FNSACC601 Prepare and administer tax documentation for legal entities /FNSACC603 Implement tax plans and evaluate tax obligations Assessment 5 Written Report Student Name: XXXX Student Number: XXXX Assessment Number: 32227B/05 All terms mentioned in this text that are known to be trademarks or service marks have been appropriately capitalised. Use of a term in this text should not be regarded as affecting the validity of any trademark or service mark. © Open Colleges Pty Ltd, 2017 All rights reserved. No part of the material protected by this copyright may be reproduced or utilised in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the copyright owner. Assessment 32227/05 FNSACC601 Prepare and administer tax documentation for legal entities FNSACC603 Implement tax plans and evaluate tax obligations Instructions Once you feel confident that you have covered the learning materials for this unit, you are ready to attempt this assessment. Write your assessment in a commonly used software program such as Microsoft Word, or you can download a Microsoft Word copy of this assessment from the relevant Study Period of your course in OpenSpace. To help Open Colleges manage your assessment, please use the following file naming convention when you save your Microsoft Word document. Your file should be named and saved to your computer’s hard drive using your [student number]_[assessment number].doc. For example 12345678_22129_01.doc Assessment submission When you are ready to submit your assessment, upload the file in OpenSpace using the Assessment Upload links in the relevant Study Period of your course. Uploading assessments in OpenSpace will enable Open Colleges to provide you with the fastest feedback and grade on your assessment. If you upload your assessment in OpenSpace you do not need to use an Assessment Cover Sheet. Alternatively, you can print and post your assessment to: Open Colleges PO Box 1568 Strawberry Hills NSW 2012 If you are submitting the assessment by post, please ensure that you use the Open Colleges Assessment Cover Sheet (available in Support in OpenSpace). Students who submit written assessments by post or via OpenSpace, should allow up to five days from receipt by Open Colleges for marking and return. It is important you keep a copy of all electronic and hardcopy assessments submitted to Open Colleges. Assessment Description By completing this assessment the learner will gather evidence of their ability, knowledge and skills to: complete lodgements and returns for legal entitiesassess taxation liabilities, optimise tax positions, establish processes and plans, evaluate tax policies and review tax compliance for legal entities. Assessment Task Assessment numberAssessment type and methods32227B/05Written ReportWritten report consists of the following assessment methods: Setting and reviewing business taxation simulationsEvaluating an integrated activity which combines the elements of the competencies Marking Distribution Writer should specify in the content table any specific content related information that the student should show in order to gain a higher grade (see highlighted sections as an example) Marks will be awarded as follows: GradeContent and research skills 50%Critical analysis, argument and original content 40%Organisation, presentation and referencing 10%HDExtensive, relevant and accurate current reading All aspects are covered and supported by evidenceDetailed, insightful analysis Sophisticated argument (original thought)High academic standards Coherent and well structured. Free from grammatical mistakes Proper referencingDNHigh level of reading. Most aspects (namely review of structures and appropriate responses to differences between structures and responses to tax technical matters noted) of questions answered. Assessable income and allowable deductions appropriately noted, completion of relevant schedules such as a Franking Account,, CGT and FBT calculations, Trust, company, and Superannuation Fund responses of a high standard) and responses supported by appropriate layout and research into relevant taxation issues.Detailed analysis Understand different points Insights and some original ideas throughoutMost sources acknowledged Referencing Minor spelling errorsCUnderstanding of the theoretical issues of the above and use of evidence from research. Many correct responses to specific taxation matters have been appropriately attempted and responses submittedAnalysis of issues and insights. Some basic understandingAcceptable academic standards Minor spelling errors Errors in referencingPQuestions are addressed but there was inadequate research into structures and specific taxation matters.Very limited analysis Basic understanding of topicsOrganisation of thought Grammatical mistakes and spelling errors in referencing Formatting issues and conclusion is missingFUnable to meet ‘Satisfactory’ requirementsUnable to meet ‘Satisfactory’ requirementsUnable to meet ‘Satisfactory’ requirements Written report The Managing Director has been very impressed with your guidance to date and he has asked you to review some specific taxation matters for the Ethical Trading Group. He has asked you to prepare a report to him in relation to the taxation matters noted for the company. Note: Please ensure that the report is structured (include subheadings based on the information provided below) and ensure you have researched and responded to issues identified. Please note that all questions in the assessment relate to the tax year ended 30 June 2017. The Managing Director would like you to review the information provided on the business activities of the Ethical Trading Group and provide some guidance on the following matters. Note: Please include any specific rates and thresholds in your responses. Report Section 1: Luxury Hybrid Fuel efficient Cars Due to the ethical nature of the business, Ethical Trading Group offers senior managers an opportunity to use a luxury hybrid car. Provide some advice on the benefits of purchasing a luxury hybrid fuel efficient vehicle, relative to a standard luxury car.The Managing Director is currently driving a hybrid vehicle that cost $66,000 including GST. Running costs on the vehicle were $12,000 plus depreciation of $16,500. The car was acquired on 1 April 2016. He has a log book showing 60% business usage. He is considering replacing this car and salary packaging a bike for $2,200 (including GST) to get him to and from work. Discuss the FBT consequences of the two means of transport.The Ethical Trading Group has now acquired two additional hybrid motor vehicles, A Toyota Hilux ute, designed to carry up to 1 tonne for $44,000 including GST and a Lexus Hybrid for $48,500 including GST. Both vehicles were acquired on the 1 April in the current FBT year. In addition the following details have been provided:The 1 tonne ute travelled 55,000 kilometres. A log book has been maintained and noted a business usage of 90%.The total running costs of the ute were $15,000 (excluding depreciation).The employee did not make any contribution towards running costs of the ute.The ute was available for use for 360 days.Jeff used the Lexus Hybrid and travelled 32,000 kilometres of which 8,000 kilometres were private. A log book has been maintained noting business usage of 75%.Running costs were $12,000 (excluding depreciation).The car was involved in an accident and spent two weeks at the smash repairers. Jeff paid $2,000 out of his own pocket for the accident.Consider both vehicles. Determine any FBT consequences and then calculate the taxable value (TV) of the benefit using both methods for car fringe benefit calculations – the statutory formula and operating cost methods. (Note: please show all workings or calculation steps in your answer). Which method provides the best result for Ethical Trading Group?There are two gross up rates used when calculating an employer’s liability for FBT. What are these rates? Why are there two rates? Provide an example of where each rate would be used. Report Section 2: GST and Imports Ethical Trading Group is importing goods on a monthly basis from India, Sri Lanka and France and selling these items both in Australia and overseas. Discuss any specific GST consequences to be aware of. Hint: Consider the rules around taxable importations. Report Section 3: Franking accounts and dividends Part (a) Discuss the requirement for the Ethical Trading Group of franking accounts. Why is it required and when can dividends be paid? What is the process that Ethical Trading Group should follow in regards to coming to the decision to pay a dividend? Ethical Trading Group had a credit franking account balance of $8,500 at the beginning of the financial year (1 July). The following transactions occurred during the year: A fully franked interim dividend of $10,000 was paid on 2 July.During the year, PAYG instalments of $3,000 were paid on the 28 July, 28 October, 28 February and 28 April of the current income tax year.The company received a fully franked dividend of $5,000 on 1 September and a further $2,000 in fully franked dividends on the 31 March.On 1 April they paid a fully franked final dividend of $7,500.On 20 February they received a tax refund of $4,500 for last financial year.On 28 July of the next financial year, a PAYG instalment of $4,000 was paid. Based on the information provided, prepare a franking account for ETHICAL TRADING GROUP. Show any workings (where relevant). DateDetailsDebitCreditBalance1 JulyOpening Balance Part (b) Identify and discuss a key Franking account issue for the Ethical Trading Group if it was a small business entity (SBE) Report Section 4: BAS Review the information in regards to one of Ethical Trading Group’s GST branches for the stores for the March Quarter Business Activity Statement (BAS). Complete the relevant fields on this form as indicated. For this part of the assessment, you need to go to the ATO website to download a copy of the BAS sample form. The branch is paying PAYG Instalments at a rate of 10%. The information provided for the company is as follows: Sales and purchases for the March quarter BAS – accruals basis CodeDescriptionRateNet sales valueNet Purchase valueGST collectedGST paidFREGST free0%$1,200$8,300 GSTGoods and services tax10%$127,000$78,70012,7007,870 Included in the purchase value, Simon acquired a new computer at a cost of $3,300 including GST on 1 March. Payroll activity summary report Gross WagesSuperannuationTaxes$33,700$3,202$9,600 Task Review the following link for the ATO Business Activity Statement Requirements: https://www.ato.gov.au/Business/Business-activity-statements-(BAS)/ a) Then download a copy of the BAS sample form from the ATO website and use it as a reference to help you complete the relevant fields for the March quarter. Refer this link to obtain a PDF copy of the BAS form: Click to access bus25199nat4189s.pdf b) Assume the form has been fully completed and reviewed by the taxation manager. Sign the relevant parts of the BAS sample form, so it is ready for submission to the ATO. Report Section 5: Trust income The Ethical Trading Group likes to invest in different types of assets, so they can use any excess profits made to reinvest in sustainable activities. Assume Ethical Trading Group has the Ethical Trading Group Discretionary Trusts and it has sold the following assets on 1 June 2017 and made a capital gain of $20,000 as follows:A gain of $5,000 on shares purchased in January 1984A gain of $7,000 on a Unit Trust investment purchased in April 1998A gain of $6,000 on shares purchased in July 2008A gain of $4,000 on shares purchased on 1 October 2016A loss of $2,000 made on a painting acquired on 1 November 2016 For each of the above transactions, discuss whether or not the gain is taxable and what concessions, if any, are available to the Trust. Include a calculation of the correct capital gain. Report Section 6: Superannuation The Ethical Trading Group has established the Ethical Trading Group Superannuation Fund to invest in sustainable and environmentally friendly investments. The fund had the following receipts and payments for the current tax year: Receipts$Employer contributions1 100 000Employee voluntary contributions150 000Contributions from a member who is self-employed (a contractor to ETHICAL TRADING GROUP/tax deductible for members) 25 000Funds rolled over from an industry super fund. (The rollover related to deducted contributions) 250 000Fully franked dividends150 000Foreign interest, net of withholding tax of 10%180,000Proceeds from Sale of shares in XYZ Ltd (sold 25/6/2017)60,000 Payments$Purchase of shares in XYZ Ltd (acquired 1/10/2016)48 000Accounting and audit fees8 500PAYG instalments160 000Acquisition of shares in HMN Ltd (acquired 7/9/2016)000 Additional information: Remaining fund assets with a cost of $250,000 were revalued to $300,000 at 30 June. Calculate the taxable income and the tax payable of the fund for 2017. (Note: show your workings and provide some explanations for any exclusions from your calculation). Report Section 7: Technology systems Discuss how the use of systems and digital technology will assist Ethical Trading Group meet its taxation compliance obligations. Discussion could include information on the use of accounting software and other systems or technology.
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