Reference no: EM132348542
Prepare tax documentation for individuals
Task 1: Theory Assessment
Student Instructions
1. Type all the answers in a word document if required.
2. You can conduct internet research to answer these questions.
3. Provide explanation of 2-3 lines when answering ‘Describe' questions.
4. Provide detailed workings for calculations questions.
5. Provide answers in table format wherever possible.
Answer the following questions in writing.
1. Identify two key sources of information and data required to calculate taxable income
2. Identify two key features of organisational policies and procedures relevant to the preparation of tax documentation for individual tax payers. Briefly explain how each applies in the preparation of tax documentation for clients.
3. Outline two key accounting principles and practices which need to be applied when preparing tax documentation for individual taxpayers.
4. Identify and briefly describe the legal requirement relevant to conflict of interest for tax practitioners.
5. Briefly define how a tax practitioner must prepare and lodge returns to the ATO, according to APES 220 Taxation Services.
6. List two responsibilities of tax agents under the Code of Professional Conduct.
7. Identify two requirements that tax agents must meet under the Tax Agent Services Regulations (TASR).
8. Briefly explain the legal environment the principles of Australian tax law operate in.
9. Briefly explain the basics of the Australian legal taxation system. (Focus your discussion on the Australian legal taxation system and how it relates to income tax for individuals.)
10. Briefly explain the constitutional considerations relevant to Australian income tax law. (Include in your discussion constitutional power.)
11. Briefly explain separation of power and its relevance to Australian income tax law.
12. Briefly explain the definition of a ‘resident' for tax purposes, as per tax legislation. How many days does a foreign resident need to be in Australia to be considered a resident for tax purposes?
13. Briefly explain the relevance of the source of income when determining accessibility, as per tax legislation.
14. List two related elements of international tax and briefly describe each one.
15. Briefly explain ‘assessable income' as per tax legislation.
16. Briefly explain the following terms, and give two examples of items or assets that can be deducted for each:
a) General deduction
b) Specific deduction
c) Decline in value
17. Briefly explain ‘tax rebates and offsets' as per tax legislation.
18. Provide a brief overview of ‘tax accounting.'
19. Briefly describe how the following four income tests are used to assess tax offsets eligibility for individuals.
a) Super income test
b) Adjusted taxable income (include the treatment of FBT under this income test)
c) Rebate income (include the treatment of FBT under this income test)
d) Income for Medicare levy surcharge purposes
20. What is Capital Gain Tax (CGT)? Identify two key aspects of the principles of CGT. Give two examples of how CGT is applied.
21. What is Fringe Benefit Tax (FBT)? Identify two key aspects of the principles of FBT. Give two examples of how fringe benefits tax (FBT) is applied.
22. What is employment termination payment (ETP)? Identify two key aspects of the principles of ETP. Give two examples of when ETP is applied.
23. Explain the basic concepts of Goods and Services Tax (GST) which need to be applied when preparing tax documentation for individuals.
24. The following questions are below relevant to the administrative aspects of the taxes relevant to individual tax payers. Answer each one.
a) Identify at least two types of documents that can be used as supporting documentation of an individual's income and eligibility for deduction/s
b) How long must records, relevant to the tax return being lodged, be kept?
c) When do individual tax returns need to be lodged by?
d) Describe how tax practitioners can lodge returns for their clients. (Include in your response, the type of confirmation your client will receive after their returns have been lodged.)
e) Briefly explain the withholding mechanisms which must be applied to payments made to workers, other businesses and other payees.
f) Briefly explain what the notice of assessment should include. (Include in your response the waiting period for the notice of assessment.)
g) Identify two obligations that individuals when it comes to taxation.
h) Identify at least two types of rulings for tax purposes.
i) Identify at least two circumstances where penalties can be imposed.
j) Briefly outline what is involved when an individual is audited.
k) Identify at least two steps the ATO will take during a review or audit.
25. Briefly explain the General Anti - Avoidance Rule (GAAR) and its relevance to submitting income tax documentation for individual taxpayers.
26. Identify at least two Specific Anti-Avoidance Rules (SAAR) and briefly explain each one and their relevance to submitting income tax documentation for individual taxpayers.
Task 2: Case Study and Practical Assessment
Student Instructions
1. Type all the answers in a word document if required.
2. You can conduct internet research to answer these questions.
3. Provide explanation of 2-3 lines when answering ‘Describe' questions.
4. Provide detailed workings for calculations questions.
5. Provide answers in table format wherever possible.
Question 1 - Case Study: Robert and Amber
Review the information provided in appendix ‘Case Study - Robert and Amber' and undertake the following questions:
a) Using the information provided in the case study, complete a two separate ‘Tax Payer Details Form' for Robert and Amber as per the organisation's policy and procedure.This form is provided in the appendix - ‘Tax Payer Details Form'.
b) Using the information provided in the case study, complete a two separate ‘Income Worksheet' for Robert and Amber as per the organisation's policy and procedure.This form is provided in the appendix - ‘Income Worksheet'.
c) Using the information provided in the case study, investigate the tax rulings that apply to both Robert and Amber. Provide at least one tax ruling for each client, your responses must be specific to each of their occupations.
d) Using the information provided in the case study, complete a two separate ‘Deductions Worksheet' for Robert and Amber as per the organisation's policy and procedure and the relevant tax rulings you identified in question c). This form is provided in the appendix - ‘Deductions Worksheet'.
e) Using the information provided in the case study, complete a two separate ‘Tax Calculation Worksheet' for Robert and Amber as per the organisation's policy and procedure.This form is provided in the appendix - ‘Tax Calculation Worksheet'.Calculate tax obligations that are payable or the refund due to both Robert and Amberby entering the taxable income amount into the ATO Simple tax calculator:
• Simple Tax Calculator
• Select the year 2018 -2019
• Select resident for full year
f) You have received the Authority to Lodge from Robert and Amber but are unsure if you have addressed all the criteria for lodging the returns in accordance with the statutory reporting requirements. You decide to seek advice from the principal accountant, Rachel.Write an email to Rachael and ask her to evaluate and moderate the decision process you have followed to prepare the returns and seek approval to lodge with the taxation office.
Question 2 - Short Calculations
Provide answer for the following questions in writing and show your all calculations:
a) How much assessable income was derived by each of the taxpayers mentioned in appendix ‘Assessable Income'?
b) Calculate the amount of Medicare levy and Medicare levy surcharge for the resident taxpayers mentioned in appendix ‘Medicare Levy'.
c) Calculate Low Income Tax Offset (LITO) for the taxpayers mentioned in appendix ‘Low Income Tax Offset'.
d) Using the table of income tax rates, calculate the primary tax for taxpayers mentioned in appendix ‘Primary Tax'.
e) From the following information, calculate the motor vehicle expense for Mr. John Schofield with all available alternatives and select the most appropriate option for tax purpose.
He bought a Honda Accord for $28,000 on 25th July 2013. It has an engine capacity of 2.6 litres. In the current financial year, he has travelled 22,000 km in total. He has kept a log book that shows 18,000 km is for work purpose. He has incurred the following expenditures for the motor vehicle:
• Petrol: $1600
• Depreciation: $2812
• Registration: $350
• Insurance: $600
• Tyres and Battery: $1075
• Servicing: $525
He has all the records for expenses.
f) Prepare a depreciation asset schedule for the assets mentioned in appendix ‘Depreciation expense'.
g) Frederick, a freelance photographer has an ABN and is registered for GST; he has about 20 clients and has charged them total fees of $60,500 including GST. He has purchased stationery and other items totalling $6,600 including for his business during the same period. Calculate the GST position of the tax payer.
h) Robert bought a property for $175,000 on 24th Oct 2009. He had to pay stamp duty of $5000 and solicitor's fee of $2000 while buying the property. He sold the property on 15 June 2010 for $240,000. He had to again pay a settlement fee of $5,500 while selling it. Calculate his capital gain/loss.
Question 3 - Gordon Smith
Provide answer for the following questions in writing and show your all calculations:
a) Using the form supplied in the appendix ‘ABN Application for a Sole Trader', prepare ABN application for Gordon Smith. The necessary information is available in appendix ‘Case Study - Gordon Smith'.
b) Prepare Income Tax Return for a small business from the information available in appendix ‘Case Study - Gordon Smith'.
Question 4 - David Lucas
a) Role play and Report
Mr.David Lucas, your new client is using your professional services. Conduct the first interview and ask appropriate introductory questions. Record the answers.
Consider follow-up questions that would be relevant to the tax return and record those answers.
Prepare a report on the interview and its outcomes. The report should include:
• a list of the questions you asked
• the answers
• the reasons for asking these questions
• advice you might give the client
• would it be necessary to liaise with anyone else:
o with whom
o why
Students need to demonstrate that they have the knowledge to seek information to enable them to fulfil their obligations as a tax agent. For this purpose, the assessor will play role of new Client (David Lucas).
b) Prepare income tax return forDavid Lucas by using the information provided in appendix ‘Case Study - David Lucas' for the year 2018-2019. Use all appropriate forms and worksheets to complete your return from ATO website.
c) One you finalised the preparation of income tax return you need to identify at least two discrepancies or unusual features in your client's tax documentation. (Your trainer and assessor must specify the discrepancies or unusual features identified by the candidate, but is not required to include the client's private information.)
d) Conduct research to resolve discrepancies or unusual features in your client's tax documentation and refer to an appropriate authority. List at least two possible authorities or legal requirements.
e) Submit the tax return to Australian Taxation Office (ATO) within established timelines.
Attachment:- Prepare tax documentation for individuals Assessment.rar