Completing Tax Assessment Tasks: Tips And Guidelines
Task Overview
What you have to do
You must satisfactorily complete all tasks in Assessments 1, 2, 3 and 4 before you can attempt the Workplace Simulation Test.
There are seven tasks in this assessment. You need to satisfactorily complete all tasks. Each task addresses a particular topic within the unit. To satisfactorily complete this assessment you must have no more than the number of errors for each task indicated below.
You must provide your answers in the shaded areas and must submit this file on the OLS web site
Task Topic No. of Errors
Case Study 1 Deductions for salary and wage earner 3
Case Study 2 Deductions for self employed 2
Case Study 3 Motor Vehicle Expenses 4
Case Study 4 Uniform Capital Allowances System (Depreciation) 5
Case Study 5 Capital Gains 6
Case Study 6 Audit Activity 2
Case Study 7 Dependent (Invalid and Carer) Tax Offset 3
Deductions for salary and wage earner (3 errors
All expenses incurred in the current tax year $ $ Document
Luke is a salesman and was fined for speeding while rushing to meet a customer. 500 0
Luke is a salesman and purchased a suit (which he wears when he goes to see customers) 350 0
Luke is a salesman and incurs costs for laundering his suit 90 0
Luke is a salesman who has incurred expenses in attending interviews for a new job (he wishes to leave his present job for one that pays more)
170 0
Tax agents fees to lodge objection against prior year tax assessment 450 450 Receipt
Tax agents fees to lodge current return 125 125 Receipt
Ian is a detective who makes subscriptions to the police union 400 400 Receipt
Ian is a detective and makes Personal superannuation contributions 2,800 2,800 Letter from Super Company
Donations to public hospital 150 150 Receipt
Donations to local netball club 140 0
Ambulance officer uniforms 300 300 Receipt
Laundry of Ambulance officer uniforms 160 160 Receipt
GST remitted to the ATO 1,600
Michelle works as an accounts payable clerk and incurred expenses travelling from her home to work in her own car.
Michelle works as an accounts payable clerk and incurred parking fees for her own car when she parks in a parking station on the days she works back.
Donations to Salvation Army (Registered Charity) 1 0
Identify the amounts which can be claimed as a deduction by the taxpayer. Where the payment can be claimed as a deduction; identify a source document which would substantiate the payment.
Task Topics and Number of Errors
Pat is a self-employed landscaper in his own business and has incurred the following expenses in 2015/16 tax year:
Subscription to local Golf club (Pat often meets with his most important clients over lunch in the club to secure future jobs)
Borrowing expenses for loan to purchase new landscaping equipment (loan was for 4 years and was incurred on 1/4/15) 249
Advertising for business in local paper 250
Purchase of protective overalls for his work 300
Personal superannuation contributions to a complying superannuation fund 4,500
Subscription to Australian Landscapers Association 250
Entertainment expenses (lunches with clients in Golf club)
Laundry of protective overalls 110
Identify which amounts Pat is able to claim as deductions in the year ended 30 June 2016.
Subscription to local Golf club (Pat often meets with his most important clients over lunch in the club to secure future jobs)
Borrowing expenses for loan to purchase new landscaping equipment (loan was for 4 years and was incurred on 1/4/16) 249
Advertising in local paper for his business 250
Purchase of protective overalls for his work 300
Personal superannuation contributions to a complying superannuation fund 4,500
Subscription to Australian Landscapers Association 250
Entertainment expenses (lunches with clients in Golf club)
Laundry of protective overalls 110
Case Study 3 – Motor Vehicle Expenses (4 errors)
Daniel leased a 3000cc motor vehicle on 1 July 2014 and maintained a log book for 12 weeks during the year. During the 12 week period Daniel travelled 5,000kms of which 1,200kms were business related. Costs incurred during the 2015/16 year include
Petrol, oil and servicing 2,500
Lease payments 7,800
Registration and insurance 2,000
Speeding fines 350
Note that the car had a market value of $60,000 at the inception of the lease
Show all available methods of calculating the motor vehicle expenses and choose the most advantageous method for Daniel for the year ended 30 June 2016.
Case Study 4 – Uniform Capital Allowances System (Depreciation)
Liz operates a small restaurant. She does not wish to take advantage of the small business concessions.
Assets that Liz had acquired post 10 May 2006 and held at 1 July 2014 were shown in the Fixed Assets Register below:
Asset Cost ($) Adjustable Value 1/7/14 Effective Life (years) Depreciation Method
Carpets 19,000 1,600 4 Diminishing Value
Freezer 9,000 950 3 Diminishing Value
Curtains 13,000 1,800 5 Prime Cost
Furniture 8,000 900 7 Diminishing Value
Coffee Machine 6,000 1,000 7 Prime Cost
Providing Answers and Submitting the Assessment
Oven 7,500 800 6 Diminishing Value
Hot water service 4,000 1,300 8 Diminishing Value
Liz had also commenced the use of a low value pool on 1 July 2006. The pool balance as at 1 July 2016 was
$4,100.
Liz places all eligible assets into the Low Value Pool.
During the current tax year, Liz purchased the following new depreciable assets. The purchase price of the assets included GST.
Asset Purchase Price ($) Including GST Date of Purchase Effective Life (years)
Refrigerator 990 1/9/15 6
Notebook Computer 1,089 1/4/16 5
Cash Register 3,300 1/5/16 7
(a)Calculate the deduction for decline in value available to Liz in respect of the year ended 30 June 2016
(b)Calculate the value of the low value pool as at 30 June 2016
- Prime Cost Workings Amount ($)
Curtains 1300/5 2600
Coffee Machine 6000/7 857
Total 3457
DIMINISHING VALUE
- Diminishing Value
Carpets (1600/4) x 2 800
Hot Water System (1300/8) x 2 325
LOW VALUE POOL
Computation of low Value Pool
Low Vale Pool Amount ($) Amount ($)
Opening Value 4100
Add: low Value Assets
Freezer 950
Furniture 900
Oven 800 2650
Add low cost assets
Fridge 900
Notebook computer 990 1890
Less: Decline in Value
Opening + Low Value 2531
Low Cost 354 2886
Closing Balance 5754
Total Depreciation (3457+1268+2885) 7610
Case Study 5 – Capital Gains (6 errors)
Christine is a married resident taxpayer with no dependants. The following has been taken from her taxation records as to property she owns or has sold.
- Private residence purchased in March 1998 for $300,000
- Christine currently lives in the house and it has a current market value as at 30 June 2016 of $900,000
Rental Property in Cairns
- Purchased on 7/8/89 for $150,000 ( the property was built in 1971)
- Exchanged contracts for the sale of this property on 30 June 2016 for $850,000
- Settlement of the sale was finalised on 12 October 2016
- Legal expenses on purchase $4,000 paid August 1989
- Stamp duty on purchase $2,500 paid August 1989
- Additional room added to property paid for on 1 July 2012 for $20,000
- Landscaping to the property paid for on 1 July 2005 for $2,000
- Legal expenses on sale $5,000 paid June 2016
- Real estate agents commission on sale $4,500 paid June 201
Shares
- Dragon Ltd shares sold on 11 February 2016 for $20,000, purchased on 1 May 1985 for $8,000
- Raider Ltd shares sold on 20 April 2016 for $11,000, purchased on 1 March 1993 for $10,000
- Eel Ltd shares sold on 2 August 2014 for $120,000, purchased 1 May 2006 for $30,000
- Tiger Ltd shares sold on 30 June 2016 for $40,000, purchased on 1 April 2016 for $16,000
- Christine has capital losses from sales of previous shares carried forward from the 2015 tax year of $8,000
- Rental income from her Cairns property from 1 July 2014 to date of sale $12,000
- Total allowable deductions in respect of this rental income for the year ended 30 June 2016 was
$15,800 (including capital write off 2.5% x $20,000 = $500)
(a)Calculate the net capital gain for Christine for the year ended 30 June 2016
(b)Calculate the taxable income of Christine for the year ended 30 June 2016
For the year ended 30 June 2015
Computation of Assessable Income
Investment Property Amount ($) Amount ($) Discount ($) Others ($)
Sale 850000
Less: Cost of Sale
Purchase Price 150000
Purchase Expenditure 6500
Capital Improvements 22000
Selling Expenditure 9500 188000
662000 50% 331000
Indexed Method
Sale 850000
Less: Cost of Sale
Purchase Price 190200
Purchase Expenditure 8242
Cost of Extension 20000
Case Study 1: Deductions for Salary and Wage Earner
Cost of Landscaping 2000
Selling Expenditure 9500 229942 620058
Discount Method
Gain on Shares
Raider Ltd (Index Method) Nil
Eels Ltd 45000
Tiger Ltd 24000
Dragon Ltd Nil 69000
Capital Losses -8000
Assessable Net Capital Gain 392000
In the Books of Christine
For the year ended 30 June 2015
Computation of Assessable Income
Particulars Amount ($) Amount ($)
Assessable Income
Net Capital gain 392000
Rental Income 12000 404000
less: Deductions 15800
Taxable Income 388200
Case Study 6 – Audit Activity (2 errors)
Mr. Jack Cashman (senior) of 100 George Street Sydney lodges his own returns and does not have a tax agent. On 1 February 2015, he received an amended assessment for the year ended 30 June 2013 from the Commissioner of Taxation as a result of an ATO audit.
The amended assessment included an amount of $6,500 omitted interest from an account No 246810 held at the St George Bank in Market Street. The amended assessment imposed an amount of $3,500 additional tax and penalties.
Mr. Jack Cashman has checked his records and has ascertained that this bank account does not belong to him and he does not have any accounts at that Bank. However he knows that his son who has the same name as himself i.e. Mr. Jack Cashman (junior) and the same address as him does have accounts at that branch.
Advise Mr. Cashman (senior) of his objection rights indicating what steps he has to take to ensure that the objection is valid.
Mr Jack Cashman (Senior) can raise an objection regarding the income tax affairs relating to the tax assessment made by ATO. As evident from the circumstances, it is evident that ATO has wrongly included the omitted interest into the Mr Jack Cashman (senior) that supposedly belonged to his son. Most of the tax individuals and small business having tax dispute can make the use of the in-house facilitation service. Similarly, Mr Jack Cashman (senior) can seek the in-house facilitation for addressing the dispute caused from the wrongly inclusion of the omitted interest. The in-house facility has the process of mediation where the impartial ATO facilitator would meet with Mr Jack Cashman (senior) along with the ATO case officer to address and identify the issue of dispute. Furthermore, the valid objection raised by Mr Jack Cashman (senior) would make the ATO case officer to consider alternatives and develop options in order to reach the resolution. It is recommended that Mr Jack Cashman (senior) must lodge the objection in writing to the in-house facilitator for addressing the matter of amended assessment. The in-house facilitation is the voluntary procedure and an ideal service. The procedure is less complex and can be used to audit the assessment along with the stage of litigation.