Assessment 2Part A – Written or Oral Questions

1. The monthly actual sales extracted from financial information of a

company are: $1,000 for August, $1,095 for September, and $1,210 for
October. The rents will be reviewed by the owner of the premises every
July, and not subject to the change until the next review. Assume that all
the income shown below has been received, and all the expenses have
been paid in cash during the month. The company tax rate is 30%. Use
Percentage to sales method to forecast the income and expenditures for
November as below. (Showing all your working and explanation) (10
marks)

October (Actual) November (Forecast)

Income $1,210

Expenses:

Administrative expenses $100

Rental expenses $300

Operating expenses $500

Net profit before tax $310

Less: income tax

($93)
expenses

Net profit after tax $217

 2. You are a registered tax agent, and have prepared a tax return
for your client. Can you lodge the tax return directly to ATO
after the completion? (3 marks)

Yes. After the approve of our client with his details we can
register the tax return. Its not necessary download anything and
its easy using devices such computer amartphone or tablet and it
have to be befire 31 october.

3. You are the owner of ABC Pty Ltd, and provide a company car
with a market value of $42,000 from 1 April 2014 for the full
365 days to an employee for personal transportation. The
employee made an after-tax contribution of $1,500. The car is
not an in-house benefit. Besides the income tax, is there any tax
obligation for the company? How much will the company be
required to pay for the tax liability in the above transaction?
How will this transaction affect the employee’s Payment
Summary? (Show all your working and explanation) (12 marks)

Tax law permits a deduction for all losses and

outgoings to the extent that they are either:

• incurred in gaining and producing assessable income;

or

necessarily incurred in carrying on business to

produce assessable income

4. Why is it important to review the tax plan on a regular basis? (5

marks)

Part A total: 30 marks

Assessment 2
Part B – Written Assessment
Case Study – Tax Plan
Sean is a resident who has always lived in Australia.
He is currently working full time for a large global company and earning
$95,000, which is expected to increase annually by 4%. His employer
paysthe superannuation guarantee to his nominated complying super
fund. Sean incurred $8,000 expenses related to his work, and such
expenses are expected to increase annually with inflation.
He may be transferred by his employer to the Branch in China for one
year, and will return to Australia to resume work here after the expiry of
the contract.
He purchased a property two years ago and immediately used it as his
main residence until now. During his absence, Sean is planning to rent
out his property. He did some research and found the average rental
income from the properties in the suburb he currently lives is $345 per
week. He also provide the following actual expenses related to the
purchase and ownership of the property:
Property purcharse price $400000
Straya levy $1970 per quarter
Council rate $394 per quarter
Water rate: $217 per querter
The cost of obtaining finance $2000
Annual interest on loan $15764

He will seek the real estate agent to manage the property during his
absence. The additional expenses may be incurred:
Advertising fees $985
Property management fees $148 per month
Sean notes that the carpet in his property is badly worn, he is
considering to rectify the damage by replacing the carpet with carpet of
a similar quality. Based on the current price research, it may cost Sean
about $7,882.
Sean bought 10,000 shares from a listed company with a cost of $0.50
per share. The current market price of the shares held by Sean is $2 per
share. The trend of the share price remains stable in these weeks. He
thinks it is the time to sell all these shares at the current price.
Sean is also planning to operate a business for exports of goods and
services from Australia. The expected turnover is $60,000, and the net
profit is estimated to be $30,000.
Sean does not have the appropriate private health fund with hospital
cover.
Required
Develop a tax plan for Sean to respond to the following issues:
1. Sean’s employer offers him a salary sacrificed super contribution
arrangement. How much pre-tax salary should Sean sacrifice to
contribute to his super fund? Is this a tax-effective strategy?

2. During his absence, will Sean still be considered as Australian

resident for tax purposes? Why or why not?

3. Advise which above expenses can be deductible for Sean if he is

about to rent out the property during his absence, and how will it
affect his tax liability?

4. Advise if Sean is required to pay CGT in the future when the

property is sold because he is about to use it to produce assessable
income during his absence.

5. Advise how to minimise the taxable capital gain arising from the
disposal of the shares.

6. Advise what kind of the tax entity (i.e. sole trader, partnership or
company) Sean can use for his proposed business, and provide the
tax planning for the GST.