CASE STUDY ASSIGNMENT-
Jordan and Cameron are a married couple. Jordan works in IT and earns $180 000 p.a. The company he works for also pays for his family's private medical insurance, $4 000 p.a. and provides him with a car for private use which is estimated to be worth $20 000 p.a. He works from home and only occasionally goes in to the company office in the city. Cameron works as a marketing executive and earns $120 000 p.a.
They have two children (both living at home) - Miranda, aged 22, undertaking graduate studies at university as a full fee paying student and also working on a casual basis earning $300 per week; Cate, aged 18, undertaking a HECS supported undergraduate degree full time, is not working but is financially supported by her parents.
Jordan and Cameron have accumulated share and property portfolios and seek advice from you in respect of calculating their tax liabilities. They have not taken any interest in their financial affairs to date but want to take a more active role in this now.
The couple provides the following information:
1. Balance sheet, other income and interest expenses
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Assets and other income (in brackets)
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Home and contents
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$1,000,000
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Cars
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$60,000
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Holiday house (rental income this financial year $4000)
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$500,000
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Investment property (rental income this financial year $22 000)
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$900,000
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Bank account (interest earned this financial year $2 000)
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$70,000
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Share portfolio (fully franked dividends of $20 000 paid this financial year)
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$530,000
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Superannuation- Jordan (after-tax return of $80 000)
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$1,200,000
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Superannuation- Cameron (after-tax return of $60 000)
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$800,000
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Total assets
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$5,060,000
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Liabilities and interest expenses
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Mortgage on home (interest paid this financial year, $12 000)
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$350,000
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Mortgage on investment property (interest paid this financial year, $56 000)
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$700,000
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Mortgage on holiday house (interest paid this financial year, $32 000)
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$390,000
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Bank loan on share portfolio (interest paid this financial year $3 500)
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$50,000
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Credit card (interest paid this financial year $1 500)
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$10,000
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Total liabilities
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$1,500,000
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2. Other expenditure
In addition to their interest and loan repayments, the couple incurred the following expenses during the year:
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Expenditure
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Cameron
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Jordan
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Work related expenses
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$1000
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$2200
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Travelling to and from home
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$1200
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$1500
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Child care expenses
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$0
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$6000
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Donations
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$500
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$0
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Living costs
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$18 000
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$18 000
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Expenses (not including interest) related to holiday home - Total of $15 000 (normal expenses, not improvements or capital expenses)
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Expenses (not including interest) related to investment property- Total $9 000 (normal expenses, not improvement or capital expenses)
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Tax agents' fees
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$700
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$900
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3. Additional information
- All of the assets are jointly owned in the names of Jordan and Cameron of except for the share portfolio which is in the name of Cameron only.
- The share portfolio was acquired for $200 000 in 2002.
- Cameron has a carried forward capital loss of $7000 relating to some shares she sold 3 years ago.
- The investment property is available for rent all year and this year, due to a change in tenants, it was rented out for 10 months.
- The holiday home was available for rent for nine (9) months of the year but was only rented out for five (5) months.
- Jordan's employer deducted $58 000 as PAYGtax while Cameron's employer deducted $35 000 as PAYG tax.
REQUIRED -
1. Calculate the net tax payable/refundable for the current year for both Jordan and Cameron and justify any inclusions other than their salaries.
2. As Jordan works from home, he is wondering whether he can get his younger daughter Cate, who is a full time student and not otherwise employed, to carry out some minor administrative work for him as a personal assistant for two hours a week. He would like to pay her $200/hr or $400/wk. This would reduce his taxable income and, in Cate's hands, the income would attract very little, if any, tax. Advise Jordan in this matter.
Further information on Assignment and its submission requirements -
Answers to questions regarding the major assignment
The following information results from questions being asked about the major assignment and is the final additional information which will be made available on the topic:
1- Format
a. The format could be similar to a report and should include a summary/synopsis (which is not part of the word count) which outlines the answer you obtain in both parts one and two
b. You could then use headings for parts 1 and 2 which refer to what is being undertaken in each of these parts.
i. Within these parts you could have something similar to an introduction, body and conclusion and appendix (if desired for the calculations, although not strictly necessary as you could include the calculations as tables within the body).
The introduction should discuss what elements of the tax equation you will be dealing with in that particular question/part- the body should then include the calculations (or these could be in an appendix) and the reasons why you have included the items you have within the calculation.
For part 2, you need to again have an introduction to what you think the key tax issue is and how you are going to approach it, then undertake the discussion in the body and have a conclusion for this part as well.
The conclusions of both parts will then be included in the executive summary/synopsis at the very start of the report.
Word count of 1500-2000 words should exclude the executive summary/synopsis. It should be roughly split between 1000 words for the first part and 500 words for the second part, ie 2/3 of the total word count for the first part and 1/3 for the second part if your total word count is more than 1500.