sections but more research required to arrive at correctPoor insufficient detail to support decisionsItem Discussion: 59INCOMECGTDEDUCTIONSRENTAL PROPERTYOTHER ISSUESAppropriate Use of Authority: 10Excellent all items correctly referenced to a variety of appropriate sourcesGood most items correctly referenced to appropriate sources; could havemade better use of case law and rulingsReasonable some items correctly referenced to appropriate sources; couldhave made better use of case law and rulingsPoor inadequate authority providedTax Payable Calculation & Cross-referencing: 15 99INCOME TAX RETURN & SCHEDULES 66LETTER OF ADVICEBusiness FormatAddressed to client in first personPitched at an appropriate level for client understandingAppropriate adviceAccurate adviceComprensive/ConciseCorrect spelling and use of grammar 10TOTAL MARKS 175REDUCED TO MARK OUT OF 35 35Penalties apply for late submission (5% of available marks for each day it is late)Marking Criteria

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