Part A - Presentation
Instructions:
Jeff Jones is a new client to your firm and you are meeting him for the first time to discuss taxation issues and the preparation of the required income tax returns for the current tax year. You will need to provide an audio or video recording of no more than 5 minutes in length. For this assessment, you will require two people, one to be the ‘client' and another to be the ‘senior tax agent'. These two people can be drawn from colleagues, family or friends. You will be interacting with both people in this presentation, so they will be working from ‘Briefing notes'. Each of the participants must ask the questions that have been allocated to them (i.e. Participant 1 or Participant 2).
Ask the participants to take notes and Complete the feedback form (Appendix A) and the consent form (Appendix B).
Before you commence your presentation, review the briefing questions below to ensure you will have the appropriate information to provide in your verbal responses.
Important Note:
When you are preparing your presentation, make sure that you research and consider the following:
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1. Details of the applicable legislation and guidance sources used (to be included in an appendix to the report).
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2. Appropriate guidance on record keeping requirements for an individual taxpayer (client substantiation guidance)
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3. Consideration of the appropriate threshold amounts for any relevant rebates, tax offsets or additional taxes that may be required.
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4. Consideration of appropriate organisational policies and procedures in relation to the collection of data from clients.
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5. Consideration of key accounting and tax principles relevant to the preparation of tax returns
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6. Consideration of the relevant principles for specific issues such as CGT, FBT and GST
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7. Seeking advice and guidance from a specialist to evaluate and moderate decision processes.
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8. The key principles you are bound by. For example - details of what legislation might be applicable and what professional standards and principles you are bound by - discussion on the tax acts such as the ITAA 1936 and ITAA 1997 can be noted, reference to the Tax agent services Act 2009 or Tax Agent Services Regulations 2009.
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9. Where salary packaging fringe benefits might be beneficial - For example consideration of car fringe benefits and expense payment fringe benefits - any discussion on salary packaging and advantages/disadvantages is appropriate.
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In your presentation, you need to:
1. Answer the questions which your client (Jeff) asks you
2. Ensure that the person who will be the ‘senior partner' observes you while you answer these questions.
3. Once you have answered your client's questions, the senior tax agent will then ask questions which you are required to answer.
Briefing notes: Client (Participant 1)
Assume you are Jeff Jones, a 55 year old resident taxpayer. You have been working for a large company as a plumber and were recently made redundant. You have recently commenced a plumbing business in your personal name and you require some taxation assistance with this.
You have been referred to a new tax agent who is going to assist you with the questions that you have, in relation to your current year tax affairs and the establishment of your new business.
You currently own a rental property which you are not sure when you acquired it but you think sometime in 2007 for $250,000, plus stamp duty of $15,000 and legal fees of $800. You are currently thinking of selling the property by the end of the current tax year. The property has been a rental property since it was acquired.
You currently do not have private health insurance but you want to know about the taxation benefits.
Questions to ask include:
- What documents will I need to provide for you to complete my tax return?
- What income is assessable to me? - (consider income elements including salary and wage earnings, and investment earnings)
- What deductions can I claim against my employment earnings? - (note: reference to the ruling on employee plumbers can be used)
- What investment deductions can I claim? (consideration of the rental property and what can be claimed)
- What rebates may I be entitled to? - (can I claim the SAPTO rebate, what thresholds may be applicable for me - consideration of )
- If I sold the property are there any tax consequences? (consideration of capital gains or losses)
- Do I need to register my business for anything tax related? - (consider GST and other registrations such as Workcover)
Note to learner: In your presentation you should consider general information that can be requested from the client such as other family members, discussion on your background and experience (or qualifications) and other taxation matters that you feel are relevant.
Briefing notes: Senior tax agent (Participant 2)
You have just observed your new tax agent interacting with a client.
Please ask the tax agent the following questions:
1. How well did you think you went providing advice to the client? What could you have done differently?
2. In regards to the information about the possible sale of the client's property, what are the key considerations about CGT? Information to be requested includes - confirmation of the purchase date (or requesting a copy of the settlement statement), discussion on a potential sales price and date of sale (discuss pre 30 June vs post 30 June), any improvements to the property, capital allowance schedules, etc.
Part B - Written report
Read the case study below and answer the following question.
You are working as a tax agent and one of your clients (Julie Palmer) has come to you for assistance. Julie is self employed as a web designer and due to her heavy work load and unpredictable working hours has not yet sorted out her tax matters. Julie spends a lot of time sorting out her business expense for tax however she has lost a few receipts and tax invoices in the last quarter of the financial year. She is unable to provide exact dollar amounts for expenses as listed in the table below. You as a tax agent have already lodged the tax return based on the details provided in Table 1.
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Education expenses
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$2000
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Software subscription
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$1000
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Internet expenses
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$500
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Telephone expenses
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$300
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After lodging the tax return Julie found her bank statement for the period 1st April to 30th June 2015 that was used to pay for these expenses. Details of this statement are as follows:
Period: 01/April/2015 to 30/June/2015
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Date
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Transaction details
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Debit
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Credit
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Opening balance (April 2015)
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-
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7500.00
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01/04/15
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Paid for workshop - BPAY
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160.00
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-
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03/04/15
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Shoebox
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255.00
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-
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04/04/15
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Monthly city rail
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150.00
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-
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09/04/15
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Fitness first (direct debit)
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99.00
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-
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13/04/15
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Vodafone (direct debit)
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80.00
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-
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12/04/15
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Services Income
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-
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4500.00
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15/04/15
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Electricity (Energy Australia)
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375.00
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-
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16/04/15
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Telstra Internet
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75.00
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-
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17/04/15
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Office rent
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2000.00
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-
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23/04/15
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Bavarian cafe
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255.00
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-
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25/04/15
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Interest charges
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125.00
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-
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01/05/15
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Paid for workshop webinar - BPAY
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60.00
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-
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04/05/15
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Monthly city rail
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150.00
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-
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09/05/15
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Fitness first (direct debit)
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99.00
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-
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13/05/15
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Vodafone (direct debit)
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80.00
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-
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15/05/15
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AGL
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155.00
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-
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16/05/15
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Telstra Internet
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75.00
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-
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17/05/15
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Office rent
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2000.00
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-
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23/05/15
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Dodo Coffee
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80.00
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-
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01/06/15
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Yearly software subscription
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800.00
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-
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04/06/15
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Monthly city rail
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150.00
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-
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09/06/15
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Fitness first (direct debit)
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99.00
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-
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13/06/15
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Vodafone (direct debit)
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80.00
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-
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15/06/15
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Apple computer
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1700.00
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-
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16/06/15
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Telstra Internet
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75.00
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-
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17/06/15
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Office rent
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2000.00
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-
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23/06/15
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HBA Learning Institute
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1200.00
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-
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25/06/15
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Services income
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-
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5500.00
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Closing income (Month ending June 2015)
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-
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5123.00
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Upon reviewing the statement you have identified there are some discrepancies in the expense claims made versus the actual expenses incurred.
Task: You are required to:
1. Reconcile the bank statement against the claims made by highlighting the items.
2. Identify any discrepancies, using the following table:
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Expense
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Estimate
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Actual
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Education expenses
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Software subscription
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Internet expenses
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Telephone expenses
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3. Identify and explain the steps you would take to address the discrepancies including your communication with your client and the regulators.
Note: In addition to identifying steps to resolve the discrepancy issue students are also required to draft and submit two separate emails.
- Email no 1 to Julie Palmer (client)
- Email no 2 to regulator (Australian Tax Office)
Part C - Written report
You have been employed by an accounting firm for just over twelve months. On reviewing the firm's policies and procedures, you have identified some weaknessesand have been asked to prepare a report for senior management on the following key organisational issues:
1. Training of new tax agents has been raised as an issue by stakeholders. You have decided that in order to assist with this issue you will create a client details checklist, tax preparation checklist and a sample of an individual tax return and relevant schedules And a procedure for applying personal services income rules and how they affect taxable income (Appendixes A, B, C F)
2. Advice on responding to clients with upcoming audits. In your report outline the steps you would take after a client calls to discuss an audit letter they have received. Identify some preliminary actions staff should take (Appendix D).
3. Outline the requirements of Part IVA and the penalties imposed on clients. Provide a recommendation on how to respond to clients who have seen recent advertising by a competitor which claims that they can offer clients a way to "pay no tax anymore".
4. Recently one of the tax agents in your firm had a new client referred to them and they discovered that they are a part owner in the building that the client was renting for her business. Referring to the Tax Practitioners Board website (www.tpb.gov.au) - consider the Code of professional conduct and how it may impact the tax agent in practice. Outline the ethical issues that the tax agent would need to take into consideration in this case and possible ways to manage the issues (Note: consider the three key concepts in your response). Outline the importance of a code of conduct for the organisation and how this could assist employees in managing these types of ethical issues (Appendix E)
5. Research two recent changes to legislative requirements and outline how these are applied to the preparation of clients' tax documentation. Your response could consider issues such as the change in Medicare Levy or rebate thresholds (Appendix see F)
As appendixes to the report you need to provide the following documents:
A. A client details checklist, including fields for the collection of appropriate information to assist with client management such as; family details, services required, entity and individual returns required and key taxation issues such as lodgement due dates and office turnaround times (for example communicating firm/client expectations such as expected job turnaround times and client communications). (Note you can use Jeff Jones and his family as an example.)
B. A tax return preparation checklist including key information requirements, such as assessable income types and allowable deductions and rebates that may be applicable.
C. A worked example of the required tax forms along with the information provided by your client. Information for the worked example is included below the heading - ‘Information for worked example'.
D. A checklist indicating how to respond appropriately to client queries and how you will communicate with the client about their obligations. (Note: Visit the ATO website and the Tax Practitioners Board website to assist you with your response.)
E. A template for a general letter to clients explaining what can be done if an audit letter is received.
F. A draft code of conduct for the organisation.
G. A procedure for applying personal services income rules and how they affect taxable income.
(Note: Please consider using sources such as the Tax Agent Services Act (TASA) and the Tax Agent Services Regulations (TASR) and the accounting professional body websites in your report. Please include all references used in your submission.)
Information for worked example:
Refer to a copy of the current year individual tax return. You may download a copy of the "Schedule of Business and Professional Items" from www.ato.gov.auor see the unit resources for a tax return extract. From the following Trial Balance and Profit and Loss Statement complete Sections P8 and Other business and professional items in the form.
Jeff has provided business details for the current tax year as follows:
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Account
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$
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$
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Advertising
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1,200
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Accounts Receivable (Trade Debtors)
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15,000
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Accounts Payable (Trade Creditors)
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10,900
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Tax payable (GST)
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3,250
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Bad Debts
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500
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Cash at Bank
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6,275
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Depreciation
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12,500
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Discount Received
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550
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Drawings
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5,000
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Electricity
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2,200
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Fines and penalties
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300
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Interest Paid
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5,000
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Opening Stock - 1/7/14
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-
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Land and Buildings
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237,850
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Lease expenses
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6,000
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Loan
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195,000
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Marketing Allowance
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3,000
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Motor Vehicle Expenses
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16,300
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Motor Vehicles
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45,000
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Accumulated Depreciation
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6,750
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Purchases
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75,000
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Plant and equipment
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54,000
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Accumulated Depreciation
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5,750
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Plumbing Services and Sales
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365,000
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Rent Expenses
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24,000
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Repairs and Maintenance
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1,500
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Retained earnings
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-
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Salaries and Wages
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150,000
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Superannuation
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14,250
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Telephone Expenses
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2,800
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Travel Costs
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1,275
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Workcover
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1,800
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Owner contributions
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75,000
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671,475
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671,475
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Notes:
- Inventory at 30/6/15 was $12,000
- Decline in value of assets for tax purposes was $15,000
- No depreciating assets were purchased or sold during 2015
- The fines and penalties relate to a speeding fine that Jeff received
Profit and Loss statement for the Year Ended 30 June 2015
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Income
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Plumbing services and sales
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365,000
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Cost of Goods Sold
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Inventory 1/7/14
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0
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Purchases
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75,000
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Inventory 30/6/15
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-12,000
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Total Cost of Goods Sold
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63,000
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Gross Profit
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302,000
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Other Revenue
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Discount Received
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550
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Marketing Allowance
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3,000
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Total Other Revenue
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3,550
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305,550
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Other Operating Expenses
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Advertising
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1,200
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Bad Debts
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500
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Depreciation
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12,500
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Electricity
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2,200
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Fines and Penalties
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300
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Interest Paid
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5,000
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Operating Lease Expenses
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6,000
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Motor Vehicle Expenses
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16,300
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Rent expenses
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24,000
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Repairs and Maintenance
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1,500
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Salaries & Wages
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150,000
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Superannuation
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14,250
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Telephone
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2,800
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Travel Costs
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1,275
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Workcover
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1,800
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Total Operating Expenses
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239,625
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Net Profit
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$65,925
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