ACCT2001 – Taxation Session 3 2021
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ACCT2001 – Taxation Session 3 2021
Assessment 2 – Income Tax Return
In this assignment, you will be provided with a case study for a client (below) and you will prepare an income tax return for the client.
This assessment covers the topics (5 to 10) and assumes that you have completed all activities and tasks for these weeks. This is an individual assignment
Submission requirements
For this assessment you will 4 tasks to complete. Please ensure you follow each instruction carefully on what you need to do and the submission requirements for each task.
1. Completion of working papers for the Income tax return using the excel template provided in the assessment tasks and submission section of the unit’s MySCU site. Your completed excel document will then be submitted via a Turnitin submission link provided.
2. Use Handitax software to prepare the 2020/2021 tax return. Submit the completed tax return in PDF format that includes the completed tax return and all accompanying schedules and estimates using the submission link provided in the assessment tasks and submission section of the unit’s MySCU site.
3. Complete online test located in the assessment tasks and submission tab of the unit’s MySCU site under the assessment 2 content folder – 10 questions with a one hour time limit that is based on the case study facts and completed tax return for the business.
4. Prepare a video, maximum 3 minutes to your client that uses software/program/app (it is strongly recommended that you use Microsoft Power point for this presentation) with slides and ‘talking head’ (this is a video of yourself talking during a slide presentation) whereby you present a letter to the client that addresses the clients overall tax position and recommendations to improve their tax position in the future. Your video needs to be readable by Blackboard and your markers. An MP4 file is recommended here.
To be accepted as a valid assessment submission, your video must include (1) identification and (2) slides and a video of you presenting (this only needs to be shoulders and up).
For identification, the first 10 seconds of your video should show your face and your student ID card, driver’s license or passport up to the screen. The name and photo on the ID must be clear and it must be obvious that you are holding this card. After this, you can start your presentation.
Business case study information
You have been asked to prepare the 2020/2021 individual tax return for Max Muscles (‘Max’). Max is the sole director and Managing director of Heavy Weight Pty Ltd that operate 20 gyms located throughout New South Wales. The company’s shareholders are Max and his wife Lara who have equal shareholding in the company.
Lara does not work in the company and is employed by another business part time working as a marketing assistant. Her annual salary for the 2020/2021 financial year was $40,000. The couple have two school aged children.
Date of birth for Max is 25th February 1980 and Lara’s date of birth is 7 March 1981.
Max has health insurance for the family and this policy was taken out with HBF on 1 September 2020. The premium paid for up until the end of the year totalled $1,120 after a rebate of $133 was claimed. The policy number is HBF862542 and HBF have notified Max that the benefit code is 30.
Employment related information
Max is paid a salary by Heavy Weight Pty Ltd. The payment summary for 2020-2021 issued by the company for Max contained the following details;
Heavy Weight Pty Ltd – ABN 84 111 122 223
Name: Max Muscles
Gross payments: $150,000
Tax Withheld $ 51,295
Max completed his University education 3 years ago and has an outstanding HELP debt of $7,000 as at 30 June 2021.
Heavy Weight Pty Ltd made the following payments during the financial year on behalf of Max;
• Additional superannuation contributions of $5,500 were paid to Max’s superannuation account by him from his after tax pay. These contributions are in addition to superannuation paid as per the superannuation guarantee requirements of the company. Max had not provided the super fund with a notice of intent to claim a deduction. Details of the find are CARE Superannuation, account number 1235654, Fund ABN 23 111 144 445 and fund TFN 999 999 610.
• Telephone payments in the amount of $1,500. The phone is held in Max’s name and the company paid these phone expenses directly to the telephone company.
• Max did a short small business course through TAFE at a cost of $1,500 and he has been able to apply his learnings and improved his skills in running the business after completing this course.
Max owns a Tesla model S motor vehicle. The car was purchased on 1 July 2020 for $150,000. During the financial year Max travelled 32,000 kms. Max has noted that 85% of this travel is work related, however he has not kept a log book of the kilometres travelled for work purposes. Max has paid for all of the running costs during the year and these are as follows;
Fuel |
$2,500 |
Servicing |
$1,200 |
Registration |
$960 |
Insurance |
$1,500 |
Parking fees |
$420 |
Other costs paid during the year included;
• Men’s health fitness magazine subscription $130.00
• Donation to Cancer Council $250.00
• Donation to Daniel Morcombe foundation $300.00
• Membership to Australian Chamber of commerce and industry $1,200.00
• Preparation and lodgement of 2020 tax return by Hillbilly Accountants $2,500.00
• Payment for life insurance policy that covers Max’s income in the event of illness or death. The premium is deducted from Max’s bank account via direct debit each month. Total premium paid for the financial year was $3,300. 60% of this amount relates to life insurance with 40% being for replacement of income in the event of a serious illness. $3,300.00
Dividends and investments
Heavy Weight Pty Ltd paid a fully franked dividend of $150,000 on 1 April 2021. This dividend paid by the company to the shareholders was used by Max and Lara to pay down their mortgage that they have on their family home. Interest paid on the home loan during the financial year was $26,000.
Max has a share portfolio (see table below) that he inherited from his grandfather who passed away on 31 July 2020. The shares were transferred from the grandfather’s estate to Max on 1 December 2020.
ASX code |
Original purchase date |
Number of shares |
Original purchase price |
Market value 31 July 2020 |
BGA |
20 Aug 2011 |
3,500 |
$5.06 |
$6.07 |
NAB |
2 Jan 1985 |
4,000 |
$5.50 |
$24.47 |
CSL |
31 Mar 1995 |
2,500 |
$25.64 |
$282.37 |
During the financial year Max received fully franked (use 30% tax rate) dividends of $950 on his shares in BGA and NAB. Rather than taking the dividends in the form of cash, Max elected to participate in the dividend reinvestment schemes offered by the companies and acquired an additional 5 shares in BGA, and 4 shares in NAB.
Max sold his shares in CSL on 1 August 2020 for $284.00 each. The brokerage fees in relation to the sale were $250. This amount is inclusive of GST.
Rental Property
Max owns a unit on the Gold Coast in Burleigh Heads (2/78 The Esplanade, Burleigh Heads, QLD, 4220) and purchased this unit on 25 January 2021 for $1,450,000. Settlement on the property was on the 24 February 2021. Max’s brother moved into the unit immediately after settlement and pays rent of $600 per week (paid in advance) to Max. (Hint: you need to research the issues around renting properties to relatives and include your findings in your workpapers and letter of advice).
The building was constructed in 2005. A quantity surveyor’s report that Max was provided with during the purchase of the unit showed that at the time of purchase the construction cost of the unit was $500,000. This report cost Max $450.00.
Max purchased wooden shutter blinds for the windows at a cost of $15,000 and a fridge for $2,500. These items were installed in the unit and ready for use on settlement date. Max does not elect to use a low value pool for depreciating assets and chooses to use the diminishing value method for depreciation where applicable at a rate of 18.75%
Other costs that were incurred in relation to the property before 30 June 2021 are as follows;
Stamp duty on purchase of property |
$36,000 |
Conveyancing costs |
$2,200 |
Body corporate fees |
$1,600 |
Insurance |
$1,500 |
Council rates |
$1,560 |
Council water rates |
$330 |
Loan repayments – interest only per month |
$2,500 |
Establishment fees bank loan (25 year loan) |
$1,050 |
Additional guidelines
1. Excel template
• Using the excel template provided, prepare a set of work papers to enable you to complete the online quiz and tax return for this assessment. You have been provided with separate sheets within the excel document to complete.
• Each item of the case study needs to be addressed and include detailed explanations about its tax treatment and providing appropriate authority for your decisions by referencing sections of the legislation, case law and/or income tax rulings
• Organise and use your work papers so that your amounts are directly transferable to items on the income tax return. This will assist you in Handitax.
• Tax payable, offsets and levies: Include all levies and offsets considered (Medicare, Medicare levy surcharge, franking credits, tax paid, low income rebate, private health rebate) and be able to explain why they are or are not applicable and reconciled to the tax return calculation. You can use Handitax to complete your calculations for these.
2. Handitax income tax return
• Use Handitax to prepare the income tax return, including all relevant schedules for the year ended 30 June 2021. You have been provided with a separate sheet located under the ‘assessment tasks and submission’ tab on the unit blackboard site titled Client set up sheet. In this document you will find details about your client that will need to be used in the Handitax software. All other relevant client details are found in the case study information.
• When completing your tax return in Handitax, ensure that you complete all relevant schedules including depreciation, rental property schedules as well as any other applicable schedules. Failure to include these schedules in your submission will result in marks being deducted.
• Print your final tax return including all schedules to a PDF document ready for submission. You must print to PDF the full tax return including all schedules.
3. Online quiz
• After completing your tax return you should now attempt the online quiz, using information
you have prepared in your excel work papers and the tax return.
• You will have 10 questions to complete and one hour time limit
• The online quiz can be located under the ‘assessment tasks and submission’ tab on the unit blackboard site under the information for assessment 2.
4. Short video
• Write and produce a video letter to your client summarising their tax situation and explaining the important aspects of the items that are included in their tax return as well as some recommendations or improvements your client can make to their record keeping and overall future tax planning.
• This video is not to exceed 3 minutes in length. Your video will only be marked up to the 3 minute point.
• The letter should not be too technical and needs to be understood by your client and communicated to them. Your client will not be interested in you recalling sections of the legislation. This should be for your own purposes in your working papers.
• At the beginning of the video you will show your identification by showing your face and student ID card, passport or driver’s license for the first 10 seconds of your video up to the screen. Your name and photo on your ID must be clear and it must be obvious that you are holding this card. After this, you can start your presentation.
• Professional looking attire is recommended as you are in a work place setting presenting to a client.
Information required to set up your client in Handitax
In the top right hand corner you will see the following, click on the + client tab to start adding information for your client.
Other details required to set up your client include;
Field |
Client Information |
Client type |
Individual |
Tax file number (TFN) |
999999515 |
Address type |
ALL |
Street |
7/11 Breaker Street |
Suburb |
MAIN BEACH |
State |
QLD |
Code |
4217 |
Staff |
This will be your SCU email address |
Client reference |
123456 |
Remaining details can be found within the case assumptions where required.
2022-01-11