Assignment Description:
By completing this assessment the learner will gather evidence of their ability, knowledge and skills to:
- Complete lodgments and returns for legal entities
- assess taxation liabilities, optimise tax positions, establish processes and plans, evaluate tax policies and review tax compliance for legal entities.
Part A: Written Report
The Ethical Trading Group has continued to grow and become a more complex organisation. You (the learner) are the CFO of the Ethical Trading Group Pty Ltd. The Managing Director has requested your assistance in relation to a few important matters. As the group has continued to grow, the Managing Director has asked you to present to the Board a written report about the tax plan (a plan to optimise the tax position of Ethical Trading Group)and an upcoming ATO audit. The Ethical Trading Group has received a notification from the ATO in regards to a scheduled audit. You (the CFO of the Ethical Trading Group) are to prepare a report to the Board to discuss the tax plan and the ATO audit.
Problem 1:
a) Provide information on the different types of taxes that may be payable by the company.
- 2019-20 tax rates - Companies
Base Rate 27.5%
Otherwise 30%
Base Rate 30%
Compiling superfund class of taxable income 15%
Additional tax on no-TFN contributions income where the company is a retirement savings account (RSA) provider 32%
RSA component of taxable income 15%
Additional tax on no-TFN contributions income 32%
Standard component of taxable income:
Base rate entity 27.5%
Otherwise 30%
Small and medium sized enterprises income component 15%
Unregulated investment component 25%
The amount that exceeds the PDF component:
Base rate entity 27.5%
Otherwise 30%
Small credit unions - under $50,000: Base rate entities 27.5%
Small credit unions - under $50,000: Otherwise 30%
Medium credit unions - $50,000 to $149,999: Base rate entities 41.25%
Medium credit unions - $50,000 to $149,999: Otherwise 45%
Large credit unions - $150,000 and over: Base rate entities 27.5%
Large credit unions - $150,000 and over: Otherwise 30%
b) Include a tax calendar highlighting key taxation lodgment due dates(for taxes identified in Problem 1a above) and any penalties to be levied for late lodgment. Please use a table format to display this information.
c) Discuss the appropriateness of the use of the accruals basis of accounting for the company.
Problem 2: Conduct research to identify updates or any potential changes to tax compliance requirements relevant to maximizing Ethical Trading Group's taxation benefits. (Hint: consider any changes Ethical Trading Group could make based on any ATO or recent Federal Budget Announcements.)
Your report should include the following;
a) Three separate updates which impact the taxation obligations of Ethical Trading Group (i.e. report on three [3] different taxes Ethical Trading Group pays).
b) Note in your report, three (3) separate sources used to research for the updates and changes (such as names of websites and publications).
c) For these three updates, document the potential record keeping and reporting requirements that Ethical Trading Group will need to implement to reflect these changes.
Problem 3: Explain how your tax plan could optimise the organization's tax position by:
a) Noting which financial records or statements Ethical Trading Group can use to ensure it is able to meet their taxation obligations. Consider two (2) key financial records Ethical Trading Group would already produce or any other external tools which could assist.
b) Note how Ethical Trading Group can use the taxation schedule and calendar developed in Problem 1b above, to assist in preparation of a budgeted cash flow.
c) Using the Income and Expenditure statement from the Ethical Trading Group, estimate the following;
i) Budgeted GST payable for the year ended 30/6/17. (Assume GST is collected at 10% of sales revenue and GST is paid at 10% of applicable expenses).
ii) Budgeted Income tax payable by the company, using the standard rate of company tax. (Assume all income is assessable and all expenses are deductible).
d) Analyze differences between budgeted GST payable and budgeted Income tax payable (as you calculated in your answer in Problem 3c) and the actual GST payable and Income tax (obtain actual balances from the 2017 Actual income and expenditure statement for 2017,
In your analysis discuss possible issues with financial management strategies (ie budgeting) or other processes and controls, taking into consideration the facts discovered from a recent internal audit review of the company.
Internal audit findings include;
- Issues have arisen with invoicing of sales where GST has not been correctly coded and processed.
- A review of income and expenditure identified $300k of legal expenses which had been incorrectly coded as deductible for tax purposes.
e) As a result of the variances between actual tax balances payable and the tax plan estimates noted in 3 d. above, what changes (2 changes) would you suggest have to be made to the budgeting and tax plan process and other management processes.
Problem 4: The ATO has written to the Ethical Trading Group informing them about an audit they will be performing of GST, FBT and CGT. For the audit, the ATO has requested the information noted in Problems a - e below.
Taking into consideration the activities of the Ethical Trading Group, identify:
a) the source documents used to verify GST collected or paid, including;
i) what information should be shown on tax invoices (at least 5 pieces of information).
ii) what is the dollar threshold amount for which you are required to issue a tax invoice.
b) Information and/or reports required to assist in preparing the FBT return for the company.
c) Records and/or resources which could be used to assist in calculating and recording capital gains tax. (Hint: Do not provide details on how to calculate CGT.)
d) Details of processes and controls to prepare and lodge GST/ FBT returns, including;
i) Review and sign off of returns
ii) Where and how tax records are stored and filed
iii) Audit trail requirements
iv) How long tax records are kept
e) Note three (3) relevant sections from the Ethical Trading Group Policies and Procedures, which would assist them being compliant with their taxation obligations.
Part B: Presentation
Instructions:
You are now to present a summary of your written report at the Board meeting of Ethical Trading Group using PowerPoint (maximum of 6 slides). Also present at the Board meeting will be a Board Member and Senior Tax Agent. The presentation will need to be recorded as audio or video recording and must be approximately 5- 7 minutes in length. Please access the Case Study PowerPoint Template to help you complete this assessment. This file is also available in the Ethical Trading Group folder in the Additional Resources for this course.
You will require the help of two people to complete this assessment, one to play the role of the 'Senior Tax Agent' and another to play the role of a 'Board member'. 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' which can be found in Appendix A of this assessment. Each of the participants must ask the Problems that have been allocated to them (i.e. different Problems have been allocated for Participant 1 and Participant 2).
At the conclusion of your presentation, each of the participants must then complete the feedback from which can be found in Appendix B. This provides feedback on how clearly you have conducted the presentation. You must also ensure you obtain appropriate approvals to conduct and record a presentation in this setting so meeting participants must sign the Audio/Video recording consent form (please see Appendix C for a template you can use for this).
Before you commence your presentation, review the 'briefing notes' to ensure you will have the appropriate information to provide in your verbal responses to the participant Problems.
The responses you provide to the participants' Problems in the briefing notes must be completed and submitted as part of the assessment evidence for this activity.
When you have finished your audio or video recording, you will need to upload your file to OpenSpace. Click on the 'Support' tab - then 'Assessment' and instruction on how to do this are within the 'Frequently Asked Problems'.
In your presentation, you need to:
Question 1: Summarize the main issues from your written report (in Part A). This summary will be documented in the slides. Use headings and bullet points to format and present your summary of the main issues.
Question 2: Answer the Problems asked by the Board Member and the Senior Tax Agent (see Appendix A). These Problems can be asked at the end of your Presentation.
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Attachment:- Administer tax documentation for legal entities.rar