Prepare tax documentation for individuals Assignment
Assessment Task Instructions for Students:
A. Calculate John Smith's minimum tax liability in a spreadsheetwith working details.
B. Transfer the relevant figures to Handi Tax, convert the tax return summary with worksheets into a PDF.
C. (i) Give advice to John re his tax obligation, signatureobtaining, substantiation and response to the ATO's future enquires;and (ii)conduct research (e.g. via internet, journals, newspaper or other methods) on any new development in legislation, case laws, ATO rulings or taxation regulations relating to John, and evaluate how it may be applied to his tax return in around 200 words. Attach the link/reference to the information source that you have relied upon.
D. Save your answers to the above tasks in THREE files and upload them to the drop box on eLearn.
Mr John Paul Smith, a welder aged 59 years, is a resident of Exmouth in Western Australia. He has asked you to prepare his income tax return for the year ending 30 June 2017. John is both an employee welder and self-employed as a contractor.
His spouse, Fran Smith, is 57 years old and is employed as a casual teacher at the local primary school. Her taxable income for 2016/17is $13,500.
They have two daughters: 22 years old Kirsten, a full time student at University of Western Australia, and 20 years old Karen who is disabled and receiving disability support pension.
John's DOB: 12November 1957
John's TFN: 999 999 968 ABN: 78 246 373 604
Fran's DOB: 29 May 1960
Residential address: 2 Chimp Terrace, Exmouth WA 6707
Postal address: PO Box 123,Scarbrough WA 6722
John provided you with the following figures, which are all properly substantiated:
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Receipts:
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$
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Gross salary (leave payer's ABN & name blank)
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97,000
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PAYG tax withheld
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24,000
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Tool allowance
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1,080
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Genuine redundancy payment
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21,000
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Superannuationgrosspayment $130k (ABN 27 222 266 667)
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- Lump sum - taxable component - taxed in the fund
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75,000
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- Lump sum- tax-free component
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5,000
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- Lump sum - taxable component - untaxed in the fund
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50,000
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3,000
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Fully franked dividends from Fortesque
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2,800
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60% Partially franked dividends from Coltes
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2,100
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Income from weldingactivities as a contractor
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31,000
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Gross rental income from investment property
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8,500
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Payments:
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$
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Employment related
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Three tools (280+199+780)
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1,259
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Union fees
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700
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Overalls and safety boots
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400
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Income protection insurance
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1,600
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Tax agent fees for 2015/16 tax return
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650
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Smith family appeal donation
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150
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Red Nose purchase (approved fund)
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6
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Welding business related
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Cost of materials
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1,050
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Safety gloves and glasses
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300
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Mobile calls ($70/month x 12 months, 80% business)
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672
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Sun screen cream for skin protection
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77
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Public liability insurance
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1,500
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Superannuation paid for himself
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12,000
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Rental property related
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Flight travel to settleproperty
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830
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Stamp duty
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22,660
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Materials purchased for repairs & painting
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4,120
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Council rates (1/3/17 - 28/2/18)
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1,800
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Land tax (1/3/17 - 30/6/17)
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620
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Landlord insurance for 12 months
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960
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Leasing a car for 10 days while in Canberra
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780
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Agent management fees @13.2% including GST
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1,122
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Interest on loan for period 1/3 - 30/6/2017
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8,900
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Natalie bought an old fridge 29/2/2017 at John's request
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950
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John purchased his investment property in Canberra for $560,000 during the year. His sister Natalie lives there and recommended him a few properties before he decided to purchase this one: 7 Makeup St, Crace ACT 2911. Immediately after the settlement on 21/2/2017, John repainted the house and fixed a few things. On 25/2/2016, he authorised a local real estate agent to look after it before he flew back on that night. The property was rented out on 1/3/2016. A property depreciation schedule was obtained one month later, which shows that the total capital allowance on the property for the period from 1/3/17 to 30/6/17 is $3,820.
Additional information:
1. John has lived in Exmouth since 2002 and has been employed by his present employer from 30 January 2003.
2. Date of redundancy - 30 November 2016.
3. He has been doing 'John's welding' business over the weekends for the past 12 years.
4. He sold the following shares on 6 December 2016:
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Shares
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Purchase date
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Cost
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Proceeds
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Fortesque
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31.03.1991
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4,200
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4,850
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Coltes
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30.05.1985
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13,600
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4,500
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Oilsearch
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31.08.2006
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4,020
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16,000
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5. Sale of collectables -John purchased two oil paintings at a public auction for $520and $300 on 9 April 2017. A dealer valued them on 4 June 2017 at $6,000 and $4,000 respectively and paid him on the same day.
6. Motor vehicles - John has two cars registered under his name. Most time during the year, he drove a Nissan Navara to carry his bulky tools. While this car was being serviced or repaired, he drove his Holden Commodore. John also used the Holden Commodore for visiting clients, training and supervising young colleagues at different work sites. John's family members also drove the Commodore quite often.
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Purchase date
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Cost
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2016/17 travel distance
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Both have effective life 8 years, using Prime Cost method for depcn
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Nissan Navara
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1/10/2014
YEB456
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52,000
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21,000 km
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Prior year log book shows 82% for travel between sites. Receipts show repairs & services $2,700, rego $1,300, insurance $780, fuels $2,470 for the year
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Holden Commodore
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1/6/2011
YPP96K
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35,000
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18,000 km
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No log book is kept. John estimated 10 travels were work related with 50km for each travel
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7. John has agreed to use low value pool starting this year.
8. John has full hospital private health cover.
9. Total NET expense incurred on disability aids for Karen was $6,200. Karen could look after herself to some extent so that Fran was freed up to do casual teaching. Karen received disability support pension of $7,800 for the year.