CLWM4100 T3 2023 Assessment 3 Outline SoAPage 1 Kaplan Business School Assessment 3 Data 2023...

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CLWM4100 T3 2023 Assessment 3 Outline SoA
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Kaplan Business School Assessment 3 Data 2023 T3
Assessment 3 Case Study Data

Background
Amity Holdings Pty Limited (Amity) is an Australian resident company that was incorporated
during 2022. After purchasing several investments including real estate and shares, in 2023
Amity commenced business as a golf equipment wholesaler with both Australian and overseas
clients.
Katy Mahon, the Managing Director of Amity, has terminated Kurt Aild, the company’s
accountant, as she is concerned that there are several e
ors in the returns prepared. Katy has
provided the following information produced by Kurt:
a) 2023 Income Tax Return
) Additional notes accompanying the income tax return including franking account
c) June 2023 Business Activity Statement (BAS)
d) Additional notes accompanying the BAS
e XXXXXXXXXXFringe Benefits Tax Return
f) Notes and workings accompanying the FBT return

Requirements
Katy has requested that you prepare a statement of advice including:
i) Any necessary co
ections to Amity’s Income Tax Return that impacts taxable income,
income tax liability or the franking account. Each co
ection should be supported by a
ief
explanation and co
ect referencing from legislation, along with any workings and
calculations.
ii) Any necessary co
ections to Amity’s Fringe Benefits Tax Return that impacts the taxable
value of benefits and fringe benefits tax liability. Each co
ection should be supported by a
ief explanation and co
ect referencing from legislation, along with any workings and
calculations.
iii) Any necessary co
ections to Amity’s Business Activity Statement that impacts GST on
sales, GST on purchases and net GST payable. Each co
ection should be supported by a
ief explanation and co
ect referencing from legislation, along with any workings and
calculations.
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Kaplan Business School Assessment 3 Data 2023 T3
Amity Holdings Pty Ltd 2023 income tax return
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Kaplan Business School Assessment 3 Data 2023 T3
Amity Holdings Pty Ltd 2023 income tax return (cont.)
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Kaplan Business School Assessment 3 Data 2023 T3
Amity Holdings Pty Ltd 2023 income tax return (cont.)

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Kaplan Business School Assessment 3 Data 2023 T3
Amity Holdings Pty Ltd 2023 income tax return (cont.)
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Kaplan Business School Assessment 3 Data 2023 T3
Notes and workings accompanying the tax return

ITEM 6
INCOME $ $
C - OTHER SALES OF GOODS AND
SERVICES
Sales of goods and services to Australian
customers
525000
Exported sales of goods and services XXXXXXXXXX
H - TOTAL DIVIDENDS
Fully franked dividends received from listed
companies
21000
Unfranked dividend from listed companies XXXXXXXXXX
R - OTHER GROSS INCOME
Rent from residential investment properties
(includes $5,000 accrued for rent outstanding)
XXXXXXXXXX
EXPENSES
A - COST OF SALES
Purchases 175000
add: Closing stock (at cost XXXXXXXXXX
D - SUPERANNUATION EXPENSES
Contributions to complying fund 21500
Superannuation Guarantee Charge XXXXXXXXXX
E - BAD DEBTS
Provision for doubtful debts (none written off
during year)
XXXXXXXXXX
H - RENT EXPENSES
Management Fees 16000
Strata Levies 44000
Insurance XXXXXXXXXX
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Kaplan Business School Assessment 3 Data 2023 T3
Notes and workings accompanying
the tax return (cont.)
Y - MOTOR VEHICLE EXPENSES
Running costs 14500
Speeding Fines XXXXXXXXXX
S - ALL OTHER EXPENSES
Fringe benefits tax paid 22300
Wages 205000
Other employee benefits 16000
Commercial rent - fully serviced business
premises
XXXXXXXXXX
ITEM 7
A - NET CAPITAL GAIN
Amity entered into a contract for the sale of a residential property that was acquired
in 2022:
Capital proceeds 820000
less: Purchase price 685000
XXXXXXXXXX
less: 50% discount XXXXXXXXXX
J - FRANKING CREDITS
30% x $21, XXXXXXXXXX
CALCULATION STATEMENT

XXXXXXXXXXT1 – TAX ON TAXABLE INCOME XXXXXXXXXX,300

$231,000 x 30%

XXXXXXXXXXKurt noted that Amity is not a Base Rate Entity as more than 20% of assessable income is
XXXXXXXXXXPassive)

XXXXXXXXXXD – NON-REFUNDABLE CARRY FORWARD TAX OFFSETS

XXXXXXXXXXAs per Item 7 J – Franking credits from listed companies XXXXXXXXXX6,300
XXXXXXXXXX30% x 21,000
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Kaplan Business School Assessment 3 Data 2023 T3

Notes and workings accompanying the tax return

NOTE 1

Amity prepared the following franking account for the
year:
DATE DESCRIPTION DR CR BAL

1-Jul Opening Balance XXXXXXXXXX

30-Sep
Fully franked dividends totalling $21,000
eceived
XXXXXXXXXX

21-Nov PAYGI Paid XXXXXXXXXX

21-Jan Dividend of $70,000 paid - fully franked XXXXXXXXXX

31-Jan PAYGI Paid XXXXXXXXXX

21-Apr PAYGI Paid XXXXXXXXXX

28-Jun Dividend of $24,500 paid - unfranked XXXXXXXXXX
NOTE 2
Rental properties held by Amity had unexpired constructions costs totalling
$600,000. All properties were constructed between 2000 and 2010.
NOTE 3
Amity was provided with artwork valued at $11,000 by a client in return for
products provided at no charge. This has not been included in any returns
as it is non-cash.
NOTE 4 In 2022, Amity incu
ed company set-up and initial costs of $15,000.

NOTE 5

PAYGI instalments paid amounts to $33,000 (i.e. 4 instalments of $8,500
each)
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Kaplan Business School Assessment 3 Data 2023 T3
Extracts from the June 2023 Business Activity Statement

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Kaplan Business School Assessment 3 Data 2023 T3
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Kaplan Business School Assessment 3 Data 2023 T3
Notes and workings accompanying the business activity statement
$ $
G1 - TOTAL SALES
Sales of goods and services to Australian
customers
192000
Exported sales of goods and services 23000
Rent from residential investment properties XXXXXXXXXX
G11 - NON CAPITAL PURCHASES
Trading stock purchases 51000
Superannuation 5300
Management Fees - rental properties 4500
Strata Levies - rental properties 12500
Insurance - rental properties 1600
Car running costs 4600
Commercial rent paid 17800
Purchase of new office furniture XXXXXXXXXX
OTHER NOTES
Amity was provided with artwork valued at $11,000 by a client in
eturn for products provided at no charge. This has not been
included in any returns as it is non-cash.

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Kaplan Business School Assessment 3 Data 2023 T3
Extracts from the 2023 fringe benefits tax return
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Kaplan Business School Assessment 3 Data 2023 T3
Notes and workings accompanying the fringe benefits tax return

ITEM 23 $
CAR FRINGE BENEFIT
Running costs 15000
Estimated business use (no logbook kept) 50%
TAXABLE VALUE 7500
EXPENSE PAYMENT BENEFITS
Hospital (medical) costs paid for
employee
10000
Furniture purchased for employee 6000
16000
NOTE - CAR BENEFIT
The car originally cost $60,000 including GST and was available
for the entire FBT year. No contributions were received from the
ecipient.

clwm4100-t3-2023-assessment-3-pycbsnqk.pdf

Sandeep · Accepted Answer

Statement of Advice
To: Katy Mahon, Managing Director of Amity Holdings Pty Limited
Subject: Corrections to Amity's Tax Returns and Business Activity Statement
Dear Katy,
Upon thorough examination of the documentation submitted, our analysis has uncovered several inconsistencies within the tax returns and Business Activity Statement (BAS) of Amity Holdings Pty Limited for the fiscal year 2023. We have meticulously outlined the essential rectifications below, accompanied by comprehensive explanations grounded in pertinent legislation and meticulous calculations:
i) Income Tax Return Corrections:
Adjustment for Taxable Income:
Correction: After reviewing the company tax return, it was noted that other sales of Goods and Services should always be included in the total taxable income.
Explanation: According to Section 6-5 of the Income Tax Assessment Act 1997, all income received by a company during the income year is assessable unless specifically exempted. Therefore, other sales of Goods and Services should always be included in the total taxable income (Cooper & Vann, 1999). This is an area it was observed some errors factoring the sales of goods and services was not included in the Taxable Income. Hence urgent need for Amity to make this adjustment to ensure that its financial situation is not significantly impacted. In the case, the exported sales of goods and services, $65,000 should be added to the total sales that has been highlighted in the tax return statement. The total calculation should have been $65,000 + $590,000 = $655,0000.
Deduction for Non-Deductible Items:
Correction: Non-deductible items should be excluded from the taxable income calculation.
Explanation: Section 8-1 of the Income Tax Assessment Act 1997 outlines that only expenses incurred in gaining or producing assessable income are deductible for tax purposes.
Adjustments to Franking Account:
Correction: The calculation of the franked dividends received from the listed companies has to be adjusted to reflect accurate dividend transactions. The total dividends received has not effectively been calculated in the note and workings accompanying the tax return section. 
Explanation: Franking refers to the system of imputation credits in Australia, wherein companies can attach imputation credits, also known as franking credits, to dividends they pay to shareholders. These credits represent the tax already paid by the company on its profits. Division 207 of the Income Tax Assessment Act 1997 requires franking account balances to be accurately maintained to avoid penalties. 
In simple terms, Smith (1992) points out that when you receive fully franked dividends from listed companies, the franking credits are typically calculated based on a 30% tax rate, as specified in the Income Tax Assessment Act 1936.
The total dividends received from listed companies in the H-TOTAL DIVIDENDS section have been miscalculated, as the 30% rates specified by tax regulations were not taken into account.

Taxation Law Assignement.

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