Reference no: EM132327700

Implement Tax Plans and Evaluate Tax Obligations Assignment -

This unit describes the skills and knowledge required to assess taxation liabilities, optimise tax positions, establish processes and plans, evaluate tax policies and review tax compliance for legal entities.

It applies to experienced individuals who use analytical and problem-solving skills to prepare plans and strategic advice for clients.

Work functions in the occupational areas where this unit may be used are subject to regulatory requirements. This unit is designed to meet educational requirements of the Tax Practitioner Board (TPB). Refer to the FNS Implementation Guide Companion Volume or the relevant regulator for specific guidance on requirements.

Learning Outcomes - On successful completion of this unit, the learner/trainee will be able to;

• Assess legal entity's tax obligations.
• Develop tax plans.
• Evaluate and advise on tax plan.

Performance Criteria - The following performance criteria specify the required level of performance for each of the elements of competency:

1. Assess legal entity's tax obligations

1.1 Quantify history and trends of legal entity's tax obligations arising from its historical taxable transactions, using standard accounting techniques.

1.2 Analyse data from current transactions to resolve discrepancies and ambiguities and confirm suitability of legal entity.

1.3 Conduct research to identify updates or additions to compliance requirements relevant to maximising client's benefit and establish recording and reporting requirements.

1.4 Identify legal entity's tax obligations by analysing data on taxable transactions.

1.5 Schedule payments of tax obligations by applying methods of determinations and tax bases.

2. Develop tax plans

2.1 Assess implications of schedule on tax entity's operations and structure.

2.2 Develop financial management strategies to ensure alignment of cash flow with incidence and schedules of tax obligations.

2.3 Develop management process and record-keeping systems to implement financial management strategies and ensure maintenance of audit trail.

2.4 Document management processes that include application of compliance requirements.

2.5 Estimate future taxation obligations from income and expenditure forecasts using standard accounting techniques.

3. Evaluate and advise on tax plan

3.1 Prepare budgets in accordance with income and expenditure forecasts, and periodically review to ensure accuracy of tax obligation estimates.

3.2 Analyse variances between actual tax obligations and tax plan to identify errors or adjustment required to financial management strategies or management process.

3.3 Monitor and evaluate performance of tax plans and advise accordingly.

3.4 Monitor and review tax documentation to ensure it complies with legislative and professional requirements.

3.5 Analyse evidence of non-compliance to diagnose origin and develop resolution.

Performance Evidence - Evidence of the ability to:

Research and critically evaluate new or changed legislative requirements and apply where relevant to the preparation of the client's tax documentation.

Identify legal entity's tax data required to calculate taxable income.

Provide taxation advice to clients in line with individual requirements.

Prepare tax documentation and tax plans for legal entities that comply with:

• Australian taxation law and Australian Taxation Office (ATO) rulings and lodgement schedules
• Accounting principles and practices.
• Tax entity's organisational policy and procedures.

Evaluate tax plan for compliance with legislative requirements.

Knowledge Evidence - To complete the unit requirements safely and effectively, the individual must:

Identify and explain ethical considerations and legislative requirements relevant to the preparation of tax documentation for legal entities, including:

• Conflict of interest.
• Responsibilities of tax agents including code of professional conduct obligations under the tax agent services act (TASA) and tax agent services regulations (TASR).
• Government tax policy documents issued by reviews, treasury and board of taxation.
• Explanatory materials in relation to legislation.
• Statutes.
• Court and administrative appeals tribunal decisions.
• Commissioner of taxation's interpretive guidance in rulings and determinations.

Explain critical and key elements of Australian taxation law as it relates to tax documentation for legal entities such as companies, trusts, partnerships and sole traders including:

• The rules and principles of Australian tax law, with an understanding of the legal environment in which these principles operate, basics of the legal system, constitutional considerations and separation of powers.
• The key aspects of income tax law covering concepts of residence and source, related elements of international tax, assessable income, deductions, tax rebates and offsets, and tax accounting.
• The key aspects of taxes that extend the ordinary income tax base, including relevant principles and application of the capital gains tax (CGT) and fringe benefits tax (FBT) rules.
• Goods and services tax (GST).
• Taxation aspects of superannuation law.
• Administrative aspects of the taxes identified above including documentation, tax collection and withholding mechanisms, assessments, obligations, rulings, penalties and audits.
• Specific and general anti-avoidance tax rules.

Describe the key sources of information and taxable transactions data required to calculate taxable income, including:

• Allowable deductions.
• Capital gains.
• Financial adjustments such as write-offs and revaluations.
• Income.
• Payments.
• Purchases.
• Superannuation payments.

Describe the key features of organisational policy and procedures relating to the preparation of tax documentation for legal entities.

Outline the key accounting principles and practices relevant to preparation of tax documentation for the different types of legal entities.

Discuss ethical considerations for the preparation of returns, including the code of professional conduct's disclosure and confidentiality requirements.

Outline financial management strategies used to optimise tax position.

The purposes of this assessment are;  

• To collect evidences that demonstrate competency in the performance criteria of the unit and satisfy skill, knowledge and employability skills requirements.
• To provide feedback to the learners/trainees indicating the areas of improvement and professional development.
• To measure the effectiveness of the delivery plan and evaluate the learning outcomes.

The required assessment criteria are provided in each assessment task for learner's information.

Assessment Task 1:  Prepare Tax Preparation Checklists (x4): Company, Trust, Non-complex Super Funds, Sole Trader

Description: Registered tax agents play a vital role in influencing participation in our taxation system by ensuring their clients are meeting their tax obligations (Field, ATO, 2012). Registered tax agents should also ensure they keep their personal tax obligations, and those of entities they are associated with, up to date. Instances where registered tax agents do not meet their personal obligations can be forwarded by ATO to the Tax Practitioners Board for consideration as potential breaches of the code of professional conduct under the Tax Agent Services Act 2009 (Field, ATO, 2012).

In this assessment task, you will assume the role of a tax agent and prepare comprehensive and detailed checklists for preparing tax returns for Company, Trust, Non-complex Super Funds, and Sole Trader for your own use and reference. The checklists should incorporate all evidences or resources (client information, reports, documents etc.) that you will require under legal and ethical provisions as a tax agent to accurately prepare the tax returns.

Ensure that you include all taxation requirements for the relevant entities including, but not limited to, assessable income, foreign income and assets/interests, deductions, tax rebates/offsets, FBT, CGT, Wine Equalisation Tax, Luxury Car Tax, GST, PAYG, superannuation, payroll tax, fuel tax credits, withholdings, and lodgement schedules. Prepare your checklists using separate headings for each type of requirement (e.g. all depreciation related information under "Decline in Value" section). The checklist style could either be a "inquiry" style with questions prepared for clients or a list of things/tasks to be undertaken. You will need to refer relevant legislations and/or guidelines where needed to support the requirement; to enhance the legal importance of it. Items for quarterly and yearly reporting must be clearly identified and listed.

As part of the checklist, you will also be required to research and write a brief statement describing your role as a tax agent, relevant laws and regulations relevant to Tax Agent responsibilities and conduct, including ethical conducts (including obligations under the Tax Agent Services Act (TASA) and Tax Agent Services Regulations (TASR)). 

Starting with your role and responsibility as a tax agent, prepare the above checklists (x4), assuming that you will be using these checklists during client interviews/meetings on tax preparation.

You may use sample checklists provided in your learning sessions as "examples" and reference documents. Your checklists should be prepared according to your own research and understanding of taxation requirements.

Assessment Criteria - The following assessment criteria will be used for marking this assessment task. Ensure that you have addressed all of the criteria in your work;

• Separate checklists are prepared for separate entities; Company, Trust, Non-complex Super Funds, Sole Trader.
• Checklists are appropriately formatted and included entity specific taxation information (e.g. Statement of Distribution, TOFA, capital gains, foreign income, Franked Dividends, employee share schemes, fringe benefits, etc.) and requirements.
• Checklists follow a logical pattern and designed to obtain and/or gather all the required information and resources for preparation of a tax return.
• Checklists reflect unique style and format with clearly distinguished areas of taxation.
• Detailed information on specific taxation item is provided with a view to gather the required evidence/supporting document.
• Legal and regulatory information is appropriately referenced by respective legislations, status and/or standards relevant to each item/task/inquiry.
• Checklists include a list of action items the need to be carried forward to the next period.
• Checklist include review provisions and references for respective taxation items/tasks; and a review of taxation preparation process consistent with ATO's lodgement schedules.
• Checklists are within the scope of taxation and reporting laws relevant to the entity.
• Own role and responsibility as a tax agent are outlined in a clear and a concise manner with reference to relevant standards (TASR)/bodies (TASA) or Tax Practitioners Board.
• Code of conduct as a tax agent and/or ethical guidelines are provided with appropriate reference.
• Cited all external sources using an appropriate referencing system.

Assessment Task 2: Evaluate Tax Obligations: Melbourne Cricket Ground (MCG) Trust

Description: In this assessment task, you will be evaluating tax obligations for a given entity using the checklist you developed in Assessment Task 1 as a reference. For the purpose of this assessment task, you will assume the role of a Tax Agent preparing the information on behalf of your client. You client for this task would be "Melbourne Cricket Ground Trust". Copies of Financial Statements of the trust will be provided to you to help you work out the tax information.

You may also choose a different organisation in consultation with your trainer/assessor.

With a view to simulate the actual work environment, your trainer/assessor will play both the roles of the client (trustee) as well as of the ATO tax officer and provide you with the required information, feedback, and recommendations for enhancing/amending the tax calculations after you have completed them.

Use the following task flow to help with completion of this assessment task;

• Obtain and review trust's financial statements.
• Use the checklist prepared in Assessment Task1 to ensure that you have all the required information.
• Research trust information on the ATO website and determine appropriate taxation obligations for the entity type.
• Identify taxable transactions and prepare a statement of income and expenses.
• Prepare a samples Trust Tax return using ATO's prescribed form (download from ATO website) to determine tax obligations.
• Write a fictitious letter (or an email) to the MCG Trustees advising of tax obligations.
• Calculate and schedule tax payments to the ATO (Excel sheet) assuming that a return will have been lodged prior to due date.

This task simulates tax calculations and payment procedures, and should contain realistic lodgement dates and proper completion of the tax return to reflect a real-life practice.

You will be using a tax return form for the purpose of accurate calculations of tax obligations, which simulates a tax preparation exercise.

Assessment Criteria - The following assessment criteria will be used for marking this assessment task. Ensure that you have addressed all of the criteria in your work;

• Gathered and used client information for calculation of tax obligations.
• A tax return is completed using the relevant and accurate financial statements as provided by the client (trainer/assessor role play) to determine tax obligations.
• Tax requirements are checked and determined against Trust Tax Preparation Checklist.
• Additional information is sourced/discussed with the client (trainer/assessor role play).
• Type of trust is correctly identified and applied.
• Accurately calculated gross profit or loss based on the given financial statements.
• All business income/revenue items are correctly identified and applied.
• All expense items are correctly identified and applied.
• Net non-primary production distribution is accurately calculated and applied.
• Eligible deductions relevant to the type of trust are identified and applied.
• Overseas transactions and/or income, if any, are identified and reported.
• Gross and net income or loss is accurately calculated.
• Transferred relevant and accurate financial information from the financial statements to the tax return.
• Transferred relevant and accurate business and professional items from the financial statements to the tax return.
• Depreciation is accurately reported and justified (Summary of notes to the Financial Statement).
• A statement of distribution (fictitious) is prepared for distribution of trust income to the listed beneficiaries (used at least two).
• Trustee's share of credit for tax is appropriately deducted (fictitious but realistic data).
• The tax return is prepared in entirety and resembles a real-life tax return with accurate/realistic calculations and information.
• Client has been advised of the agent's tax assessment and communication kept for record (letter or email).
• ATO recommendations are reviewed and necessary amendments/enhancements applied based on the recommendations received.
• A payment scheduled is developed in line with ATO's due dates.

Assessment Task 3: Develop and Evaluate a Tax Plan: MCG Trust

Description: Executing business strategies, projects and transactions in a tax-effective manner is an ongoing challenge for businesses, particularly as the tax legislation is becoming more complex. A structured and focussed tax planning process may help businesses/entities maintain an effective cash flow and fulfil their compliance responsibilities.

In this task, you will be required to develop a tax plan for an entity based on their income and expense projections that includes strategies for maintaining;

• Tax compliance.
• Interim tax liabilities (e.g. quarterly BAS/GST obligations), schedules, and their implication on entity's cash flow.
• Yearly tax liabilities, schedules, and their implication on entity's cash flow.

Using the company/case organisation brief and financial data in the previous assessment task (MCG Trust or any other organisation used), develop a word-processed tax plan that includes objectives, tax management strategies and actions to implement the plan.

Future Projections - You will require projected income and expenditure data to appropriately plan for the next financial year. Using the available data, assume that in the next financial year, the organisation is;

• Expecting its revenues to increase by approximately 8% per quarter.
• Expecting new revenues totalling $283,000 from an increase in the membership fees.
• Spending $560,000 for expansion of the stadium.
• Purchasing and installing 6500 new chairs at $85 per chair.
• Recover long term debts of approximately $128,000 from the members.
• Allocate $8,500 per quarter for launching of a junior cricket academy.

Using this information and historical data;

1. Develop income and expenditure forecast for the next financial year. Once completed, use the forecast data in preparing a tax plan for the organisation.

2. Develop an operational budget covers revenues and expenses covering everyday operations.

3. Drawing from your workings in Assessment Task 2, estimate tax obligations for both budgeted and forecasted income.

Tax Plan - Next, prepare a tax plan that essentially includes (but is not limited to);

• Goals and objectives
• Key stakeholders
• Compliance environment and requirements (for the type of entity selected for this task)
• Strategies to achieve the intended objectives
• Summary of income and expenditure in the next financial year
• Strategies to maintain an effective cash flow
• Strategies to manage periodic and end-of-the-year tax obligations
• Suggestions for addressing and meeting compliance requirements
• Supporting management process
• Data sources, verification and record-keeping
• Processes for monitoring the tax plan

 Using the above as section guides/headings, write a tax plan for the organisation with reference to the relevant laws and regulations affecting the entity status and structure.

The plan must be prepared as a formal business document with an appropriate structure and format (headings/subheadings).

Once ready, provide a draft to your client (trainer/assessor role-play) for feedback and evaluation. When received, implement the changes and finalise the plan.

 Assessment Criteria - The following assessment criteria will be used for marking this assessment task. Ensure that you have addressed all of the criteria in your work;

• Completed the task within the given organisational and financial contexts.
• Prepared budgeted operating expenses from the information provided.
• Accurately categorised and listed fixed and variable costs.
• Calculated net profit or loss for each quarter as well as the whole fiscal year.
• Identified and quantified budgeted surplus or deficit for the company.
• Forecast assumptions are based on realistic analysis of market data and trends.
• Prepared a revenue/income forecast.
• Prepared an expense forecast.
• Forecast data is consistent with previous year data.
• The forecasts are prepared based on all the considerations of the financial items.
• The forecasts are balanced and covers all the expected income/funding sources and expenditures.
• Forecasts are prepared using a spreadsheet template and commonly used format consistent with accounting principles.
• Forecasts are based on realistic assumptions and parameters to ensure accuracy, relevance and compliance.
• Budget includes all the required sections and information and used an appropriate format for budget reporting.
• All business income/revenue items are correctly identified and applied.
• All expense items are correctly identified and applied.
• Gross and net income or loss is accurately calculated.
• Developed a formal tax plan.
• The tax plan is appropriately structured and maintains a logical presentation and flow of data/contents under respective sections/headings.
• Plan goals and objectives are realistic and relevant to the organisation type and financial history.
• Identified and articulated legal and compliance requirements with references to applicable legislative requirements and standards.
• Appropriate strategies are devised to maintain compliance, including tax and reporting compliance.
• Strategies are effective in aligning organisation's cash flow with periodic and end-of-the-year tax payment schedules.
• Suggested/devised management processes to support the implementation of intended strategies.
• Outlined plan monitoring and record-keeping processes.
• Obtained feedback and amended/improved the plan.
• Demonstrated an understanding of effective tax management process and formulating a plan to implement within an organisation.

Submission Guidelines -

Submit:

1. Projected operational budget.

2. Projected income and expenditure forecasts.

3. Calculation of tax obligations.

4. Hard copy of the tax plan with a signed assignment cover sheet.

5. Copies of financial statements extracted from the annual report as attachments.

Note - Need Only Assessment Task 3.

Attachment:- Assignment File.rar