ASSESSMENT COVER SHEET
Course Name: Advanced Diploma of Accounting FNS60215
Subject Name: Income Tax Applications FNSAC C601
Assessment No.: 3
Weighting: 40%
Mark: 100
Due Date: Week 9
Competency Title/s: FNSACC601 Prepare and Administer Compliant Tax Returns
for legal entities
Student Name: ___________________________________
Student Number: ___________________________________
Student Signature: __________________________________
Date: _____/____/_____
Trainer Name: Nadeem Tahir
Purpose of Assessment
This assessment task covers topics covered in week 1 to 8 and has been designed to ensure that you are engaging with the subject content on a regular basis. More specifically it seeks to assess your ability to understand and apply taxation principles and how they are applied.
Description of Assessment
Where necessary, state any assumptions you have made. Assignments should show all workings and students will be penalised for failing to do this.
You will be assessed on:
• your understanding of the problem;
• your choice of method for solving the problem;
• your application of techniques;
• the accuracy of your answers;
• written communication skills;
• Critical thinking and analysis.
Part A
Q1: You have found the following expenses have already been claimed by your client as allowable deductions for tax purpose. As a Tax Agent, what is your advice if you find the following discrepancies in record keeping? (05 marks)
Discrepancies Recommended action
(a) $5,000 was recorded for equipment purchase while the receipt shows only $4,500. Depreciation expenses were deducted as per $5,000 asset cost.
(b) Annual insurance premium of $5,000 was paid on 1stJanuary 2015, for the year ended 31st December 2015 (12 months). The full amount was used as allowable deduction as insurance expense in 2014/15 income tax return.
(c) List down at least 8 basic financial records that the law require a business to keep.
(d) Identify example(s) of valid documents to support the following transactions.
• Receipt of Cash
• Payment of cash
• Expenses incurred
• Credit sales
Short Answer Questions (02 marks each)
Q2. List down features of organisational policy and procedures (for tax agents) relating to preparation of tax documentation for a legal entity.
Q3: List different types of accounting records that should be maintained by an organization for income tax purposes.
Q3: Please explain specific and general anti-avoidance tax rules for individual?
Q4: What are the different types of income included in assessable income?
Q 5: Define allowable deductions and tax offsets and explain the differences between them?
Q6: Define and explain General Deductions and Specific Deductions?
Q7: Who need to report GST on cash basis and accrual basis? What are the dates of filing BAS statement to ATO?
Q8: What are the Tax Agent Codes of Professional Conduct under the TASA 2009?
Q9: What are the consequences of not providing Tax File Number to the employer and the financial organizations?
Q10: How do you advice your client about foreign income and taxation issues?
Q11: You are completing a return for a client who provides receipts for child care and asks you to claim them as a deduction.
As a diligent tax agent, you sent the draft tax return to clients for signature and also inform your client that the expenses are not allowable deductions under section 8-1 ITAA1997 because they are of a private and domestic nature. Your client is quite emphatic, citing the injustice of the tax laws and the recession and instructs you to claim them. What do you do?

Q12: You are a tax agent for Joseph (Sole Trader resident client for whom you have prepared his 2015) received a letter from ATO that his 2015 tax return is be to audited therefore seeking your assistance. List the cooperative approaches you need to respond to tax office enquiries and meet taxation audit requirements in timely manner.
Q 13: The notice of assessment for Korean Restaurant Pty Ltd for Tax year 2015 tax return disclosed taxable income of $90,000. However, the company had failed to include $15,000 of assessable income from investment, received a letter from ATO about taxable income discrepancies and Korean Restaurant Pty Ltd wishes to know what options are available. Advise the company of current tax obligations and steps to be followed to resolve the discrepancies
Q14: Define key aspects of principles of fringe benefit tax and indicate whether or not the following case to which FBT applies.
Fresh Start Pty Ltd is a resident company that owns and operates a car dealership. During the year, the company has provided the use car to Darwin (current employee of Fresh Start Pty Ltd )’s wife Susana, who does not work at the dealership

Q 15: A taxpayer has business income of $55,000, other assessable income of $28,000 and general deductions allowed of $10,000. Calculate his taxable income.
Q 16: A taxpayer has general deductions allowable of $6,500, $9,600 PAYG withheld and a taxable income of $55,650. Calculate his tax on taxable income.
Q 17: If a single taxpayer with private health cover has assessable income of $65,000 and a taxable income of $56,000, what is the current Medicare levy payable?
Q 18: A single taxpayer with no private health cover has wages of $73,000, other Assessable income of $12,000, general deductions allowed of $5,500 and PAYG withheld of $8,500. Calculate his Medicare levy & Medicare surcharge payable MLS.
Q19: Discuss superannuation guarantee levy. How do you determine the amount of superannuation levy to be paid to an employee and what is the %?
Q 20: Under Taxation Ruling TR 98/17: Income tax: explain the following case - residency status of individuals entering Australia:
Veronica is from Indonesia and she intends to stay in Australia for at least the next 1 year. She has her family members and home in Indonesia. Unfortunately, her visitor’s visa only permits her to stay in Australia for a period of five months. The visa also forbids her to apply for a permanent resident's visa while in Australia.
Part B (01 mark each)

True or False Questions (Show Calculations where required)
Q1: Individual taxpayers whose taxable income is less than $30,000 always receive the full low income tax offset (FY 15-16). Circle: T or F
Q2: A net capital gain is the total of a taxpayer’s capital gains for an income year reduced by capital losses made by that taxpayer. Circle: T or F
Q3. All collectable assets are subject to CGT upon their disposal. Circle: T or F
Q4. A capital loss is a deduction. It can be used to reduce other types of assessable income. Circle: T or F
Q5: If a dwelling is used partly as a main residence and partly as a place of business then the business proportion of the house is subject to CGT upon disposal. Circle: T or F
Q6: All superannuation benefits received by taxpayers aged over 60 years are tax-free. Circle: T or F
Q7: An entity will be classified as a small business entity if its aggregated turnover is less than $1m. Circle: T or F
Q8. Income tax payable on taxable income of $72,000 is:
• $21,600
• $4,650
• $15,150
• $35,000
• None of the above
Q9: A prepaid expense is immediately deductible to a small business entity taxpayer if the payment made is less than $1,000. Circle: T or F
Q10: S.70-35(1) requires trading stock to be taken into account in determining assessable income by comparing the value of trading stock on hand at the beginning of the income year to its value at the end of the income year. Circle: T or F
Q11: The value of trading stock taken by a taxpayer for their own personal use forms part of the assessable income of the business. Circle: T or F
Q12: Bribes to government officials to hasten planning approvals required by a business are deductible. Circle: T or F
Q13: Payments of wages made by a taxpayer to their spouse are not deductible for tax purposes.
Circle: T or F
Q14: To be tax deductible a gift must be $2 or more and in the form of cash or other property. Circle:
T or F
Q15: A tax offset is an amount that comes directly off the tax levied upon a taxpayer. Unlike a deduction, a tax offset directly reduces tax payable. Circle: T or F
Q16: A capital gain or loss is not included in the calculation of s.90 PNI. Circle: T or F
Q17: For tax purposes a company is defined as all bodies or associations corporate or unincorporated, but does not include a partnership. Circle: T or F
Q18: Companies are taxed at a flat rate of 30% for the 2015/16 year of income tax year. Circle: T or F
Part C:
Q1: For the year ended 30 June 2016, a sole trader earned $250,000 in revenue and incurred operating and depreciation expenses of $110,000 and $10,000 respectively. The trader also received fully franked dividends of $40,000 and un- franked dividends of $10,000 from investments in blue chip companies. He has paid $50,000 tax instalments to ATO during the year. What the trader’s: (03 marks)
(a) Income tax liability and
(b) After tax income?
(c) What will be his tax payable or refund [He is single and has no private health cover].
Please refer to Individual income tax rate 2015-16
Taxable income Tax on this income
0 - $18,200 Nil
$18,201 - $37,000 19c for each $1 over $18,200
$37,001 - $80,000 $3,572 plus 32.5c for each $1 over $37,000
$80,001 - $180,000 $17,547 plus 37c for each $1 over $80,000
$180,001 and over $54,547 plus 45c for each $1 over $180,000
Q2: Calculate the capital gain (if any) on each of the following asset disposal and give reasons for your answer. (05 marks)
Assume each asset has been held for less than 12 months
Cost base Proceeds Capital Gain $$$ (Explanation)
$ $
Refrigerator 850 880
Rare Book 520 580
Rare Coin 500 530
Painting 490 2400
Victoria Cross medal 900 4000
Dining table 2000 1800
Q3: Tamara advises that for the year ended 30 June 2008 her capital losses carried forward for taxation purposes are $3800(general) and $380 (collectables) (05 marks)
In the Following tax year she sold the following assets that she had purchased since 2000:
Cost Sold
$ $
Shares 1400 1890
Units in a trust 2400 2300
Car 15000 15200
Jewellery 1800 2600
What is the capital gain for the year and how much are the capital losses to be carried forward to future years (in their respective categories)?
Q4: Andrew maintained a logbook of his car use during the year. It showed that he had accumulated the following kilometres over the 12 weeks of travel he recorded. Vehicle was purchase for $35,000: (05 Marks)
Km
Home to work 1820
Client to client 438
Work to home 2820
Work to clients 1872
Private 751
Client to work 749
Total 6450
Andrew’s work related car and travel cost over the entire year were:
$
Fuel 3120
Insurance 563
Repairs 742
Parking Fees 80
Registration 543
Road tolls 167
Car wash 90
Lease payments 4100
Taxi Fares 64
Total 9469
a) Calculate Andrew’s motor vehicle deduction using the logbook method
b) Calculate Andrew’s motor vehicle deduction using the one-third actual expenses method.
c) What is deduction if he uses the cost of the vehicle method?
d) Which method should Andrew adopt for his tax return?
Q5: Gemini Pty Ltd is a footwear retailer that made the following transactions for the year ended 30 June: (05 marks)

$
Sales 580000
Purchases of footwear 235000
Staff salaries 93000
Rent 12000
Other deductible expenses 7000
Trading Stock at 1 July 125000
Trading stock at 30 June 130000
• Calculate the company’s taxable income for the year.
• What would be the answer if the company qualifies as an SBE taxpayer?
Q6: Bill and Ben are partners in a business that manufacturers flowerpots. They share their profits equally after allowing for wages and interest. The following information reflects their business activities for the last year: (05 marks)

$
Sales 350400
Cost of materials 85000
Wages to employees 84000
Wages to Bill 38000
Wages to Ben 35000
Wages to Bill’s wife 35000
General business expenses 22600
Superannuation—Bill 3420
Superannuation—Ben 3150
Superannuation—Employees 7560
Drawings—Bill 5700
Drawings—Ben 3800
Interest to bank 1850
Interest to Bill( loan account) 1020
Interest on Capital—Bill 400
Interest on capital—Ben 250
The tax Office considers that only $12000 of the wages paid to Bill’s wife is reasonable.
A. Calculate the partnership net income and prepare a partnership distribution statement.
B. Calculate bill’s taxable income.
Q7: John is an individual who operates business. Identify each of the following outgoings and tick the correct category. (05 marks)

OUTGOING EXPENSE CAPITAL DOMESTIC NON-DEDUCTABLE
WAGES
FACTORY RENT
TRUCK
COUNCIL RATES (HOME)
REPAIRS CAR (SON)
FAX MACHINE
COFFEE STAFFROOM
FOXTEL
BANK INTEREST
BANK CHARGES
MORTGAGE PAYMENTS
TRIP TO INDONESIA
Q8: Which of the following are employment deductions? (06 marks)

Tick: Yes or No (Allowable/ Not Allowable)
ITEM YES NO
CLOTHING
COMPULSORY UNIFORMS
APRON WORN BY CHEF
GOOGLES USED BY WELDOR
SUNGLASSES
EAR PLUGS FOR RUBBISH
COLLECTOR
QANTAS PILOT’S CAP
STOCKINGS TO MATCH UNIFORM
WIG FOR A JUDGE
STEEL TOE CAP SHOES FOR A CHEF