Prepare legally compliant tax returns for Individuals
Assessment Instructions for the Candidate:
• Access to a computer loaded with Microsoft Word and Excel
• Access to an email system
• Your assessment must be completed using the Excel template provided.
• It is recommended that on completion of this unit, participants should be able to produce accurate work with not more than three re-submissions.
• Upload your assessment document to the online platform.
• Remember to name the document to include the following: Unit number - assessment name and number - your name.
There are only two possible results of any assessment:
• Not yet competent
An assessment of ‘Competent’ recognises that you have clearly demonstrated to your assessor that you have current skills and knowledge as outlined in the units of competency for which application was made.
Not Yet Competent
If an assessment of ‘Not Yet Competent’ is made, the assessor will give you specific feedback as to the reasons for the result. This will also provide information about gaps found in the assessment of competency. You may also discuss options to address the gaps in competency with your assessor.
: Prepare Legally Compliant Tax Returns for Individuals Final Practical Assessment
You are currently employed as a Tax Agent for a local Accounting Firm (Tax Agent number 123456 78). Your clients are predominately individuals including salary & wage earners and sole traders.
The policies and procedures of your firm require you to use the Microsoft Excel templates provided to complete your calculations. The ATO website should be used to verify current tax legislation and to seek advice and guidance.
All client communications should be via email. Client details required to complete the Individual Tax Return are recorded on a new client details form.
Destiny Childs is a 57 year-old, single, resident taxpayer. She has appointed you as her tax agent and provided you with the following information for the 2018/19 tax year:
Net Business Income $ 42,000
Gross Wages (no PAYG tax withheld) $ 10,000
Assessable portion of Net Capital Gain $ 33,000
Net Loss from Rental Property ($ 22,000)
Reportable fringe benefits $ 7,000
Destiny does not have any dependants and was NOT covered by private hospital health insurance.
a) Who would you consult if you required advice and guidance to determine any income tax related issues?
b) Using the Excel template provided by your firm, calculate Destiny's net tax payable or refundable for the 2018/19 tax year. Clearly show all workings for each component of your calculation.
Sunil Agarwal, a resident taxpayer, purchased a townhouse in Sydney as an investment property on 1 July 2018 which he made available for lease by tenants. Details of the purchase were as follows:
Purchase Price $ 478,000
Stamp Duty $ 17,000
The vendor provided Sunil with a certified schedule indicating that the eligible construction costs of the property amounted to $140,000 (constructed in 2010). The schedule also specifies that the adjustable value of fittings was $14,500 and has a remaining useful life of 5 years.
Sunil recorded the following transactions for the 2018/19 tax year in respect of the property: Receipts
Rent received (net of agent’s commission of $2,100)
Recovery from the Rental Bond Board (tenant damage March 2019)
Reimbursement of water rates (usage portion only)
Rebate from State government for washing machine
- purchased on 1 Oct 2018)
Mortgage repayments to ANZ Bank - principal
Mortgage repayments to ANZ Bank - interest
Loan establishment fees to ANZ Bank for a 15 year mortgage
- paid upon commencement of loan 1 July 2018
Council and Water Rates
Building Insurance Premiums
Repair of carpet
- carried out on 19 July 2018 in respect of damage by previous owner
Repair of guttering
- carried out on 27 March 2019 in respect of damage by tenants Renovation of bathroom
- completed on 1 January 2019
Travel costs (refer to other information)
Purchase of washing machine
- 1 October 2018, 5 year effective life
Purchase of ceiling fans - 19 April 2019, 10 year effective life $ 41,900
$ 3,560 $ 610
$ 1,845 $ 830
$ 1,250 $ 240
Sunil lives in Ballina. During the 2018/19 tax year Sunil made 4 trips to Sydney.
Each trip cost a total of $800. One of the trips was taken in July 2018 finalise the purchase of the property; another trip taken during May 2018 was to view another property that Sunil was considering purchasing; the remaining 2 trips were taken during the year in order to inspect the rental property
Sunil also received gross salary for the year of $96,480 from which $25,000 of PAYG tax was withheld.
Sunil has diarised $470 of work-related expenditure including a briefcase costing $280 and $190 of stationery; and 5 work related journals (each costing less than $10). He has not retained any receipts.
Sunil was not covered by adequate private health insurance.
a) Using the Excel template provided, calculate Sunil's taxable income for the 2018/19 tax year.
b) Explain below how your calculation of eligible deductions would have been different if this for the 2015/2016 tax return.
c) Write an email to your client advising him of:
• The change in tax law for claiming travel expenses as a deduction and how this will affect future tax returns.
• Record-keeping requirements for claiming eligible deductions.
Melissa Mitchell has operated a small sign making business since 2016 (Sign Writing Industry Code: 69240). She has not previously elected to be treated under the SBE provisions, however she would like to minimise her tax obligation. Melissa has provided you with the following information in regards to the 2018/2019 financial year. The figures provided exclude GST.
Receipts from customers $950,000
Payments to creditors (trading stock) $75,000
Employee wages $250,000
Purchase of computer (1/1/2019) $6,000 *effective life 4 years
Purchase of office chair (1/4/2019) $600 *effective life 8 years
Office rent $520,000
Other deductible expenses $55,000
Other Balances 30 June 2018 30 June 2019
Trading Stock $4,500 $7,300
Debtors $31,900 $39,700
Creditors $2,900 $11,600
Office rent prepayment $0 $40,000
Depreciating Assets held
Office Furniture & Equipment
Purchased 1/7/2016 at a cost price of $45 000 (effective life 8 years)
a) Using the Excel template provided, calculate Melissa’s taxable income for the 2018/19 tax year if she chooses to not apply any of the small business concessions. She has previously used the diminishing value method of depreciation.
b) Using the Excel template provided, calculate Melissa’s taxable income for the 2018/19 tax year if she chooses to apply the small business concessions and make a list of the small business concessions applied.
c) Complete Form I Individual Tax Return. Attach a copy of the tax return to an email to Melissa requesting she sign and return the form for lodgment with the ATO and explaining the impact of the SBE concessions used.
Dave Banks, a resident taxpayer aged 58, was employed by Cool Brick Ice Creamery until 17 June 2019 when his position became redundant. Dave had total employment with the company of 20 years and 11 months.
Upon receiving the redundancy, Dave notified his superannuation fund that he intended to retire and drew his entire superannuation entitlement as a lump sum.
Amounts received by Dave from Cool Brick Ice Creamery for the year included:
Gross wages 1/7/2018 to 17/6/2019 (Including PAYG tax withheld $27,000) $ 76,000
Redundancy payment $ 117,840
Unused annual leave (all post 18/8/1993) $ 3,500
Unused long service leave
- Service post 18/8/1993 $ 16,400
Amounts received from his superannuation fund included:
Superannuation Lump Sum
Tax free component (Dave's own contributions) $ 95,000
Taxable component (element taxed in the fund, PAYG tax withheld $ 17,325) $ 260,000
a) Using the Excel template provided, calculate Dave's taxable income for the 2018/19 tax year.
b) What website did you refer to, in order to gain guidance the taxation of redundancy payments? Include link to the website.
c) What information is missing for you to be able to calculate Dave's net tax payable or refundable for the 2018/19 tax year?
d) Compose an email to Dave requesting the missing information so you can complete his tax return.
One of your long time clients is a company called The Green Apple, a large health food retailing franchise of which you have a 20 percent ownership interest.
You have been approached by The Purple Pear, a rival health food retailing franchise to provide tax agent services including tax planning work.
a) As a registered tax agent with the Tax Practitioner’s Board, what issues do you need to consider to ensure you meet your professional and ethical obligations?
b) Should you accept the Purple Pear as a client? Explain your answer
Jack Peterson is an Australian resident aged 42. During the 2018/19 income year, Jack derived the following income:
Gross Salary (PAYG tax withheld $15 000) $60 000
Gross rental income- France (tax of $5 000 was paid on this amount) $20 000
Jack had no deductions during the year and was covered by adequate private health insurance.
(a) Calculate Jack’s taxable income for the 2018/19 income year.
(b) Calculate Jack’s net tax payable or refundable for the 2018/19 income year.
During the 2018/19 tax year, Ella Rodgers had the following payments relating to her employees and business dealings:
1. Ella paid her husband Brock gross wages of $35 000. In a private tax ruling, the Commissioner indicated that $15 000 is reasonable.
2. Her son Bill is a university student that does not work in the business at all. Ella paid Bill gross wages of $18 000.
3. Ella employs two sales representatives, one of whom is her brother Alex. Ella paid Alex gross wages of $65 000 and her other sales representative gross wages of $55 000.
4. During the year, Ella paid rent amounting to $30 000 to her father for the rent of her business premises. The commercial rate of rent for the premises is $50 000.
5. Ella paid $28 000 to Green & Associates, an accounting firm. The commissioner has indicated that $10 000 is reasonable for the work performed. Her sister Liz is a partner at the accounting firm.
(a) Identify, giving reasons, which amounts are allowed as deductions for the 2018/19 tax year.
-End of assessment-
DOCUMENTS TO BE UPLOADED
• Excel spreadsheet – Answer Template (Question 1 to 7)
• Email to Sunil Agarwal - Question 2(c)
• Complete Form I Individual Tax Return – Melissa