TASK: 1,2 & 3

1. Purpose of GST and its application by businesses:

- GST is a consumption tax levied on goods and services.
- Purpose: Simplify tax system, promote transparency, and generate revenue.
- Businesses apply GST by charging it on their sales and remitting it to tax authorities.

2. Formula for calculating taxable income:

Taxable Income = Assessable Income - Deductions

3. Taxable income Tax on this income Source: Australian Taxation Office tax rates for
resident individuals 2020-21 financial year
0 – $18,200 Nil

$18,201 – $37,000 19c for each $1 over $18,200

$37,001 – $87,000 $3,572 plus 32.5c for each $1 over $37,000

$87,001 – $180,000 $19,822 plus 37c for each $1 over $87,000

$180,001 and over $54,232 plus 45c for each $1 over $180,000

4. Rate of Medicare levy for Australian taxpayers:

- Generally 2% of taxable income.

5. Income range for no Medicare levy for a single person:

- Varies each year, refer to Australian Taxation Office (ATO) for latest information.

6. Who pays the Medicare levy surcharge:

- Australian taxpayers without private hospital insurance, earning above a certain income
threshold.

7. Examples of Australian tax residency:

- Residing in Australia with an established home.
- Being in Australia for more than half the income year (unless their usual home is overseas).
- Being an Australian citizen or holding a permanent residency visa.

8. Definition of work-related deduction under Income Assessment Act section 900.30:

- Expenses directly related to employment or business activities.
- Must be incurred for the purpose of earning income or carrying out work-related duties.
- Supported by appropriate documentation.

9. Allowable deductions under the Income Assessment Act:

- Work-related expenses (e.g., uniforms, tools, work-related education).
- Charitable contributions.
- Self-education expenses.
10. Circumstances in which foreign residents do not need to submit an Australian tax return:
- If they have not earned any Australian-sourced income during the financial year.
- If they are below the tax-free threshold and their total income is below the applicable threshold.

11. Reportable employer superannuation contributions:

- Contributions made by an employer on behalf of an employee that are required to be reported
on the employee's payment summary.
- These contributions are included in the employee's assessable income.

12. Non-reportable employer superannuation contributions:

- Contributions made by an employer on behalf of an employee that are not required to be
reported on the employee's payment summary.
- These contributions are not included in the employee's assessable income.

13. Information required to lodge a tax return:

- Personal identification details (name, address, date of birth).
- Income details (payment summaries, investment income statements).
- Expense details (work-related expenses, deductions).

14. Salaries and wages for taxation purposes, according to the Australian Tax Office (ATO):
- Payments received as remuneration for employment services, including salary, wages, bonuses,
allowances, and commissions.

15. Penalties for late lodgement of a tax return by individuals (not using a tax agent):
- Failure to lodge on time (FTL) penalty starts accruing from November 1st.
- The penalty amount increases over time based on the individual's income and the delay period.

16. Business record retention period for tax purposes:

- Generally, business records must be retained for a minimum of five years from the date the tax
return is lodged.

17. Importance of seeking advice or guidance for a tax return:

- Ensures compliance with tax laws and regulations.
- Minimizes the risk of errors or omissions.
- Maximizes the potential for eligible deductions and credits.

18. Definition of conflict of interest under TPB Code of Professional Conduct:

- A situation where a tax practitioner's personal or financial interests may influence their
professional obligations to act in the best interest of their clients.

19. Three ways to manage conflicts of interest as prescribed in TPB Code of Professional
Conduct:
- Avoidance: Completely remove oneself from the conflicting situation or client engagement.
Example: Declining to provide services to a family member to maintain objectivity.
- Disclosure: Transparently communicate the conflict of interest to the client and seek informed
consent.
 Example: Disclosing a financial interest in a business being assessed for tax compliance.
- Management: Implement procedures or safeguards to minimize the impact of the conflict and
prioritize the client's best interests.
Example: Assigning an independent team member to oversee a client engagement where a
conflict of interest exists.

20. Five principles of professional conduct required by tax agents, BAS agents, and tax advisers:
- Honesty and integrity: Acting honestly and maintaining professional integrity.
- Independence: Providing objective advice and avoiding conflicts of interest.
- Confidentiality: Safeguarding client information and maintaining confidentiality.
- Competence: Possessing the necessary knowledge and skills to provide quality services.
- Professional behavior: Adhering to ethical standards and behaving professionally.

21. Importance of a written agreement (letter of engagement) between an agent and client:
- Establishes the scope of services, responsibilities, and expectations.
- Defines the terms and conditions of the professional relationship.
- Provides clarity on fees, obligations, and rights of both parties.
- Helps prevent misunderstandings and disputes.

22. Sharing employee's tax return details with their employer:

- No, tax agents are generally not allowed to share an employee's tax return details with their
employer.
- This is because tax return information is confidential and protected by privacy laws.
- Exceptions may exist in limited situations where consent is obtained or required by law.

23. Fringe Benefits Tax (FBT):

- FBT is a tax on non-cash employee benefits provided by employers to employees or their
associates.
- Examples of fringe benefits for tax purposes: Company car for personal use, employer-
provided housing, and entertainment expenses.

24. Recent changes to Fringe Benefits regarding living away from home allowance:
- Recent changes limit the availability of the living away from home allowance (LAFHA) tax
concession.
- The concession is generally only available for employees maintaining a home in Australia that
they are living away from temporarily.

25. ATO definition of a genuine redundancy payment:

- A genuine redundancy payment is made when an employee's position is genuinely abolished.
- Example of a genuine redundancy payment: Payment received due to job redundancy.
- Example of a payment that is not a genuine redundancy payment: Payment received as
compensation for unfair dismissal.

26. Capital Gains Tax (CGT):

- CGT is a tax on the profit (capital gain) made from the sale or disposal of certain assets.
- It is taxed for an individual by including the capital gain in their assessable income and
applying the applicable tax rates.
27. Application of CGT for foreign residents:
- Yes, CGT generally applies to foreign residents for certain taxable Australian property, such as
real estate or shares.
- However, different rules and tax rates may apply to foreign residents compared to Australian
residents.

TASK 2
CASE STUDY 1

Source documents to request from Maria:

• Payment summaries or income statements from Melbourne Accounts

• Bank statements or interest certificates showing the $240 bank interest
received
• Car expense records or logbook to verify the car allowance and car
provided by the employer
• Documentation for the mobile phone and laptop provided by the employer
• Disability insurance policy details and payment statements
• Receipts or evidence for professional membership fees
• Private health insurance statement for the year

Tax Payable Calculation for Maria - Year Ending 30 June 2017

Item
Amount

Salary
$100,000

Superannuation (9% of Salary)

$9,000

Bonus
$8,000

Bank Interest
$240

Car Allowance
$13,200

Car Fringe Benefit

Calculated

Mobile Phone Fringe Benefit

Calculated
Laptop Fringe Benefit
Calculated

Super Contribution from Savings

$8,000

Disability Insurance Payments

$15,000

Professional Membership
-$1,200

Private Health Insurance

-$1,140

Total Assessable Income

Calculated

Total Deductions
Calculated

Taxable Income
Calculated

Tax Payable
Calculated

Case Study 2

3.
a. The statutory formula method:

• Determine the taxable value of the car by using the statutory formula
method:
• Taxable value = (Base value + Statutory percentage) * Number of days
• Calculate the base value: $62,000 - $2,200 = $59,800
• Calculate the taxable value: ($59,800 + 20%) * 303 days = $18,294

b. The operating cost method:

• Determine the taxable value of the car by using the operating cost method:
• Taxable value = Total running costs - Employee contributions
• Calculate the taxable value: $5,200 - $0 = $5,200
4. Based on the provided information, it is not clear which method Unique would prefer. The
decision would depend on various factors such as the cost of running the vehicle, the value of
employee contributions, and the preferences of the company.

Case Study 3

5. Calculate tax payable on the ETP:

Determine the tax-free component of the ETP: Since the ETP has no tax-free component, the tax-
free component is $0.

Calculate the assessable component of the ETP: The entire ETP amount of $25,000 is considered
the assessable component.

Determine the applicable ETP cap: To determine the ETP cap, we need to consider Mark's age
and years of service. However, the provided information does not include Mark's years of
service. Therefore, we cannot determine the specific ETP cap without that information.

Once the ETP cap is known, we can calculate the tax payable using the ETP tax rates applicable
to Mark's age and the ETP cap. However, without the ETP cap value, we cannot provide an
accurate calculation of the tax payable on the ETP.

Case Study 4

6.
a. Stock purchased for $6,600 including GST:

GST paid: $660

GST claimable: $660

b. A bicycle sold to Mr Venlo for $3,300 excluding GST:

GST payable: $330

c. A lycra cycling outfit Heidi purchased for herself for $660 (including GST):

GST paid: $66

GST claimable: Not applicable (for personal use)

d. A machine that cost $4,400 (including GST) used 80% for business:

GST paid: $440

GST claimable: $352

e. Beef and vegetables for the office BBQ $230:

GST paid: $23

GST claimable: $23
Case Study 5

7.
Calculator:
Cost: $65
Effective life: 3 years
Date of acquisition: 1/11/2016

Reasoning:
Since the asset was acquired on 1/11/2016, it was used for a partial year in the year ended 30
June 2017. Therefore, the maximum decline in value for the calculator will be calculated based
on the remaining effective life. Considering the remaining life of 2 years, the maximum decline
in value for this item for the year ended 30 June 2017 will be $65 / 3 * 2 = $43.33.

Printer installed in Ted’s home (80% for Silver Stuff business use):
Cost: $285
Effective life: 2 years
Date of acquisition: 1/09/2016

Reasoning:
Since the printer was used for business purposes, the decline in value will be calculated based on
the business use percentage of 80%. Therefore, the maximum decline in value for this item for
the year ended 30 June 2017 will be $285 * 80% / 2 = $114.

Office in a new building:

Cost: $825,000
Effective life: 100 years
Date of acquisition: 1/07/2016

Reasoning:
The office building has a long effective life of 100 years, and it was acquired on 1/07/2016.
Considering its long-term nature, the maximum decline in value for this item for the year ended
30 June 2017 will be negligible.

Mercedes Benz for a Director’s wife:

Cost: $92,000
Effective life: 15 years
Date of acquisition: 23/09/2016

Reasoning:
The Mercedes Benz was acquired on 23/09/2016, so it was used for a partial year in the year
ended 30 June 2017. Considering the remaining life of 15 years, the maximum decline in value
for this item for the year ended 30 June 2017 will be $92,000 / 15 * (9/12) = $46,000 * 0.75 =
$34,500.

Forklift for warehouse (using DV method):

Cost: $65,000
Effective life: 10 years
Date of acquisition: 12/07/2016

Reasoning:
The forklift was acquired on 12/07/2016, so it was used for a partial year in the year ended 30
June 2017. Considering the remaining life of 10 years, the maximum decline in value for this
item for the year ended 30 June 2017 will be $65,000 / 10 * (9/12) = $48,750.

Case Study 6

8.
a. You as a tax agent:
As a tax agent, it is important to uphold professional ethics and maintain confidentiality.
However, if you become aware of tax evasion or fraudulent activities, you have a legal and
ethical obligation to report such information to the relevant authorities. Failure to report can
result in penalties and potential legal consequences. The specific legislation code may vary
depending on the jurisdiction, but general tax regulations and professional conduct guidelines
govern tax agents' responsibilities.

b. Daisy as a taxpayer:
Daisy's intention to avoid tax by setting up a company and making loans to herself raises
potential concerns of tax evasion. Tax laws are designed to prevent individuals from using such
schemes to evade their tax obligations. Participating in such activities could result in penalties,
fines, and legal consequences for Daisy as a taxpayer. The specific legislation code governing tax
evasion may vary depending on the jurisdiction.

c. Silver Stuff Ltd. as a taxpayer:

If Silver Stuff Ltd. collaborates or is complicit in Daisy's plan to evade taxes, the company could
also face legal consequences. Tax authorities may scrutinize the company's actions and impose
penalties or initiate legal proceedings. The specific legislation code for corporate tax evasion
may vary depending on the jurisdiction.

9. A week later you become aware that Daisy has gone ahead with her initial plan in
collaboration with one of your colleagues. What process would you now take to report this to the
relevant authorities?

Discovering that Daisy has proceeded with her tax avoidance scheme in collaboration with a
colleague raises serious concerns. To report this to the relevant authorities, follow these steps:

Gather all relevant evidence and documentation supporting your knowledge of the tax evasion
scheme.
Consult with your internal compliance department or legal team to ensure you follow the correct
reporting procedures.
Identify the appropriate authority responsible for handling tax evasion cases in your jurisdiction.
This could be the tax authority or a specialized enforcement agency.
Prepare a formal report detailing the tax evasion scheme, including all relevant information,
dates, parties involved, and supporting evidence.
Submit the report to the relevant authority, following their prescribed reporting procedures.
Ensure that you maintain confidentiality and protect any sensitive information during the
reporting process.
Cooperate fully with any investigations or inquiries conducted by the authorities, providing any
additional information or support as required.

It is crucial to act responsibly and ethically in such situations to uphold the integrity of the tax
system and protect the interests of all stakeholders involved.

Case Study 7

10.
Auditing Requirement for Mohammad and Selina's Milk Bar:
a. Appropriate evidence of all cash transactions:
• Cash register records: Date, time, items sold, and amounts received.
• Separate records for cash removal: Petty cash log or withdrawal receipts.
• Monthly account statements for regular customers with accounts.
b. Verification of 'Z-totals' as accurate cash sales records:
• Compare 'Z-totals' with cash register records.
• Reconcile any discrepancies between 'Z-total' and actual cash sales.
• Ensure proper accounting for cash removals in separate records.
c. Appropriate evidence of all purchases:
• Purchase invoices from distributors.
• Delivery dockets reconciled with items delivered.
• Cheque payments made to distributors after reconciling invoices.
d. Additional documentation for auditing requests:
• Bank statements showing cash deposits.
• Retained rolls of cash register tapes (1 month).
• Book with glued 'Z-totals' noting discrepancies.
• Monthly computer summaries reconciling sales, purchases, expenses.

Task 3

**1. Draft email to Janice**

Subject: Meeting Request and Tax Return Preparation Information

Dear Janice Delaney,

Thank you for reaching out to us for assistance with your tax return preparation. We are glad to
hear that our services were recommended to you, and we are happy to help. Please find the
answers to your questions below:

1. The latest date of lodgement for an individual tax return is generally October 31st. However, if
you are using a registered tax agent like us, we can request an extension if required.

2. Any tax payments due must be paid by the due date specified on your Notice of Assessment.
This date may vary depending on your specific circumstances.

3. To find out if you are eligible for a tax offset as a low-income earner, you can visit the
Australian Tax Office (ATO) website or consult with us during our meeting.

For our meeting, please bring the following documents and information:
- Your Tax File Number (TFN)
- Date of birth
- Payment summaries (e.g., from your employer)
- Bank statements (for interest earned)
- Dividend statements (if you own shares)
- Rental property income and expenses (if applicable)
- Work-related expenses (e.g., receipts for uniforms, travel, etc.)
- Private health insurance statement
- Any other relevant income and expense information

Our fee for preparing your tax return is $XXX. We accept payment by cash, cheque, or bank
transfer.

Please let us know your availability this week, and we will schedule a meeting to discuss your
tax return in more detail.

Kind regards,

Amit Chhetri
Mr
0403XXXXXX

**10. Draft email to Janice regarding ATO audit**

Subject: Important Information about ATO Review and Audit

Dear Janice,
We have been informed by the Australian Tax Office (ATO) that your tax return will be subject to
a review and possible audit. This can be a routine process, and there is no need for immediate
concern.

A review involves the ATO examining specific aspects of your tax return, while an audit is a
more comprehensive examination of your financial affairs. The ATO expects taxpayers to
cooperate during the review and audit process by providing accurate and complete information.

The review and audit process may include:

- Providing information and documents (e.g., receipts, invoices, bank statements)
- Answering questions from the ATO
- Verification of information with third parties (e.g., employers, banks)

If discrepancies are found, the ATO may impose penalties, interest charges, or pursue legal
action. However, if you have been honest and accurate with your tax return, there should be no
reason for concern.

Regarding your uniform expenses, please gather all receipts for your uniform purchases and
provide them to us as soon as possible. We will submit these receipts to the ATO to support your
claim.

If you have any questions or concerns, please do not hesitate to contact us. We are here to help
and guide you through this process.

Kind regards,

Amit Chhetri
Mr
0403XXXXXX

**11. Draft email to ATO on Janice's behalf**

Subject: Clarification of Uniform Expenses for Janice Delaney

Dear ATO Officer,

We are writing on behalf of our client, Janice Delaney (TFN: XXX-XXX-XXX), in response to
your request for clarification regarding her uniform expenses as part of her tax return review.

Please find attached the receipts for Janice's uniform purchases, totaling $XXX. The unusually
high amount is due to her purchasing three uniforms at once, as she prefers to have a clean
uniform available at least once every two days. We believe this explanation, along with the
attached receipts, should provide sufficient evidence to support her claim for uniform expenses.

We hope this information addresses your concerns and mitigates the need for a further review or
audit. If you require any additional information or documentation, please do not hesitate to
contact us.

Kind regards,

Amit Chhetri
Mr
0403XXXXXX
Attachment: Janice_Delaney_Uniform_Receipts.pdf