FNSACC411 - PROCESS BUSINESS TAX REQUIREMENTS

Answers
Formative assessments
Activity 1
 1
Describe cash accounting and accrual accounting systems and the relevant advantages and
disadvantages of each. 150–180 words

Cash accounting - an accounting system method where transactions are recorded when the
actual payment occurs, regardless of when the goods or services are delivered.
Cash accounting is restricted to to government schools, endorsed charities or gift deductible
entities. GST is payable in the period that the payments for goods and services rendered by
a business are received - regardless of when the goods or services were invoiced.
Accrual accounting - transactions are recorded as they occur regardless of when payment
for that transaction is made or received. This method measures the performance and
position of a business by recognising economic events regardless of when cash transactions
occur.
This method also allows current cash inflows/outflows to be combined with future expected
cash inflows/outflows to give a more accurate picture of a business's current financial
condition.
GST is payable in the period goods and services are invoiced, regardless of when the
payment is received.

Trainer Comments

03/07/2019 correct
10:11PM

 2
What would influence your decision to use cash accounting or accrual accounting? 50–80
words

Cash accounting can be used if the business is only operating on cash at delivery. Where
payments are made when the goods are invoiced/received.
Accrual accounting will be used when you offer a credit to customers and allow them to
purchase items and pay for them at a later time.

Trainer Comments

03/07/2019 correct
10:12PM

Activity 2
 Why is it necessary to maintain adequate records to support the taxation accounting
system? 50–80 words
 Maintaining adequate records is an essential part of satisfying taxation obligations. All
transactions should have the documentation to proof it occurred. The primary basis of
evidence for taxation purposes are the source documents that a business creates or receives.
Source documents must be accurate because they provide evidence as to the validity of
transactions. They show the intention of the business to conduct a specific transaction, for
example a purchase order. Records can be used as the basis for entries in accounting records
and evidence for taxation purposes.

Trainer Comments

03/07/2019 correct
10:12PM

Activity 3
 Why has the ATO stipulated specific taxation requirements for business documents? 50–80
words

There are specific taxation requirements for business documents that need to be satisfied in
order to comply with ATO expectations. These include the way documents are formulated
and the information that is contained within the. The standards help achieve greater
consistency in the format of tax invoices and make it easier for recipients to locate the
necessary information for tax purposes.

Trainer Comments

03/07/2019 correct
10:13PM

Activity 4
 Why is it necessary to establish an accounting system to manage the taxation lodgement
process? 100–120 words

Financial records must be retained by all businesses regardless of their size. Each business
will have established a system for maintaining these records so they are easily accessible
and can be utilized in their accounting system. One of the keys to business success is
maintaining a reliable, accurate and timely accounting system. This will allow the business
to ensure that its financial information is accurate and current. This enables the business to
monitor results on a regular basis, compare actual results to forecast, identify areas in
which over spending mat be occurring, ensure accurate information is provided as to the
overall financial position of the business, make better decisions for the business because of
the quality of the information, it improves relationships with the business's bank or other
investors and it fulfill statutory and taxation obligations.

Trainer Comments
 03/07/2019 correct
10:14PM

Activity 5
 1
How will you ensure that sufficient and current records are maintained to comply with
lodgement requirements? 150–180 words

The ATO prescribes a system of lodgement of documents for reporting purposes. These
requirements and lodgement might include BAS, IAS and payment advice. Under the
Australian taxation law businesses must keep financial records for at least five years. This
requires a filing system that is secure and allows easy access to records when they are
required.
Documents retained in a business may include; customer invoices, banking slips, receipts,
purchaser requisitions ect.
The complexity of the filling system depends on the size and nature of the business you work
for.
Documents can be filed or stored in different filing systems. But it is essential for you to keep
a copy of all documents in the files, even if a photocopy has been taken of the original.
Documents are only useful if they can be easily found and accessed when required,
documents might be needed to check for mistakes. It is therefore essential that you know
where to file documents and where to find a document when it is required. Files, records
and information are in daily use, new files are being created and old files removed from
both the systems and file index, and information is modified and updated within fildes.

Trainer Comments

03/07/2019 incorrect, please describe data validation checks and what must be avoided like
10:16PM
lost data, invalid data, spelling mistake etc.

23/08/2019 Answer Accep[ted.

05:25AM

 2
List five examples of records used for taxation purposes.

- Financial reports - for example financial statements, reconciliation, audit reports

- Cash book records of daily receipts and payments
- Tax invoices and income tax records
- Records relating to employees
- Banking records - for example bank statements, deposit books, bank reconciliation

Trainer Comments
 03/07/2019 correct
10:16PM

 3
What does the term internal control mean and why is it important in terms of taxation
reporting? 50–80 words

Internal control is all of the policies and procedures management uses to achieve the
following goals.

Safeguard University assets - well designed internal controls protect assets from accidental
loss or loss from fraud.
Ensure the reliability and integrity of financial information - Internal controls ensure that
management has accurate, timely and complete information, including accounting records,
in order to plan, monitor and report business operations.
Ensure compliance - Internal controls help to ensure the University is in compliance with the
many federal, state and local laws and regulations affecting the operations of our business.
Promote efficient and effective operations - Internal controls provide an environment in
which managers and staff can maximize the efficiency and effectiveness of their operations.
Accomplishment of goals and objectives - Internal controls system provide a mechanism for
management to monitor the achievement of operational goals and objectives.

Trainer Comments

03/07/2019 correct
10:16PM

Activity 6
 How will a business determine the correct establishment of lodgement schedules? 120–150
words

The ATO has established lodgement requirements for reporting of taxation obligations.
There are penalties that the ATO will apply if the required documents are not submitted by
the due date. There are penalties that the ATO will apply if the required documents are not
submitted by the due date. These are known as FTL penalties and are applied when in the
ATO's opinion the administration of the tax system is put at risk by taxpayers who do not
meet their obligations to supply information as and when required.

It is applied when documents and reports are required to be lodged with the ATO by a due
date and are not received by that due date.

This would include documents and report such as:

-activity statements
- income tax returns
- FBT returns
 -PAYG withholding annual reports
- annual GST returns
- annual GST information reports
- superannuation guarantee levy

Trainer Comments

03/07/2019 correct
10:17PM

Activity 7
 1
Conduct appropriate research using the ATO website to determine what information the tax
office can pre-print on an activity statement. List and describe 10 items.

1. Bar code - The bar code is used by the scanners to identify your activity statement.
2. Date - example (JAN-MARCH 2012) This is the reporting period that the activity statement
covers. It's usually a month or a quarter.
3. The documents ID - is a unique identifier for each activity statement you receive
4. Due dates - they indicate when you have to lodge your activity statement and when you
have to make a payment.
5. Dates which show you the dates and only include amounts for the reporting period shown
6. A section you need to complete with your contact details if the ATO needs to contact you
6.Method of payment at the bottom of the first page
7. At the back there will be more dates - these dates will show you whether you are
reporting monthly or quarterly for PAYG withholding.
8.A section which needs to be completed of you withhold from payments to others
9. A section where you summarise your reporting obligations and calculate where you are
due a refund or need to pay
10. There will also be a payment advice that you use when making a payment to the ATO

Trainer Comments

03/07/2019 correct
10:17PM

 2
The activity statement allows a business to calculate obligations, allowing a single payment or
refund for each reporting/ payment period, across the taxes.

If in a quarterly reporting/ payment period, a business had:

o a GST credit of $15,000

o a PAYG instalment liability of $6,000
o a PAYG withholding liability of $1,500, and
 o an FBT liability of $1,000
Would the business need to make any payments? Explain your answer. 30–50 words

The BAS allows a business to report different taxes, some will be credited (ATO owes money)
like the GST credit in the Activity, which represents the difference between GST Collected
and GST Paid.
The difference between all the tax credits and liabilities reported in the BAS, including the
FBT, is what will be either paid to the ATO or received from the ATO
GST@$15,000-(PAYG instalemnt@$6,000+PAYG withholding@$1,500+FBT@$1,000)=$6,500
Thus the business will receive credit of $6,500

Trainer Comments

03/07/2019 incorrect.
10:18PM
Hint:
business will receive credit of $6500

23/08/2019 Answer accepted.

05:26AM

 3
Provide a brief description of each of the three main returns and lodgements that might be
required by reporting entities. 30–50 words each

BAS - Business activity statement

Businesses registered for GST use the BAS to report their tax entitlements and obligations,
including GST, pay as you go (PAYG) instalments, PAYG withholding and fringe benefits tax
(FBT) instalments. Businesses can also offset tax payable against tax credits to arrive at a
net amount. The BAS replaces several business tax forms.
IAS - Instalment activity statement
The IAS is a form similar to the BAS but without GST and some other taxes. Businesses that
are not registered for GST, and individuals who are required to pay PAYG instalments or
PAYG withholding (such as self-funded retirees) use this form to pay PAYG.
Payment Advice
Payment advice slips re printed stationary provided by the ATO to the business to enable
them to pay taxation obligations using electronic funds transfer (EFT), Australia post bill or
BPAY. The ATO uses the details on the advice to identify a taxpayer and credit the amount of
the payment to their account. Payment advice stationery must be to the ATO's specification.

Trainer Comments

03/07/2019 correct
10:19PM

Activity 8
  A business purchases 10 digital televisions for use in its offices. When the televisions arrive
at the workplace the owner of the business decides that one will be taken home. The total
cost of the acquisition was $26,500 (GST inc).

Describe in 80–100 words how you would process this to comply with taxation reporting
requirements. How much input tax credit could be claimed? What would be the BAS code for
the acquisition? Why would you code it there?

A business can only claim an input tax credit for purchases associated with the business
(creditable acquisitions). Purchases for private purposes (non-creditable) are not able to be
claimed.
Apportionment is the separation of non-credible and creditable acquisitions for the purpose
of only claiming input tax credits for credible expenditure. It is necessary when a business
acquires something that has both credible and non-creditable purposes.
In this scenario only 90% of the input tax can be claimed.
GST for 10 TV’s = $2409.09
$2409.09/90% = $2168.18
Thus the credible acquisition will be $2168.18.
This will be reported under 1B when completing the BAS.
1B is GST on purchases

Trainer Comments

03/07/2019 incorrect,
10:21PM

What will be the creditable acquisition ?

23/08/2019 Answer Accepted.

05:26AM

Activity 9
 Why do drafts of returns and lodgements need to be reviewed by authorised personnel?
30–50 words)

Each time Tax professional lodge an approved form on behalf of clients, the law requires to
have first received a signed declaration in writing from your client. This declaration states
that this person is authorised to submit documents from clients behalf. Thus, return and
lodgements need to be reviewed and signed to prevent any misstatement, pose
accountability and line of authorisation on the tax professionals if any misstatement is given
or the fact is hidden.

Trainer Comments

03/07/2019 correct
 10:22PM

Summative assessment 1
Question 1
 What information must be included in a tax invoice for supplies of less than $1,000? List and
describe six examples of information.

A tax invoice for supplies less than $1000 must include the following information.
- the supplier's identity and ABN
- the GST inclusive price of the taxable supply
- the words tac invoice stated prominently
- the date of issue of the tax invoice
- a brief description of each good and service supplied
- when GST payable is exactly 1/11th of the total price, either a statement along the lines of
"total price includes GST', or the GST amount
- if the supply is a mixed supply (taxable and GST free supplies) the amount of GST (if any)
payable in relation to each supply.

Trainer Comments

03/07/2019 correct
10:22PM

03/07/2019 correct
10:22PM

Question 2
 What are the three options for calculating and reporting GST? 80–100 words

There are 3 GST options available to calculate and report GST.

1. Calculate and report GST quarterly- Calculation sheet method or the accounts methods
can be used.

2. Calculate and report GST annually- Calculation sheet method or the accounts methods
can be used.

3. Pay in instalments- This option can be chosen only if i) annual turnover is $ 2 million or
less ii) no GST refund received in last 2 quarters and iii) submitted 2 quarterly BAS.

Trainer Comments

03/07/2019 correct
10:22PM

Question 3
 What does PAYG tax withheld involve? 100–120 words
 Under PAYG withholding, you need to withhold tax from certain payments made to others.
These payments include:

payments to employees, company directors and office holders

payments to workers under a labour-hire agreements
payments under voluntary agreements
payments where an Australian business number (ABN) has not been quoted in relation to a
supply.
You must report any withheld amounts in the PAYG tax withheld section of your business
activity statement (BAS), and pay all withheld amounts to us.
If you fail to comply with the PAYG withholding obligations for a payment to a worker, you
may not be entitled to a deduction for that payment. Penalties may also apply.

Trainer Comments

03/07/2019 correct
10:23PM

Question 4
 What action can the ATO take if a taxpayer fails to correctly report or pay by the due dates?
100–120 words

The tax laws authorise the ATO to impose administrative penalties for conduct such as:

- making a false or misleading statement or taking a position that is not reasonably

arguable
- failing to lodge a return or statement on time
- failing to withhold amounts as required under the PAYG withholding system
- failing to meet other tax obligations.
The purpose of the penalty provisions is to encourage taxpayers to take reasonable care in
complying with their tax obligations. We take into account your circumstances when
deciding what action to take.
If you're liable for a penalty we'll notify you in writing of the reason for the penalty, the
amount and the due date for payment, which will be at least 14 days after the notice is
given. You’re unable to claim a deduction for penalties we impose.

The penalty amount is calculated using either a statutory formula, based on your behaviour
and the amount of tax avoided, or in multiples of a penalty unit.

Trainer Comments

03/07/2019 correct
10:23PM

Question 5
  What is a recipient created tax invoice (RCTI) and why are they necessary? 30–50 words

A recipient created tax invoice (RCTI) is a tax invoice that is issued by the recipient of the
goods and/or services rather than the supplier. RCTIs can only be issued by a recipient if:

- the recipient and the supplier are both registered for GST
- the sales for which the recipient can issue a RCTI are agreed to in writing by the recipient
and the supplier either in a separate written agreement specifying the supplies to which
each agreement relates or embedding this information or specific terms, as outlined in the
Legislative Instrument, in the tax invoices they issue
- the agreement is current and effective when the RCTI is issued
- the goods or services being sold under the agreement are of the type that we have
determined can be invoiced using RCTIs.
The ATO have made legislative determinations about the types of sales of goods or services
that can be invoiced using RCTIs.

Trainer Comments

03/07/2019 correct
10:23PM

Question 6
 What is debit and credit formula for each account type?

Account rules (Debit&Credit).xlsx (3.94 KB)

Trainer Comments

04/07/2019 Correct
04:07AM

Summative assessment 2
Project 1
 You are paying GST monthly and you are required to provide the following details each
month:

o total sales
o export sales
o other GST free sales
o capital purchases
o non-capital purchases
o GST on sales
o GST on purchases
 1
Provide the correct codes for these transactions:
 Activity BAS code

Total sales G1

Export sales G2

Other GST free sales G3

Capital purchases G10

Non-capital purchases G11

GST on sales 1A

GST on purchases 1B

Trainer Comments

03/07/2019 correct
10:23PM

 2
What is included in total sales?

Total amounts for sale including:

- goods or services you sell of supply
- sales of trading stock
- the sale of business assets such as office equipment or motor vehicles
- the sale, lease or rental of land and buildings
- memberships you have provided
- earnings from financial supplies you make
- goods and services provided in return for government grants and some private sector
grants
- cancelled lay-by sales
- forfeited customer security deposits
- employee contributions for fringe benefits you have provided
- the sale of a debtor property that was made to satisfy the debt owed to you
- entry into, or release from an obligation to
- do anything
- refrain from an act
- tolerate an act or situation
- providing goods or services in return to sponsorship
 - the GST-inclusive market value if
- your association is not registered, or required to be registered for GST
- your association has not received the thing either partly or wholly for their business
- the thing received by your association relates partly or wholly to making sales that would
be input taxed, or
- the thing supplied partly or wholly of a private or domestic nature.

Trainer Comments

03/07/2019 Answer Accepted.

10:24PM

Simple answer would have been:

All Taxable, input taxed and GST free sales

 3
List 10 things that are not reported in total sales.

You do not report the following in G1:

- dividends you receive
- donations and gifts you receive
- private sales that are not related to your business, for example, selling your home or
furniture from your home
- salary and wages you receive
- government pensions and allowance
- amounts you receive from hobby activities
- any trust and partnership distributions you receive
- tax refunds
- business loans you receive
- taxes, fees and charges that you have received that don't include GST

Trainer Comments

03/07/2019 correct
10:24PM

Project 2
 1
Use the calculation sheet to prepare a BAS. Figures shown are GST inclusive where applicable.
An estimated amount of purchases for private use has been determined to be $25,000. If you
wish download a sample of a BAS from the ATO website and transfer the amounts from the
calculation sheet to the BAS.

Total sales $350,000

Export sales $50,000

Input taxed sales $10,000

Adjustments (sales) $30,000

Capital purchases $150,000

Non-capital purchases $10,000

Purchases for making input taxed sales $10,000

GST amounts you owe the Tax Office from sales

Total sales (including any GST) G1 350,00

Export sales G2 50,000

Other GST free sales G3 Nil

Input taxed sales G4 10,000

G2 + G3 + G4 G5 60,000

Total sales subject to GST G6 290,000

(G1 minus G5)

Adjustments (if applicable) G7 30,000

Total sales subject to GST after adjustments G8 320,000

(G6 + G7)

GST on sales (G8 divided by 11) G9 29,090.90

GST amounts the Tax Office owes you from purchases

Capital purchases G10 150,000

(including any GST)

Non-capital purchases G11 10,000

(including any GST)

G10 + G11 G12 160,000

 Purchases for making input taxed sales G13 10,000

Purchases without GST in the price G14 Nil

Estimated purchases for private use G15 25,000

or not income tax deductible

G13 + G14 + G15 G16 35,000

Total purchases subject to GST G17 125,000

(G12 – G16)

Adjustments (if applicable) G18 Nil

Total purchases subject to GST after G19 125,000

adjustments (G17 + G18)

GST on purchases (G19 divided by 11) G20 11,364

Trainer Comments

03/07/2019 GST on sales is correctly calculated but in GST on purchase calculation, you
10:28PM
missed to mention the amount on estimated purchases for private use or not
income tax deductible of 25000 hence affecting your answer.

Hint GST on Sales = 29091

GST on Purchase=11364

23/08/2019 Correct
05:26AM

 2
Once you have prepared the GST calculation sheet and the draft BAS, what further action
would you take? 1 sentence

Return the drafts to be viewed by authorised personnel.