Reference no: EM133072794

ACCT6005 Taxation Law and Practice - Southern Cross University

Assessment - Income Tax Return

In this assignment, you will be provided with a case study for a client (below) and you will prepare an income tax return for the client.

This assessment covers the topics (5 to 10) and assumes that you have completed all activities and tasks for these weeks. This is an individual assignment

Submission requirements

For this assessment you will 4 tasks to complete. Please ensure you follow each instruction carefully on what you need to do and the submission requirements for each task.

1. Completion of working papers for the Income tax return using the excel template provided in the assessment tasks.

2. Use Handitax software to prepare the 2020/2021 tax return.

3. Complete online test located in the assessment tasks and submission tab of the unit's MySCU site under the assessment 2 content folder - 10 questions with a one hour time limit that is based on the case study facts and completed tax return for the business.

4. Prepare a video, maximum 3 minutes to your client that uses software/program/app (it is strongly recommended that you use Microsoft Power point for this presentation) with slides and ‘talking head' (this is a video of yourself talking during a slide presentation) whereby you present a letter to the client that addresses the clients overall tax position and recommendations to improve their tax position in the future. Your video needs to be readable by Blackboard and your markers. An MP4 file is recommended here.

To be accepted as a valid assessment submission, your video must include (1) identification and (2) slides and a video of you presenting (this only needs to be shoulders and up).

Business case study information

You have been asked to prepare the 2020/2021 individual tax return for Bronte Carr. Bronte is the sole managing director of the business Mindfulness Pty Ltd that operates 20 retail outlets located throughout Victoria selling scented candles and oil diffusers. The company's shareholders are Bronte and her husband Will. Bronte and Will both have equal shareholding in the business.

Will does not work in the company and is employed by another business full time as a CEO of an IT business. His annual salary for the 2020/2021 financial year was $750,000. The couple have two school aged children Milly and Angus.

Date of birth for Bronte is 29th March 1985 and Will's date of birth is 16th April 1980.
Bronte has health insurance for the family and this policy was taken out with BUPA on 1 October 2020. The premium paid for up until the end of the year totalled $1,450 after a rebate of $120 was claimed. The policy number is BUP862599 and BUPA have notified Bronte that the benefit code is 30.

Employment related information
Bronte is paid a salary by Mindfulness Pty Ltd. The payment summary for 2020-2021 issued by the company for Bronte contained the following details;

Bronte completed her University education 4 years ago and has an outstanding HELP debt of $3,000 as at 30 June 2021.

Mindfulness Pty Ltd made the following payments during the financial year on behalf of Bronte;
• Additional superannuation contributions of $2,000 were paid to Bronte's superannuation account by her from her after tax pay. These contributions are in addition to superannuation paid as per the superannuation guarantee requirements of the company. Bronte had not provided her super fund with a notice of intent to claim a deduction. Details of the fund are Host Plus, account number 1235346, Fund ABN 23 111 144 445 and fund TFN 999999716
• Telephone payments in the amount of $1,600. The phone is held in Bronte's name
and 70% of the expense relates to phone calls made relating to Mindfulness Pty Ltd.
• Bronte did a short course through Class Bento on making soy candles at a cost of $750. Bronte is now making some of her own candles for the business and selling these to customers as a result of taking this course.
Bronte owns a Mazda CX5 motor vehicle. The car was purchased on 1 July 2020 for $38,000. During the financial year Bronte travelled 25,000 kms. Bronte has noted that 70% of her travel is work related, however she has not kept a log book of the kilometres travelled for work purposes. Bronte has paid for all of the running costs during the year and these are as follows;

Other costs paid during the year included;

• Gardening Australia magazine subscription $150.00
• Donation to Red Cross $350.00
• Donation to a Go Fund Me to cover expenses for parents of a lost child $200.00
• Membership to Small Business Association of Australia $97.00
• Preparation and lodgement of 2020 tax return by MPA Accountants $1,650.00
• Books related to running a small business and candle making $250.00
• Payment for life insurance policy that covers Bronte's income in the event of illness or death. The premium is deducted from Bronte's bank account via direct debit each month. Total premium paid for the financial year was $3,000. 75% of this amount relates to life insurance with 25% being for replacement of income in the event of a serious illness. $3,000.00

Dividends and investments

Mindfulness Pty Ltd paid a fully franked dividend of $30,000 on 1 April 2021. This dividend paid by the company to the two shareholders was used by Bronte and Will to pay down their mortgage that they have on their family home. Interest paid on their home loan during the financial year was $12,000.

Bronte has a share portfolio (see table below) that she inherited from her auntie who passed away on 31 August 2020. The shares were transferred from the auntie's estate to Bronte on 1 January 2021.

During the financial year Bronte received fully franked (use 30% tax rate) dividends totalling $1,500 being $650 on her shares in NAB and $850 on her shares in CBA. Rather than taking the dividends in the form of cash, Bronte elected to participate in the dividend reinvestment schemes offered by the companies and acquired an additional 16 shares in NAB, and 9 shares in CBA. Bronte also received
$300 in dividends from WOW that were paid to her as a cash dividend.
Bronte sold her shares in ADH on 1 October 2020 for $2.57 each. The brokerage fees in relation to the sale were $110. This amount is inclusive of GST.

Rental Property
Bronte owns a unit on the Gold Coast in Southport (9/20 Little Norman Street, Southport, QLD, 4215) and purchased this unit on 10 March 2021 for $360,000. Settlement on the property was on the 7 April 2021. Bronte's niece moved into the unit immediately after settlement and pays rent of $370 per week (paid in advance) to Bronte. (Hint: you need to research the issues around renting properties to relatives and include your findings in your workpapers and letter of advice).

The building was constructed in 1990. A quantity surveyor's report that Bronte was provided with during the purchase of the unit showed that at the time of purchase the construction cost of the unit was $100,000. This report cost Bronte $350.

Bronte purchased new roller blinds for the windows at a cost of $3,000 and a washing machine for
$529. These items were installed in the unit and ready for use on settlement date. Bronte does not elect to use a low value pool for depreciating assets and chooses to use the diminishing value method for depreciation where applicable at a rate of 18.75%
Other costs that were incurred in relation to the property before 30 June 2021 are as follows;

Additional guidelines
1. Excel template

• Using the excel template provided, prepare a set of work papers to enable you to complete the online quiz and tax return for this assessment. You have been provided with separate sheets within the excel document to complete.
• Each item of the case study needs to be addressed and include detailed explanations about its tax treatment and providing appropriate authority for your decisions by referencing sections of the legislation, case law and/or income tax rulings
• Organise and use your work papers so that your amounts are directly transferable to items on the income tax return. This will assist you in Handitax.
• Tax payable, offsets and levies: Include all levies and offsets considered (Medicare, Medicare levy surcharge, franking credits, tax paid, low income rebate, private health rebate) and be able to explain why they are or are not applicable and reconciled to the tax return calculation. You can use Handitax to complete your calculations for these.

2. Handitax income tax return

• Use Handitax to prepare the income tax return, including all relevant schedules for the year ended 30 June 2021. You have been provided with a separate sheet located under the ‘assessment tasks and submission' tab on the unit blackboard site titled Client set up sheet. In this document you will find details about your client that will need to be used in the Handitax software. All other relevant client details are found in the case study information.
• When completing your tax return in Handitax, ensure that you complete all relevant schedules including depreciation, rental property schedules as well as any other applicable schedules. Failure to include these schedules in your submission will result in marks being deducted.
• Print your final tax return including all schedules to a PDF document ready for submission. You must print to PDF the full tax return including all schedules.

3. Online quiz

• After completing your tax return you should now attempt the online quiz, using information you have prepared in your excel work papers and the tax return.
• You will have 10 questions to complete and one hour time limit
• The online quiz can be located under the ‘assessment tasks and submission' tab on the unit
blackboard site under the information for assessment 2.

4. Short video

• Write and produce a video letter to your client summarising their tax situation and explaining the important aspects of the items that are included in their tax return as well as some recommendations or improvements your client can make to their record keeping and overall future tax planning.
• This video is not to exceed 3 minutes in length. Your video will only be marked up to the 3 minute point.
• The letter should not be too technical and needs to be understood by your client and communicated to them. Your client will not be interested in you recalling sections of the legislation. This should be for your own purposes in your working papers.
• At the beginning of the video you will show your identification by showing your face and student ID card, passport or driver's license for the first 10 seconds of your video up to the screen. Your name and photo on your ID must be clear and it must be obvious that you are holding this card. After this, you can start your presentation.
• Professional looking attire is recommended as you are in a work place setting presenting to a client.

Attachment:- Taxation Law and Practice.rar