Reference no: EM132831673
LAW 6001 Taxation Law - Laureate International Universities
Assessment - Case Study (Individual taxpayer's tax return)
Learning Outcome 1: Identify and analyse the tax treatment of various types of income and deductions.
Learning Outcome 2: Effectively apply taxation law in determining tax outcomes in various scenarios and sole trader structure
Learning Outcome 3: Apply the legislation to determine the assessable income and availability and amount of the tax deduction associated with employment and business structure on an accrual basis including GST application.
Learning Outcome 4: Calculate the specific deduction associated with trading stock balances
Learning Outcome 5: Calculate depreciation using the prime cost and diminishing value method and calculate an associated balancing adjustment following the disposal of a depreciating asset
Learning Outcome 6: Preparation and calculation of individual income tax return on various income and deductions using current tax return form.
Context:
This assessment assesses your research skills, your ability to synthesise an original piece of work to specific content requirements and your ability to produce a comprehensible piece of advice which addressing the client's needs.
It also assesses your written communication skills. The ability to deliver to a brief is an essential skill in the workplace. Clients may well approach advisors seeking a combination of specific information needs and advice on the tax implications of a particular arrangement in the Australian tax jurisdiction. It is therefore important to be able to identify all the issues presented by an arrangement and to think about the potential consequences of different approaches to addressing the client's needs.
Instructions:
• Your case study needs to identify and discuss the tax implications of the various issues raised.
• A report (word document, approx. 2,000 words) must be submitted for the calculations of the assessable income; allowable deductions and taxable income of the taxpayer including identifying and discussing them. E.g., how the amounts of income & deductions have been derived. If any receipts and payments are not assessable or deductible, the reasoning for non-inclusion of these in assessable income or deductions as per relevant legislation or cases.
• Critically analyse the following case study. With respect to each task:
• Review relevant case law and legislation (ITAA1936, ITAA1997)
• Apply the law to the facts of the case study
• Reach a conclusion/ give practical advice to your client.
• You will be assessed in accordance with the Assessment Rubric.
• This case study must be presented as an individual effort. The case study requires individual research. It is expected the student will survey the relevant literature, including decided cases, and select appropriate additional resources.
• Your case study is not just a list of answers. Your reasons for your conclusions and recommendations must be based on your research into the relevant cases and legislation.
• The format of the report should be a business report and using APA referencing style
Case Study: Comprehensive Individual Tax Return
Jeremy Wild, a resident single taxpayer aged 49. Jeremy runs a mixed business and has not elected to apply any of the small business entity concessions. Jeremy uses an accrual method.
Jeremy's records disclosed the following for the 2019/20 tax year. All amounts are GST exclusive.
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Receipts
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Cash receipts from customers (sales)
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$ 279,000
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Fully franked dividend Received
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2,000
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Proceeds from loan for shop repairs
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25,000
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Proceeds from sale of Motor vehicle - see note 1
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14,000
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COVID19 Cash Boost payment from the ATO
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15,000
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COVID19 Job keeper payment from the ATO
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14,300
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Payments
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Purchases of trading stock
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159,300
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PAYG Tax Instalments paid by Jeremy
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6,200
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Borrowing Costs (incurred on 1 May 2020 on an 8-year loan)
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1,800
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Drawings
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19,000
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Repairs - see note 2
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29,200
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Loan Repayments (interest only)
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2,000
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Net Wages to employee
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17,500
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PAYG tax withheld from employee's wages
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4,500
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Superannuation for employees - see note 3
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9,800
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Annual/Personal leave paid - see note 4
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4,000
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Personal Super contributions
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6,000
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Private health insurance
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1,800
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Drivers licence renewal
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185
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Late lodgement fee relating to Business Activity Statement
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500
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Other Deductible Expenses
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29,300
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Note 1
The motor vehicle had an adjustable value of $13,000 as at the date of disposal. The original cost was $54,000 in June 2017. The car was used 80% for business.
Note 2
During the year, Jeremy spent the following amounts on repairs:
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Landscaping at Front of Shop (30 October 2019)
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$ 3,200
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Repaint Shop (1 March 2020)
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10,000
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Installation of Concrete Ramp (completed on 31 January 2020)
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16,000
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Note 3
Additional annual/personal leave accrued (provided, not paid) on 30 June 2020 was $4,500
Note 4
Employees' superannuation of $1,400 was accrued as at 30 June 2020 (not yet paid)
Other Information
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Stock as at 30/6/19 - at cost
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8,100
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Stock as at 30/6/19 - at market selling value
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7,000
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Stock as at 30/6/20 - at cost
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9,400
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Stock as at 30/6/20 - at market selling value
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12,200
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Debtors (Sales) at 30/6/19
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4,500
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Debtors (Sales) as at 30/6/20
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3,900
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Creditors (Purchases) as at 30/6/19
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7,800
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Creditors (Purchases) as at 30/6/20
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9,200
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Stock taken by Jeremy - at cost
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3,400
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Stock taken by Jeremy - at market selling value
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5,100
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Stock taken by Jeremy - at market selling value 5,100
In the 2018/19 tax year Jeremy used market selling value as the basis for valuing his trading stock. Assets held by Jeremy as at 30 June 2020 included:
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Asset
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Cost ($)
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Year
Acquired
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Adj. Value at
30/6/19 ($)
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Effective
Life
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Depreciation
Method
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Shop Fittings
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80,400
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2016/17
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30,200
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10 years
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Diminishing Value
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Computer
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4,100
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2016/17
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2,200
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4 years
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Prime Cost
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Equipment
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21,000
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28/2/2020
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n/a
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7 years
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?
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Jeremy has an adequate private hospital insurance.
Required
The following Part A and Part B must be submitted as a single file in MS Word format.
Part A) Calculate Jeremy's taxable income for 2019/20 and net tax payable or refundable. Use the template provied below (add more lines if needed). Show all workings of each income & deductions of calculations and any tax offsets available for Jeremy.
Part B) Explain inclusion/exclusion of each income and deductions with reference to relevant available cases and section numbers as per ITAA36/ITAA97.
Attachment:- Taxation Law.rar