Reference no: EM131496454

Prepare tax documentation for individuals Assignment

Assessment Task Instructions for Students:

A. Calculate John Smith's minimum tax liability in a spreadsheetwith working details.

B. Transfer the relevant figures to Handi Tax, convert the tax return summary with worksheets into a PDF.

C. (i) Give advice to John re his tax obligation, signatureobtaining, substantiation and response to the ATO's future enquires;and (ii)conduct research (e.g. via internet, journals, newspaper or other methods) on any new development in legislation, case laws, ATO rulings or taxation regulations relating to John, and evaluate how it may be applied to his tax return in around 200 words. Attach the link/reference to the information source that you have relied upon.

D. Save your answers to the above tasks in THREE files and upload them to the drop box on eLearn.

Mr John Paul Smith, a welder aged 59 years, is a resident of Exmouth in Western Australia. He has asked you to prepare his income tax return for the year ending 30 June 2017. John is both an employee welder and self-employed as a contractor.

His spouse, Fran Smith, is 57 years old and is employed as a casual teacher at the local primary school.  Her taxable income for 2016/17is $13,500.

They have two daughters: 22 years old Kirsten, a full time student at University of Western Australia, and 20 years old Karen who is disabled and receiving disability support pension.

John's DOB:                              12November 1957

John's TFN:                               999 999 968                         ABN: 78 246 373 604

Fran's DOB:                              29 May 1960

Residential address:                  2 Chimp Terrace, Exmouth WA 6707

Postal address:                         PO Box 123,Scarbrough WA 6722

John provided you with the following figures, which are all properly substantiated:

Receipts:	$
Gross salary (leave payer's ABN & name blank)	97,000
PAYG tax withheld	24,000
Tool allowance	1,080
Genuine redundancy payment	21,000
Superannuationgrosspayment $130k (ABN 27 222 266 667)
Lump sum - taxable component - taxed in the fund	75,000
Lump sum- tax-free component	5,000
Lump sum - taxable component - untaxed in the fund	50,000
PAYG tax withheld	3,000
Fully franked dividends from Fortesque	2,800
60% Partially franked dividends from Coltes	2,100
Income from weldingactivities as a contractor	31,000
Gross rental income from investment property	8,500

 

Payments:	$
Employment related
Three tools (280+199+780)	1,259
Union fees	700
Overalls and safety boots	400
Income protection insurance	1,600
Tax agent fees for 2015/16 tax return	650
Smith family appeal donation	150
Red Nose purchase (approved fund)	6
Welding business related
Cost of materials	1,050
Safety gloves and glasses	300
Mobile calls ($70/month x 12 months, 80% business)	672
Sun screen cream for skin protection	77
Public liability insurance	1,500
Superannuation paid for himself	12,000
Rental property related
Flight travel to settleproperty	830
Stamp duty	22,660
Materials purchased for repairs & painting	4,120
Council rates (1/3/17 - 28/2/18)	1,800
Land tax (1/3/17 - 30/6/17)	620
Landlord insurance for 12 months	960
Leasing a car for 10 days while in Canberra	780
Agent management fees @13.2% including GST	1,122
Interest on loan for period 1/3 - 30/6/2017	8,900
Natalie bought an old fridge 29/2/2017 at John's request	950

John purchased his investment property in Canberra for $560,000 during the year. His sister Natalie lives there and recommended him a few properties before he decided to purchase this one: 7 Makeup St, Crace ACT 2911. Immediately after the settlement on 21/2/2017, John repainted the house and fixed a few things. On 25/2/2016, he authorised a local real estate agent to look after it before he flew back on that night. The property was rented out on 1/3/2016. A property depreciation schedule was obtained one month later, which shows that the total capital allowance on the property for the period from 1/3/17 to 30/6/17 is $3,820.

Additional information:

1. John has lived in Exmouth since 2002 and has been employed by his present employer from 30 January 2003.

2. Date of redundancy - 30 November 2016.

3. He has been doing 'John's welding' business over the weekends for the past 12 years.

4. He sold the following shares on 6 December 2016:

Shares	Purchase date	Cost	Proceeds
Fortesque	31.03.1991	4,200	4,850
Coltes	30.05.1985	13,600	4,500
Oilsearch	31.08.2006	4,020	16,000

5. Sale of collectables -John purchased two oil paintings at a public auction for $520and $300 on 9 April 2017.  A dealer valued them on 4 June 2017 at $6,000 and $4,000 respectively and paid him on the same day.

6. Motor vehicles - John has two cars registered under his name. Most time during the year, he drove a Nissan Navara to carry his bulky tools. While this car was being serviced or repaired, he drove his Holden Commodore. John also used the Holden Commodore for visiting clients, training and supervising young colleagues at different work sites. John's family members also drove the Commodore quite often.

	Purchase date	Cost	2016/17 travel distance	Both have effective life 8 years, using Prime Cost method for depcn
Nissan Navara	1/10/2014   YEB456	52,000	21,000 km	Prior year log book shows 82% for travel between sites. Receipts show repairs & services $2,700, rego $1,300, insurance $780, fuels $2,470 for the year
Holden Commodore	1/6/2011   YPP96K	35,000	18,000 km	No log book is kept. John estimated 10 travels were work related with 50km for each travel

7. John has agreed to use low value pool starting this year.

8. John has full hospital private health cover.

9. Total NET expense incurred on disability aids for Karen was $6,200. Karen could look after herself to some extent so that Fran was freed up to do casual teaching. Karen received disability support pension of $7,800 for the year.