Australian Taxation Law and Accounting Practices

This assignment provides in-depth solutions to a series of taxation law and accounting practice questions, focusing on Australian tax laws. It covers topics such as taxable income, fringe benefits, depreciation, and superannuation. The problems include calculating net tax payable, determining the base value for depreciation, and understanding franking account transactions. The provided answers offer detailed calculations and explanations, making it a valuable resource for students seeking to grasp these concepts. By studying this assignment, learners can develop a stronger comprehension of Australian taxation law and accounting practices.

ADVANCE ACCOUNTING

Table of Contents
Activity: 1....................................................................................................................................1
Activity 2.....................................................................................................................................1
Activity 3.....................................................................................................................................2
Activity 4.....................................................................................................................................3
Activity 5.....................................................................................................................................4
Activity 6.....................................................................................................................................5
Activity 7.....................................................................................................................................5
Activity 8.....................................................................................................................................6
REFERENCES................................................................................................................................7

Activity: 1
According to the partnership act, 1963 applied in Australia, net income of the partnership
is founded after disposal of business expenditures i.e. interest on capital, salaries, commission
and other whereas interest on drawing is included in the assessable income.
Net profit for the year 254,000
Add: Interest on drawing
Jason 5,000
Nancy 7,000 12,000
Total profit 2,66,000
Less: Interest on capital
Jason 15000
Nancy 18000
Johnny 12000 45,000
Partner’s salaries
Jason 62,000
Net profit for the year
Jason (1/3) 53,000
Nancy (1/3) 53,000
Johnny (1/3) 53,000 159,000
Activity 2
According to the Trust tax return instruction & Trust act, 1973, Trust’s net income is
determined by subtracting the deductible expenditures from the assessable income for the given
year. Trust can also set-off their previous year losses from the current year’s taxable income so
as to get tax benefits (Barkoczy, 2016).
Answer:
Net loss in 2012/13: 15,000
Net loss in 2013/14: 22,000
Assessable income in 2014/15: 277,800
General deduction: 120,800
Calculation of Trust’s net income for the year 2014/15
Net income in 2014/15 277,800
Less: Deductible expenditures 120,800
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Net income for the year 157,000
Calculation of Trust distribution for the year 2014/15
Net income in 2014/15 277,800
Less: Deductible expenditures 120,800
Net income for the year 157,000
Less: carry forward losses of previous year
Net loss of 2013/14 15,000
Net loss of 2012/13 22,000
Total losses of previous years 37,000
Net loss 120,000
Activity 3
Personal service income (PSI) refers to the income derived by an individual on their own
expertise, skills and knowledge. As per the ATO tax guidelines, an income will be considered as
PSI if, it is more than 50% of the total income. In the given case, ABC P/L’s PSI is reported to
100,000 which is above 50% of the total income therefore, will be classified as PSI (Woellner, R.
and et.al., 2016). Besides this, salary paid and contribution to employee’s superannuation fund
who perform principle work is allowable, however, payment made to associate i.e. spouse,
brother and other are not considered as tax deductible.
Answer:
Calculation of taxable income of ABC P/L
Receipts
Unfranked dividends 23,000
Less: Entity maintenance expenditures 1,000
Unfranked dividend 10,000
Total 11,000
Taxable income for the year 2014/15 12,000
Taxable income of Patrick
Particulars Amount
Personal Services Income (PSI) 100,000
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Unfranked dividend 5,000
Salary 20,000
Personal superannuation 3,000
Total 128,000
Less: PSI deductions 4,000
Taxable income for the year 124,000
Taxable income of Judy
Particulars Amount
Unfranked dividend 5,000
Salary 40,000
Superannuation 10,000
Taxable income for the year 55,000
Activity 4
Answer:
Assessable income
Assessable contributions 210,000
Interest 60,000
Excessive non-arm’s length income 20,000
Dividends (Including 6000 franking credit) 20,000
Total 310,000
Less: Deductions 12,000
Taxable income 298,000
As per Australian taxation office (ATO) ruling, for the complying Superannuation fund, a
concessional taxable rate of 15% is charged. In the given situation, assessable contribution
and investment earnings i.e. dividends and interest will be charged at a tax rate of 15%.
However, on the other side, excessive non-arm’s length income will be charged @ marginal
tax rate of 47% (Tax on Self Managed superannuation fund. n.d.).
Taxable income 298,000
47% on excessive arm’s length income 20,000*47% = 9,400
15% on remainder income 278,000*15% = 41,700
Total tax liabilities 51,100
Less; Franking credit 6,000
Tax liability 45,100
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Activity 5
Answer:
According to the taxation provision, as XYZ Ltd is here entitled to get GST credit therefore,
higher gross-up rate will be used. In other words, for the GST creditable benefits, in order to
compute taxable amount, high gross-up rates should be use. However, the tax liability can be
determined by multiplying the tax rate with the taxable amount of fringe benefits. As per the
tax rates, for the assessment year 2014/15, 47% tax rates is applicable on FBT (Fringe benefit
taxes. n.d.).
In the given case, employee were also entitled to use car facilities as a fringe benefit, and
according to the tax ruling, car purchased on or after 10th May 2006, asset will be charged @
25% depreciation rate.
Particulars Amount
Low interest loan
2450
Payment of private telephone account
1940
Use of Volkswagen car (Purchased jan 2009)
3380
Use of Holden Car (Purchased March 2011)
9415
Payment of private school fees
10825
Total fringe benefits received
28010
Less: Depreciation @ 25%
3199
Net amount
24811
Type 1 (Higher gross-up rate for 2014/15)
47.00%
Gross up taxable fringe benefits [28010/(1-47%)]
46814
Computation of tax payable for the year 2014/15
Taxable fringe benefits
46814
Tax rate @ 47%
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22003
Net fringe benefits received
24811
Activity 6
Answer:
Date Particulars Debit ($) Credit ($) Balance ($)
Balance forward 20000 20000
21/07/14
Payment of final PAYG
installment 7000 13000
29/09/14 Receipt of refund 5200 18200
28/10/14
Payment of 1st PAYG
installment 15000 3200
28/02/15
Payment of 2nd PAYG
installment 20000 -16800
28/04/15
Payment of 3rd PAYG
installment 10000 -26800
30/09/14 Frankable distribution 15000 -11800
31/03/15 Frankable distribution 40000 28200
Based on the franking account tax return instructions each corporate tax entity is
required to franking account. According to Australian tax office, the entity pays and receives
refunds in franking account (Franking account. n.d.). In the above computation, frankable
distribution has been debited from the account of BCD Pty ltd for $15000. In the end the
computation shows credit balance of $28,200
Activity 7
Answer:
Particulars Income Expenses Balance
Gross Profit 1501800
Add: Other income
Dividends (11000 – 7700) 3300
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Gain on sales of shares 5000
1510100
Expenses
Depreciation 34000
Fringe benefits tax 36000
Payroll tax 37900
Superannuation (78000-30000) 48000
PAYG installment paid 92000
Other deductible expenses (950360 – 28000) 922360
1170260
Taxable amount 339840
Net Tax payable @30% 101952
Activity 8
Answer:
Formula: Base value*days held/total days *200%/estimated life
Depreciation on computer and office equipment:
$4,300*365/365*200%/5 years= $1,720
Printer (Purchased on 1st January 2014): $5,670*181/365*200%/5 years = $1,125
Depreciation on Vehicle:
31,000*31/365*200%/8 years = $658
Audi (On 1st Oct 2014): $52,000*273/365*200%/8 years = $9,723
Total depreciation for the year 2014/15: $1,720 + $1,125 + $658 + $9,723
= $13,226
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REFERENCES
Books and Journals
Barkoczy, S., 2016. Foundations of Taxation Law 2016. OUP Catalogue.
Woellner, R. and et.al., 2016. Australian Taxation Law 2016. OUP Catalogue.
Online
Franking account. n.d. [Online]. Available through:
https://www.ato.gov.au/Business/Imputation/Paying-dividends-and-other-distributions/
Franking-account/. [Accessed on 15th June 2017].
Fringe benefit taxes. n.d. [Online]. Available through: < https://www.ato.gov.au/general/fringe-
benefits-tax-(fbt)/how-to-calculate-your-fbt/>. [Accessed on 15th June 2017].
Tax on Self Managed superannuation fund. n.d. [Online]. Available through: <
https://www.ato.gov.au/Super/Self-managed-super-funds/Investing/Tax-on-income/>.
[Accessed on 15th June 2017].
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