Assessment Task 1
This is a classroom based task and involves two parts.
Part A needs to be completed as an individual task.
Part B is a team task. Your trainer/assessor can assist you with forming the teams.
Part A:
An individual income tax return includes income from various sources, allowable deductions and tax offsets.
Under taxation laws, all Australian residents, permanent or temporary, are required to lodge a tax return at the end of each financial year. Research the taxation information and legislations and complete the following practical tasks. These tasks must be completed in presence of an assessor.
Step 1A:
John is a full time tertiary student, enrolled under HELP loan scheme that covers his total course fee of $5,800. John also works part time in a suburban restaurant, earning a gross income of $380 per week. Each year, John receives an additional lump sum payment of $3,400 from a family trust set up by his grandparents that he keeps putting in a fixed deposit with a bank. In a stroke of luck this year, John has won a Lotto prize of $12,000 which he has promptly put in another fixed deposit.
Calculate;
1. John's total assessable income for the current financial year
2. HELP repayment amount at the current income thresholds
3. Tax deductions that John may be entitled for
Support your answers with reference to appropriate tax legislations that apply in each situation.
Step 2A:
Sarah was working as an admin assistant for a telecommunication company for the first four months of the current financial year. She received a gross wage of $1,680 each fortnight. After four months of employment, Sarah decided to join her sister's home based hand-made stationary business as a 50% partner. At the end of the financial year, they had a total turnover of $86,890 with a gross profit of $66,660. Sarah has two children aged 3 and 5 and uses school's day care facility to help her with her work schedule.
Calculate;
1. Sarah's total assessable income for the current financial year
2. Tax deductions that their home-based business may be entitled for
3. Tax offsets that may apply in Sarah's situation
4. Sarah's approximate income tax liability using ATO's tax tables or online calculators
Support your answers with reference to appropriate tax legislations that apply in each situation.
Step 3A:
Stella Sharp is a casual bookkeeper who derives income from various investments including her superannuation fund and her share portfolio. Stella is 56 years old and has elected to apply all available small business concessions in her tax planning strategies.Stella's income receipts for the tax year are as follows:
Fully franked dividends $ 8 000
Superannuation income (PAYG withheld $1000) 36 000
Bookkeeping 9 000
Stella has private health insurance cover with HBF.
Using this information calculate Stella's taxable income and net tax payable or refundable for the year using the following tax rates. Support your answers with reference to appropriate tax legislations that apply in each situation.
Assessment Criteria
- Completed the assessment tasks in presence of an assessor
- Completed all the given tasks
- Calculations are error-free and presented in legible and structured format
- Calculated assessable income by applying a range of tax criteria for John
- Referred to and quoted relevant tax regulations relating to trust funds, HELP loan scheme and tax free income
- Calculated HELP payment based on income threshold for John
- Identified and listed applicable deductions for John
- Calculated assessable income by applying a range of tax criteria for Sarah
- Referred to and quoted relevant tax regulations relating to wages and income from business activity
- Identified and listed applicable deductions available to home-based businesses
- Demonstrated understanding of tax offsets
- Calculated estimated tax liability based on Sarah's situation
- Calculated Stella's assessable income and determined tax situation
- Applied Medicare provisions to all assessable incomes in all the tasks
- Applied relevant offsets and deductions as needed in all the tasks
- Tax calculations are consistent with current tax legislation and individual tax requirements
Submission Guidelines
- Completed practical tasks: Word processed or hand written
- Copies of legislations, guidelines or other reference documents
Part B:
In this task, you will play the role of a tax agent and prepare a non-complex income tax return for an individual client in accordance with statutory requirements. Task will include gathering and verifying data, calculating taxable income and reviewing compliance.Assume that you are a tax agent and at the end of the current financial year one of your clients, Sarah Smith, has come to you for assistance with preparing and filing a tax return. Sarah is employed as a Business Manager by a large IT firm also works for home for the company two days a week. Due to her heavy work commitments has not organised her tax documents and matters. She currently earns $85 500 per annum and has had $18 250 PAYG withheld from her gross income. Rebecca also received an unfranked dividend from her personal BHP shares of $7500.
After sorting through the shoebox that holds all of Rebecca's paperwork, you have uncovered the following receipts and expenses;
Professional association membership $480
Phones used for business purposes $650
PR and client relationship $900
Home office expenses (stationery, electricity, $2,800
internet, printer consumables)
Bank interest earned from deposits $1,200
- Sarah also advised that she had additional self-education expenses of $2,800, but could not locate the receipts.
- Sarah had private health insurance for three months during the assessment period.
- Sarah is single and has no dependents.
- Sarah often works from her home office and she is also required to travel on a daily basis to various work clients to service their computer systems. Sarah has not kept a log book with her kilometres. She drives a Toyota Corolla which has a 1300-cc engine.
- Among her papers, you find a daily work log which details her client appointments, times and locations.
With help of the above information, complete the following tasks;
- As her tax agent, what advice can you give Sarah about the ATO's lodgement process and deadlines?
- What are Sarah's lodgement options?
- What can you tell Sarah about the self-assessment process?
- What range of powers does the ATO have for auditing and reviewing a taxpayer's tax affairs?
- What advice can you give Sarah a about future tax preparation, including legal information?
- Calculate Sarah's taxable income.
- Calculate Sarah's tax payable/refundable for the 2011/12 financial year, using the rates provided below.
- Provide Sarah with a code of conduct, outlining your ethical and professional responsibilities as a tax agent that you have to adhere to when dealing with tax matters
Assuming that Sarah has accepted your assessment and is ready to lodge her return, prepare her return using ATO's e-tax application. Use fictitious information to set up the tax file. E-tax application can be downloaded from ATO website at: https://www.ato.gov.au/etax. Your assessor may ask you to change/modify some information in the return.
You will not actually lodge the return but prepare the return to the point where it can be sent to the ATO as an actual return.
Assessment Criteria
The following assessment criteria will be used for marking this assessment task. Ensure that you have addressed all of the criteria in your work.
- Referred to and provided information on applicable taxation law relevant to income tax
- Developed a code of conduct outlining ethical and professional responsibilities and relevant to practice as a tax agent
- Provided appropriate written advice to the client including tax obligation, penalties, lodgement options, due dates
- Provided appropriate written advice to the client regarding the self-assessment process and ATO's powers in investigating tax affairs
- Appropriately collated and organised all the given information for taxation purpose
- Derived assessable income from the given data
- Calculated franking credit on share income
- Derived applicable deductions under the current law/ruling from the given data
- Calculated applicable offsets and benefits under the current law/ruling from the given data
- Calculated applicable Medicare liabilities
- Determined and calculated client's tax liability or return as applicable
- Tax calculations are accurate and take into account current tax rates, benefits, offsets and bonuses as applicable
- Downloaded and used ATO's e-tax software and correctly set up the tax file
- Duly completed the tax returns and derived final assessment
- Checked and amended errors and adjusted the return as per the instructions
Submission Guidelines
- Written client advice: Word processed
- Completed paper-based tax assessment
- Copy of draft calculations (or print out of a Word file or an Excel sheet if used)
- E-tax file
- Copies of legislations, guidelines or other reference documents
FNS50215 Diploma of Accounting
FNSACC502Prepare Tax Documentation for Individuals
Assessment Task 2:
Answer the following questions:
Q1. What is an assessable income for income tax purpose?
Q2. List at least five tax deductions that are available to small business owners with a turnover under $1 million per annum
Q3. If you earned an income of $36,500 in wages and other contractual income of $42,600 working under your own ABN, making a net profit of $38,500, what would be your total assessable income?
Q4. What does BAS stands for?
Q5. What is a fringe benefit tax and how does it apply to individual employees? Support your answer with an example
Q6. If, as a small business owner, you have purchased a new car for $12,500 for business purpose, write the depreciation schedule using depreciation rule for motor vehicles
Q7. You have just received $8,600 in franked dividends from your share portfolio. Explain how this dividend will be treated by ATO in calculating your income tax
Q8. Describe the applicable criteria for Medicare levy and Medicare Surcharge in an individual tax return. In what circumstances can the levy be exempted?
Q9. What are the available methods for calculating deductions for car expenses? Support your answer with an example
Q10. Describe three main types of tax offsets available to individual tax payers? Which are the four refundable tax offsets?
Q11. What rules apply to the valuation of trading stock if a taxpayer is classified as an SBE?
Q12. If a taxpayer business chooses not to be assessed under the simplified taxation system (STS) what other methods of trading stock valuation are available to be used?
Assessment guidelines:
- All the questions are attempted and answered
- Please use appropriate references from the resources used