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CLWM4100_T3_2021_Assessment_3 Page 1 XXXXXXXXXXKaplan Business School Assessment Outline Assessment 3 Information Subject Code: CLWM4100 Subject Name: Taxation Law Assessment Title: Case Studies...

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CLWM4100_T3_2021_Assessment_3

Page 1 XXXXXXXXXXKaplan Business School Assessment Outline

Assessment 3 Information
Subject Code: CLWM4100
Subject Name: Taxation Law
Assessment Title: Case Studies
Assessment Type: Statement of Advice
Weighting: 30 %
Total Marks: 40
Submission: Via Turnitin on MyKBS
Due Date: Monday of Week 13 at 19:55 AEST
Your Task
Your task is to analyse client information outlined in the three different case studies below and
present the findings in three Statement of Advice (approximately 2,000 words).

You are required to prepare Border Pty Ltd’s taxation return.
1) You are required to provide advice and tax calculations to Cynthia and Andreas (directors of
Border Pty Ltd) regarding the tax payable by the company.
2) You are required to calculate the capital gains tax for Cynthia and Border Pty Ltd.
3) You are required to complete the franking account and tax implications on dividend received
y Border Pty Ltd shareholders.

For each question you are expected to:
1) identify the facts and issues for each case
2) apply the relevant legislation and/or case law.
Learning Objectives

After completing this Individual Assignment, you will be able to:
1) Research information about each question using tax cases and tax legislation.
2) Determine the main issues and make recommendations for each case.
3) Calculate taxes for an individual, a trust and a company.
Assessment Instructions

Statement of Advice 1 – Prepare a tax return for an entity (Australian private company)
(10 marks for technical and calculation accuracy and relevance and 10 marks for writing style;
efer to marking ru
ic for more guidance.)

In your cu
ent role, you are responsible for providing taxation services to individual
usiness
clients. You conducted an initial meeting with two (2) clients (Cynthia and Andreas Rafter, both
Australian residents) to obtain and document all the relevant information which is required to
prepare the relevant tax documentation.

Both Andreas and Cynthia are directors of Border Pty Ltd, an Australian resident private
company with a corporate tax rate for imputation purposes of 30% for the 2020/21 income year.
Page 2 Kaplan Business School Assessment Outline
The clients have requested that you evaluate their tax position and provide recommendations
elating to income tax liability and the optimum tax treatment.
Border Pty Ltd sells coffee machines using accrual basis accounting for tax purposes. Receipts
and payment details as at 30 June 2021 are as follows (ignore GST and small business
concessions).
Receipts
Cash received for Sales (note 1) $278,000
Dividend received (note 2) $8,720
Payments
Purchases of inventory (note 3) $97,000
Net wages paid to employees $57,890
PAYG withholding paid to the ATO $12,780
Superannuation paid (note 4) $4,987
PAYG instalment paid the ATO (note 5) $5,210
Fringe benefit tax paid to the ATO $11,210
Fully franked Dividend paid (note 6) $30,000
Purchase of motor vehicle (note 7) $52,000
Other deductible expenses $26,900
Notes
Note 1) All sales during 2021 income year were on credit. Account receivable balances were as
follows.
Date 1 July XXXXXXXXXXJune 2021
Accounts receivable $17,600 $19,800
Note 2) Dividend income received by Border Pty Ltd for the year included:
• On 30/8/2020, a dividend of $3,600 received from Australian Bank Ltd (an Australian resident
public company for tax purposes) franked to 60%.
• On 28/2/2021, an unfranked dividend of $5,120 from Lowest Ltd (an Australian resident public
company for tax purposes).
Note 3) All inventory purchases during 2021 tax year were on credit. Account payable and
inventory balances were as follows.
Date 1 July XXXXXXXXXXJune 2021
Accounts payable $5,280 $5,830
Inventory (trading stock) on 1 July 2020 $7,100
Inventory (trading stock) on 30 June 2021
- at cost $8,400
- at market selling $8,600
- at replacement $8,500
Page 3 Kaplan Business School Assessment Outline
Note 4) As per the ledger balances on 30 June 2021, Superannuation payable for June quarter
was amounted to $1,727. The payment is due by 28 July 2021.
Note 5) As per the ledger balances on 30 June 2021, PAYG instalment liabilities payment and
payable information are as follows.
24/8/2020 PAYG instalment paid for June quarter 2020 $ 860
25/11/2020 PAYG instalment paid for September quarter 2020 $1,450
28/2/2021 PAYG instalment paid for December quarter 2020 $1,450
26/5/2021 PAYG instalment paid for March quarter 2021 $1,450
June quarter 2021 was amounted to $1,450. The payment will be paid on 25 August 2021.
Note 6) The fully franked dividend was paid on 25 Fe
uary 2021.
Note 7) The motor vehicle was purchased on 1 March 2021 and used to deliver coffee
machines. Andreas wishes to use the taxation effective life to depreciate the machine.
Required
1) Andreas wishes to minimise the income tax for 2020/21. Calculate Border Pty Ltd’s net tax
liability in respect of the income that it derived in the tax year XXXXXXXXXX.
2) Advise assessability of receipts and deductibility of payments with explanations (Sales,
Dividend income, Trading Stock, PAYG withholding, PAYG instalment, Superannuation
guarantee, fringe benefit tax, Dividend paid and motor vehicle purchase). Include section
numbers and/or cases in your explanations.
Statement of Advice 2 – Advice on company franking account and distributions (10 marks
for technical and calculation accuracy; refer to marking ru
ic for more guidance)
Cynthia and Andreas seeking your advice regarding Border Pty Ltd’s franking account. (Please
note: use all figures/information provided from Statement of Advice 1 above to construct the
franking account for 2020/21. Opening balance is provided below).
Required
1) 1 July 2020, the balance in Border Pty Ltd’s franking account was $7,158. Construct Borde
Pty Ltd’s franking account for the 2020/21 financial year. You also need to calculate the
franking account balance as at 30 June 2021.
2) Border Pty Ltd wishes to pay a final fully franked dividend of $40,000 on 30 June 2021.
However, Andreas and Cynthia are concerned about the franking account to go into deficit.
Calculate and advise the maximum frankable distribution amounts that Border Pty Ltd can pay
as fully franked dividend. What are the tax consequences if Border Pty Ltd goes ahead and
pays $40,000 fully franked dividend on 30 June 2021?
3) Assuming Border Pty Ltd paid $40,000 fully franked dividend on 30 June 2022 (only dividend
paid for the year), comment on the tax treatment of the dividend to the following four (4)
shareholders:
• Cynthia & Andreas Rafter receive a dividend of $15,000 each. They are Australian
Page 4 Kaplan Business School Assessment Outline
esidents at the highest marginal tax rate.
• $5,000 to Justin Rafter, the son of Cynthia & Andreas, who has been studying in London
for three years and is a foreign resident.
• $5,000 to Leaf Pty Ltd, an Australian private company with a 30% company income tax
ate.
Advise how each of the above four shareholders of Border Pty Ltd would be taxed on the
distribution received in 2021/22.
Statement of Advice 3 – Advice on net capital gains (10 marks for technical and calculation
accuracy; refer to marking ru
ic for more guidance.)
Since 1997 Andreas and Cynthia have invested in various Australian shares. Cynthia acquired
the shares in her own name whereas Andreas had his company Border Pty Ltd acquire his share
portfolio. On 20 August 2021 both Cynthia and Andreas made a decision to dispose of their
Australian shares and the proceeds and purchase prices information are as follows.
Cynthia’s share portfolio
Shares Purchase date Costs Proceeds
Mega Mining Ltd 1 April 1997 $8,000 $12,400
Global Media Ltd 10 June 2000 $15,000 $90,000
Watson Tel Ltd 17 May 2013 $34,000 $33,500
Qantas Ltd 8 January 2021 $17,900 $21,000
Border Pty Ltd share portfolio
Shares Purchase date Costs Proceeds
Xero Ltd 28 March 2018 $45,000 $62,000
Qantas Ltd 26 June 2021 $21,600 $28,800
Other information
Cynthia has a capital loss of $600 ca
ied forward from sale of painting during 2018.
Required
1) Advise both Cynthia and Andreas on the CGT consequences of their share sales.
2) Calculate net capital gains for both Cynthia and Border Pty Ltd the 2021/22 tax year. You
must provide all methods available for her and choose the best method to minimise net
capital gains.
Page 5 Kaplan Business School Assessment Outline
Important Study Information
Academic Integrity Policy
KBS values academic integrity. All students must understand the meaning and consequences
of cheating, plagiarism and other academic offences under the Academic Integrity and Conduct
Policy.
What is academic integrity and misconduct?
What are the penalties for academic misconduct?
What are the late penalties?
How can I appeal my grade?
Click here for answers to these questions:
http:
www.kbs.edu.au/cu
ent-students/student-policies/.
Word Limits for Written Assessments
Submissions that exceed the word limit by more than 10% will cease to be marked from the point
at which that limit is exceeded.
Study Assistance
Students may seek study assistance from their local Academic Learning Advisor or refer to the
esources on the MyKBS Academic Success Centre page. Click here for this information.
http:
www.kbs.edu.au/cu
ent-students/student-policies
https:
elearning.kbs.edu.au/course/view.php?id=1481

Page 6 XXXXXXXXXXKaplan Business School Assessment Outline



CLWM4100 Taxation Law
Assessment 3
Marking Ru
ic
40 marks
Statement of Advice 1 (10 marks)
0 – XXXXXXXXXXAchieved marks ( /10)
Has demonstrated limited achievement:
Co
ectly calculated some taxable income with
assessable income and allowable deductions items.

Stated recommendations for the best outcome of
taxable income in relation to credit sales, dividend
eceived, inventory, wages, PAYG
withholding/instalment, superannuation, fringe
enefit tax, dividend paid and purchase of motor
vehicle.

Struggled to articulate the co
ect
Answered 1 days AfterMar 10, 2022

Solution

Jyoti answered on Mar 12 2022
57 Votes
TAXATION LAW: CLWM4100
    
STATEMENT OF ADVICE
Table of Contents
1. Executive summary
2. Statement of Advice- Tax return preparation for Border Pty Ltd.
3. Statement of Advice- Border Pty Ltd.’s Franking account and distributions
4. Statement of Advice- Net capital gain on sale of shares by directors
Executive Summary
The present case study consists detailed analysis and advice for three scenarios for an Australian based private company, Border Pty Ltd. and its board of directors.
First part of statement of advice relates to determination of taxable income and tax liability of Border Pty Ltd. for financial year 2020-21 along with explanation for each item.
Second part of advice is for preparation of franking account for company and treatment of franked dividend paid to different shareholders as per Australian tax laws.
Last part of statement of advice is providing consequences of shares sold by the directors in other companies considering all methods of capital gain tax calculation.
Statement of Advice -1
Tax Return Preparation for Border Pty Ltd.
1. Facts & Issue
Border Pty Ltd. is engaged in business of selling coffee machines. For the year ending at 30th June, 2021, various figures relating to sales, expenses, etc. are given to a
ive at net tax liability.
We are required to provide assess ability of receipts and deduction for various payments with relevant applicable sections and case laws.
2. Law
In order to a
ive at tax liability of company, one needs to calculate taxable income which is the result of assessable income –deductions. Assessable income is an income which a business earns and includes all other income which is not part of business activities also like capital gain, interest, etc. Section 8-1(1) of the ITAA, 1997 allows deductions from assessable income towards any loss or expense if the same is incu
ed in connection with assessable income or in connection with ca
ying on business activities. An expense must have the essential character of income producing expense. (Lunney v. FC of T; Hayley v. FC of T).
Income tax rates are then, applied on taxable income and income tax is calculated for a financial year after reducing allowable tax offsets. The net tax liability is then paid through self-assessment or in advance through PAYG instalments.
3. Analysis
Let us find out the tax liability of Border Pty Ltd. by determining its assessable income and reducing deductions therefrom to a
ive at taxable income.
    Particulars
    Amount
    Explanation
    Sales
    $280,200
    It is taxable as ordinary income under section 6-5 of ITAA 1997 and forms part of assessable income.
    Change in inventory of trading stock
    $1300
    An increase in trading stock over the year is included in assessable income. It is calculated as value of closing trading stock – value of opening trading stock. Note that value of closing stock is lower of cost, market value or replacement value.
    Wages
    $57,980
    Wages are operating expenses and hence, allowed as deduction. (Refer section 8-1 of ITAA 1997).
    Purchases
    $97,000
    Purchases are operating expenses and hence, allowed as deduction (Refer section 8-1 of ITAA, 1997)
    Superannuation paid
    $6714
    Superannuation expenses are operating expenses and hence, allowed as deduction. (Refer section 8-1 of ITAA 1997).
    Other deductible expense
    $26900
    Operating expenses are allowed as deduction (Refer section 8-1 of ITAA 1997).
    Depreciation
    $2167
    Depreciation is a deductible item as per provisions of section 40-25 of ITAA, 1997 read with section 8-1 of ITAA, 1997.
    Net profit from business
    $88,139
    
    Dividend
    $8720
    It is taxable as statutory income (refer section 10-5 of ITAA 1997) and forms part of assessable income.
    Total assessable income
    $96,859
    
    Fringe benefit tax paid to ATO
    $11,210
    Fringe benefit tax paid is allowed as deduction (Refer section 8-1 of ITAA 1997).
    Total income after fringe benefit tax
    $85,649
    
    Tax payable with 30% tax rate (as specified)
    $25,694
    
Notes:
1. Accounts Receivable
Closing balance $19,800
Add: Cash received $ 278,000
Less: opening balance $17,600
Sales ...
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