Australian Taxation Oz Assignments

Australian Taxation Oz Assignments

Australian Taxation Oz Assignments

Introduction

In the Taxation assignment there will be critical evaluation on the financial information provided by Sapphire Stables Pty Limited which is a chain of horse riding training institute. The evaluation will be done in order to evaluate on the taxability on the income of the company. In order to calculate the taxable income of the company the financial information will be assessed. Various financial management  will be undertaken to assess the taxability of the company. Taxation assignment will also discuss about how to minimize a client's debt burden so that the taxes are minimized for the benefit of the consumer. In this age of modern taxation it is very important for the organization to determine their taxability under their respective taxation system.

 

Tax Assignment Hep

Preparation of the statement of taxable income

Income statement of Sapphire Stables Pty Ltd. For the year ended 30.06.2017

Particulars

Amount ($)

Amount ($)

Income

 

 

Fees

 $  660,000.00

 

Subscription

 $            32,000.00

 

Sales of riding gear

 $            77,000.00

 

Seminars

 $            16,500.00

 

Show jumping events

 $            55,000.00

 

Vetcare subsidy

 $            15,000.00

 

Tax refund

 $              8,000.00

 

Exempt income

 $              7,360.00

 

Advertising income

 $              5,500.00

 

Net dividend sapphire Pty (Perth) Subsidiary

 $              1,400.00

 

Net dividend from UK Horse Centre Pie

 $              6,000.00

 

Total income

 

 $  883,760.00

Less Expenses

 

 

Net wages

 $  220,000.00

 

PAYG Withheld

 $            80,000.00

 

Superannuation

 $            28,900.00

 

Rent

 $            88,000.00

 

Purchase of stock

 $            66,000.00

 

Veterinary fees

 $            22,000.00

 

Donations

 $              4,440.00

 

Asset purchase

 $              5,500.00

 

Advertising

 $              9,900.00

 

Legal 3 year lease

 $         990.00

 

Entertaining staff at Perth

 $              9,900.00

 

Airfares of the staff

 $              8,800.00

 

Accommodations expenses of the staff

 $            11,000.00

 

Fully franked dividend paid 20th may 2017

 $            80,000.00

 

PAYG instalments

 $            50,000.00

 

Fringe benefits paid for 31.3.2017

 $            14,700.00

 

Refund of fees

 $              6,600.00

 

Tax advice provided to staff

 $              1,650.00

 

Help paid for employee

 $              4,500.00

 

Hiring cars for employees

 $         880.00

 

Supply uniforms to staff

 $              3,960.00

 

Total expenses

 

 $  717,720.00

Profit before tax

 

 $  166,040.00

Deduction of GST (10 %)

 

 $            16,604.00

Profit after tax

 

 $  149,436.00

The above income statement shows the total amount of taxable income of Sapphire Stables Pty Limited. In the above statement it is seen that the total taxable of the company is $ 149,436. 

Determining the tax payable

  • The amount that the company has incurred before the deduction of GST is $ 166,040
  • The amount of profit that is incurred by the company is taxable.
  • The tax rate that will be deducted on the profit incurred is 27.5 %

Tax payable of Sapphire Stables Pty Ltd for the year 30.03.2017

Particulars

Amount ($)

Profit before tax

 $  166,040.00

Tax rate

27.5%

Amount of tax that is to be paid

 $            45,661.00

If the tax rate is 27.5 % the tax which will be payable by the company will be $ 45.661.

Completing a company tax return

In order to complete the company tax return it is very important that the size of the company is recognized which will help in determining the tax return that will be implied on the profit that will incurred by the company. In this case it is seen that Sapphire Stables Private limited is a small sized business running in Australia (Sharma, Vandenberg & Hollingsworth, 2014). According to the tax reform of Australia the tax rate that will be implied on the income of the small sized business is 27.5 %. It makes it very evident that the tax rate imposed on Sapphire Stables Private Limited will be 27.5 %. So that tax return that the company is liable to pay is as follows:

Tax payable of Sapphire Stables Pty Ltd for the year 30.03.2017

Particulars

Amount ($)

Profit incurred by the company

 $  166,040.00

Tax rate according to the tax system of Australia

27.5%

Amount of tax that is to be paid by Sapphire stables private limited

 $            45,661.00

Preparing an franking account

Franking account of Sapphire Stables Pty Ltd 

Parrticulars

Tax rate (27.5 %)

Company level- SAPPHIRE STABLES PTY LTD.

 $                 166,040.00

Taxable income

 $                   45,661.00

Shareholder level- UK HORSE CENTER PLC

 

Dividend

 $                     6,600.00

Add- Franking credit gross up

 $                     1,980.00

Taxable income

 $                     8,580.00

Tax on taxable income (27.5 %)

 $                     2,359.50

Less Franking offset

 $                     1,980.00

Net tax payable

 $                         379.50

Net tax payable by the firm is $ 379.50

Completing the annual business activity statement

The Business activity statement will help the company to successful lodge and report their taxes like GST, PAYG and other taxes. In accordance to this the amount of GST that is to be paid by the company is as follows:

GST paid by the company in the year 2017

Particulars

Amount

Taxable amount

 $  166,040.00

GST rate

10%

GST paid

 $            16,604.00

Total amount of PAYG paid:

PAYG paid by the company in the year 2017

Particulars

Amount

Paid on 1.09.2016

9000

Paid on 1.12.2016

9000

Paid on 1.03.2017

16000

Paid on 1.06.2017

16000

Total PAYG paid

50000

Listing the payments that would be liable for fringe benefits tax

Fringe benefits are additional income tax which means consideration for employment privileges that is provided to the employees by the employers. . Mainly it can be said that these are the additional advantage that can be given by the employers for the retaining their employees. In this process the employer is liable to pay tax on behalf of the employee (Piketty, Saez & Stantcheva, 2014). In this case the fringe benefits incurred by Sapphire Stables Private Limited are as follows:

  1. Entertainment
  2. Transportation
  3. Accommodations
  4. Hospitality
  5. Lodging
  6. Hotel
  7. Boarding.  

The above are the fringe benefits that are incurred by the company for the welfare of the employees. For all these benefits provided by the employee the company has to pay taxes on the behalf of the employees to the tax system of the country (Vandenberg & Sharma, 2016).

Determining any penalties applicable to the franking accounting and late lodgment of BAS

There are penalties that are applicable on late payment of tax through BAS and if the company lodges late tax return the company is liable to pay penalties to Australia Tax Department. In this case it i seen that the tax have been properly lodged which shows that the company is properly which makes it evident that the company is not liable to pay any further taxes (Nijland & Dijst, 2015). It is to consider that that late lodging of tax to the Australian taxation office invites penalties which will be harmful for the financial position of an company. The company has to pay online tax and they have to pay taxes on time in order to avoid any other legal actions.  

Minimizing the client's tax burden

Minimizing tax or\burden of a company will help the company to increase the dividend, shareholder funds and shareholder wealth as the revenue of the company will increase. It is seen that there have been various firm which have increased their revenue by decreasing their tax burden. There are various ways in which a company can minimize their tax and they are as follows:

  1. Contribution towards tax free investment schemes:  In this scheme the company will have to contribute in various schemes and bonds which provide tax free returns as this will increase the revenue of the company (Cao et al. 2015). 
  2. Contribution to employees’ provident funds: The employers are to contribute to employer provident funds which will ultimately decrease the tax burden as well as increase the revenue of the company.
  3. Superannuation funds: This is also a very significant process which helps a firm to increase their revenue as well as decrease their tax burden. The employees in this case are liable to contribute in the company in respect of which they will get an amount at the time of their investment (Braithwaite, 2017).
  4. Donations in charitable trust and nonprofit seeking concern: It is seen that donations in charitable and nonprofit seeking activities will help the organizational behaviour to decrease their tax liability and increase their revenue.

Following all these process will help the company to increase their tax liability and burden as it will be very helpful for the company. It is seen that by decreasing the tax burden the company will be able to increase their wealth as well as increase the wealth of their investors which will ultimately lead to increase in the financial stability of the company (Ahmad & Scott, 2015). The most practiced method of increasing debt burden is Donations to nonprofit seeking corns\cents this decreases the tax burden of the company in a very good way.  

Notice of objection against assessment

To Deputy Commissioner of Taxation

 In the process of evaluating the Assessment Notice on 1.07.2017, I object that the total sum of rent is accommodated is $ 88,000

According to the deductions that the company has submitted you the rent expenses amounted to $ 88,000. You reported back as describing that the rent amount that is to be taxable is $ 44,000 rather than $ 88,000 which is appropriate. It is to consider that there are various factors which are have been overlooked while making the decision. As per the company's convenience the landlord charges $ 88,000 as rent for the occupied space which is being used by the company for commercial use. Hence it can be said that the total amount of the rent expenses that is paid by the company is $ 88,000. So it becomes very evident that the company is using the whole space provided by the landlord so the whole amount is subjected to be taxable under Australian taxation office.   So, I would recommend that there are some amendments that are to be made in order to revalue the rent expenses. According to the Australian Taxation office all the expenses which are used for the commercial use of a company is taxable under the Australian taxation system. This states that the rent paid for the commercial use of space provided is taxable under taxation system of Australia. According to the landlord deed with the company it is seen that the space occupied by the company is precisely for commercial use which states that the whole amount of rent paid is taxable. The company receipt also describes the same. So it recommended that the amount is changed from $ 44,000 to $ 88,000.

Please go through the rent receipt received by the landlord to make sure that the rent paid amounted to $ 88,000 for the space used by the company fully for the commercial use of the organization.   

Please consider this and kindly update the assessment notice accordingly.

Conclusion

Conclusion in the light of the above assignment, it can be said that there are various aspects that are to consider for evaluating the taxability of firm. In order to make out the financial results it is very important that the company ensures that it properly discloses all of it income so that it can properly calculate their taxes and properly pay them as this will help the company to fluently and ethically run their business. There are various aspects like fringe benefits which the company should consider while calculating the amount of profit that is taxable. There are legal requirement that the company has to comply with in order to properly pay taxes to respective departments. There are various ways in which a company can decrease their tax burden and increasing their revenue this will help the organization to decrease their tax liability and maintain their fluent business run.     

References

1. Ahmad, R., & Scott, N. (2015). Fringe benefits and organisational commitment: the case of Langkawi hotels. Tourism review70(1), 13-23.

2. Braithwaite, V. (Ed.). (2017). Taxing democracy: Understanding tax avoidance and evasion. Routledge.

Cao, L., Hosking, A., Kouparitsas, M., Mullaly, D., Rimmer, X., Shi, Q., ... & Wende, S. (2015). Understanding the economy-wide efficiency and incidence of major Australian taxes. Treasury WP1.

3. Nijland, L., & Dijst, M. (2015). Commuting-related fringe benefits in the Netherlands: Interrelationships and company, employee and location characteristics. Transportation Research Part A: Policy and Practice77, 358-371.

4. Piketty, T., Saez, E., & Stantcheva, S. (2014). Optimal taxation of top labor incomes: A tale of three elasticities. American economic for business journal: economic policy6(1), 230-271.

5. Sharma, A., Vandenberg, B. & Hollingsworth, B., (2014). Minimum pricing of alcohol versus volumetric taxation: which policy will reduce heavy consumption without adversely affecting light and moderate consumers?. PLoS One9(1),

6. Vandenberg, B., & Sharma, A. (2016). Are alcohol taxation and pricing policies regressive? Product-level effects of a specific tax and a minimum unit price for alcohol. Alcohol and Alcoholism51(4), 493-502.