FNSACC601 Prepare and Administer Tax Documentation for Legal Entities Final Assessment

The article covers theory questions and practical activities related to FNSACC601 final assessment on tax documentation for legal entities. It includes topics such as tax legislation, managing conflicts of interest, supporting documentation, and practical activities. The practical activities include preparing statements, calculating net tax payable, and distribution schedules.

Assessment Instructions for the Candidate
Requirements:
 Access to a computer loaded with Microsoft Word and Excel
 Access to an email system
 Calculator
Assessment Conditions:
 Your assessment can be completed in the program of your choice such as
Microsoft Word or Excel.
 It is recommended that on completion of this unit, participants should be able to
produce accurate work with not more than three re-submissions.
On completion
 Upload your assessment document to the online platform.
 Remember to name the document to include the following: Unit name and number -
assessment name and number - your name.
Assessment Outcomes
There are only two possible results of any assessment:
 Competent
 Not yet competent
Competent
An assessment of ‘Competent’ recognises that you have clearly demonstrated to your
assessor that you have current skills and knowledge as outlined in the units of competency
for which application was made.
Not Yet Competent
If an assessment of ‘Not Yet Competent’ is made, the assessor will give you specific feedback
as to the reasons for the result. This will also provide information about gaps found in the
assessment of competency. You may also discuss options to address the gaps in competency
with your assessor.
FNSACC601 - Prepare and Administer Tax
Documentation for Legal Entities
Final Assessment

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PART A – Theory Questions
(a) Explain how the following have a role in interpreting and applying tax legislation in
Australia.
Ensure you include both a description and the role they have in assisting to interpret the
legislation.
Public and private rulings and determination
Court and tribunal decisions
(b) Describe the three (3) methods specified by the TPB, for tax agents to manage conflicts
of interest
The public and private ruling has a crucial role in interpreting and applying tax
legislation. The public ruling is being defined as the binding interpretations relating to tax law
and this assist in interpretation of statement and guidelines. On the other side, the private
ruling is the one which only applies to the certain taxpayers only but after the application is
being provided by taxpayer for ruling. Both the public and private ruling is assistive in
interpreting the legislation as both these ruling involves the titles being used in the tax law.
For instance, TR in tax law interprets taxation ruling, LCR is law companion ruling, GSTR is GST
ruling and similar kind of rulings. Along with this the private ruling assist in interpreting the
fact that how a tax law is applied in respect to some specific scheme.
Court and tribunal are the regulatory bodies which provide justice and their final
judgment. This is essential for the reason that when any case is being handled by the case
then all the decision will be made by the related court and tribunal. Thus, it is very essential
for the court and tribunal to decide for the case to be solved in proper and justified manner.
The reason pertaining to the fact is that court and tribunal knows what needs to be done and
how the case will be solved. Thus, it plays an important role within the analysis and solving the
case of the people.
 The first measure is to avoid that is the agent can try to avoid the situation and
conflict. This is the situation where the solution to the conflict of interest is not
controllable.
 Along with this another method specified by the TPB for the management of conflict
 Moreover, in addition to this disclosing is another way in which conflict can be
managed in proper and effective manner. This is particularly because when the
sufficient information is being provided then there will not be any situation of meeting
conflict.

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(c) Indicate the supporting documentation the ATO might ask to be provided, to verify the
amounts included in the tax return for each of the following:
Assessable income
The support document which is necessary for the person to provide for the verification of
assessable income involves salary or wage slip including the employer name and address,
contact number and copies of original payment summary. In addition to this, it will also be
required for the person to present the original bank statement and original documents.
Deductions
For the deduction as well there are different support documents which need to be analyzed
and evaluated. This involves work related car expense which includes all the details of the
kilometer per car worked, per year income, copy of purchase or lease document for the
vehicles, car registration certificate and other related documents. Along with this, in case
there is any kind of travel expenses being undertaken by the person then its documents will
be required for the effective management of the work.
To establish a valid distribution has been made by a Family Trust, in particular:
 The recipient is a beneficiary
 Where and when the distribution decided/declared
 When and how the distribution was settled (i.e. was it paid or otherwise
accounted for).
In case when recipient is beneficiary then in that case the net income of the trust will
be taxed depending on the fact that whether beneficiary is entitled to the income of trust or
not. In case the trust is having the derived capital gain or franked distribution then in that case
trustee has streamed the beneficiary
When the distribution is decided then the beneficiary will get the declared amount in
the intended manner.
Along with this the distribution or the settlement will take place in the intended
manner. This is necessary because of the reason that when the trustee has failed to provide
the final accounting then a petition can be found in order compels the trust to provide the
share.
To establish a complying SMSF has accounted for and correctly included all
contributions
(Note: it would not be less than a Tax Agent would require to prepare and lodge the
return)
This is also very essential for the person to comply with SMSF that is self- managed
super fund. This is particularly because of the reason that SMSF is the Australian

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superannuation fund during the income year and not have been issued the SMSF with the
notice of non- compliance. There are various documents which need to be presented at the
time of taxation. All the document need to be managed and listed in proper manner as this
will outline all the details of the person in proper and effective manner.

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(d) Identify whether the following are considered fringe benefits, giving reasons for
your answer.
West Point Motors Pty Ltd is a resident company that owns and operates a car
dealership. During the year it provided the following benefits:
Mark, a salesperson, receives the use of a car
In case, Mark the salesperson is receiving the use of car then this will be included
within the fringe benefits. The reason pertaining to the fact is that when the person is using
the car not for the personal use then only they will receive the use of car and will be included
in fringe benefit.
Dianne, Mark’s wife who does not work at the Dealership, receives the use of a car
This will not be included in the fringe benefit as Dianne is wife of Mark and she is not
an employee in Dealership. Hence, as a result of this she is not entitled to any of the fringe
benefits.
Geoff, a Director, is given use of a car instead of receiving a Director’s Fee
In the case of Geoff, the director of the company is being given the use of car in place
of receiving the director’s fee will not be included in the fringe benefits. The reason underlying
this fact is that when the director is not being provided with the fees which are against the
work being done by them. Rather, fringe benefits are the one which are provided other than
the basic pay or the fees.
Anne the full time bookkeeper, who works from home 1 day per week and in the
office for the remaining 4 days, is given a mobile phone and computer
In case the mobile phone and computer is being provided to Anne then this will be a
non- taxable fringe benefit. The reason underlying this fact is that when the employee is being
provided with cell phone and laptop for the official use then this will be non- taxable fringe
benefits.

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PART B – Practical Activities
You are currently employed as a Tax Agent for a local Accounting Firm (Tax Agent number
12345678). Your clients include individuals (salary & wage earners and sole traders) as
well as companies, trusts and partnerships.
The policies and procedures of your firm require you to use the Microsoft Excel templates
provided to complete your calculations. The ATO website should be used to verify current
tax legislation and to seek advice and guidance.
All client communications should be via email. Client details required to complete the
Individual Tax Return are recorded on a new client details form.
QUESTION 1
Hot Pink Batts Pty Ltd manufactures pink batts. The company wishes to use all available
small business concessions to minimise taxable income. Hot Pink Batts Pty Ltd has prepared
the following Profit & Loss Statement for the 2019 financial year:
Gross Sales
$ $
2,400,000
Less Cost of Goods Sold
Opening Stock 33,000
Purchases and Manufacturing Costs 1,250,000
1,283,000
Closing Stock - 300,000 983,000
Gross Profit 1,417,000
Add Other Income
Diesel Fuel Rebate (Government Subsidy) 3,500
Dividend from American Company – Note 1 8,000
Interest Income 2,000 13,500
Expenses
1,430,500
Gross Wages 680,000
Superannuation 62,000
Provisions for Customer Warranty Claims – Note 2 30,000
Truck Expenses 31,000
Accounting Depreciation – Note 3 60,000
Share of Loss from Partnership with Al Insulation Pty Ltd 13,000
Tax Related Expenditure – Note 4 24,000
Other Deductible Expenses 400,000 1,300,000
NET PROFIT BEFORE INCOME TAX 130,500

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NOTE 1
Hot Pink Batts Pty Ltd owns shares in an American company. The $8,000 dividend received
from this investment is net of $4,000 tax withheld by USA government.
NOTE 2
The amount of warranty expenses paid to customers during the 2019 income year was
$11,000.
NOTE 3
Decline in Value for tax purposes needs to be determined using the following information:
General SBE Pool Balance at 30 June 2018 $ 90,000
Purchase of New Machine on 1 December 2018 $ 98,000
Purchase of New Computer on 1 February 2019 $ 900
NOTE 4
Tax related expenditure is comprised of the following:
Payroll Tax $ 7,000
Tax Agent Fees $ 6,000
ATO Penalties $ 4,000
ATO General Interest Charge $ 7,000
NOTE 5
$50,000 of PAYG tax instalments were paid for the 2018/19 income year.
REQUIRED:
Using the templates provided:
(a) Prepare a statement reconciling net profit with taxable income
(b) Calculate the net tax payable by the company for the year, clearly showing all
your workings
(c) Who would you consult if you required advice and guidance to determine
any income tax related issues?

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QUESTION 2
Zany Funds Management Pty Ltd is an investment company. There is a carried forward tax
loss of $80,000 from the 2018 financial year. The company has prepared the following
Profit & Loss Statement for the 2019 financial year:
Income
Distribution from Unit Trusts – Note 1 $ 1,000
Bank Interest 3,500
Unfranked Dividends 6,000
Fully Franked Dividends – Note 1
Expenses
Accounting fees
7,000
7,000
17,500
Capital Loss on sale of shares 10,000
Ongoing financial advice 19,000
Other deductible expenses 40,000 76,000
NET LOSS (58,500)
NOTE 1
The income distribution from the unit trust included $300 of franking credits.
Fully Franked Dividends represents the amount received from non SBE entities.
NOTE 2
One PAYG tax instalment was paid on 28 October 2018 of $11,000 (this related to the
2018/19 tax year)
REQUIRED:
Using the template provided:
(a) Prepare a statement reconciling net profit with taxable income
(b) Calculate net tax payable/refundable
(c) Calculate ALL losses carried forward by the company

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QUESTION 3
The Rosy Discretionary Trust has a property investment portfolio. During the 2019 income
year the Trustee recorded a net trust income of $168,000. All of the income is derived from
Australian property investments. The trustee resolved to distribute the net income of the
trust as follows:
Rosy (aged 28) 30%
Indiana (Rosy's sister aged 16) 10%
Sarah (Rosy's sister aged 16, working full time at Coles since January) 10%
RPM Pty Ltd (Australian resident company - 100% owned by Rosy) 10%
The Robe Soccer Club (non-profit, tax exempt community organisation) 5%
Ben (aged 29) - Rosy's Friend who is a bankrupt 10%
There was one discretionary distribution made:
 $10,000 was paid towards Indiana's school fees.
The balance was undistributed.
REQUIRED:
Using the templates provided
a) Complete a Distribution schedule
b) Calculate the tax payable by the trustee

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QUESTION 4
Wharf and Alexander are father and son. Together they operate a business partnership
providing security services. Wharf is aged 45. His son, Alexander aged 20, works full-time in
the partnership.
During the 2018 financial year the partnership began business and made a loss of $10,000.
This loss was distributed equally between both partners.
The partnership agreement states that all profits and losses will be shared equally after
allowing for wages to partners and interest on capital.
During the 2018/19 income year the partnership had the following transactions:
RECEIPTS
Gross Fees $ 610,000
Business Loan from Wharf 50,000
Gross Bank Interest 1,000
PAYMENTS
Interest on Overdraft 7,000
Interest on Loan from Wharf 5,000
Lease of all Security Systems Equipment owned by Wharf – Note 1 50,000
Interest on Capital - Wharf 3,000
Wages to Employees 250,000
Wages to Wharf 40,000
Wages to Alexander 45,000
Superannuation paid for Employees 10,000
Other overheads (deductible) 168,000
NOTE 1
Wharf owns all the security equipment and leases all the equipment to the partnership.
Wharf is entitled to a deduction of $34,000 for decline in value of the equipment.
REQUIRED:
Using the templates provided
a) Calculate Net Partnership Income
b) Prepare a Partnership Distribution Statement
c) Calculate Wharf’s Taxable Income
d) Calculate Alexander's Taxable Income

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QUESTION 5
Your supervisor has provided you with the following information she has prepared for a
client. The partnership consists of three partners; Matthew, Helen and Lynn James, who
operate a boat hire business (Industry code 66390).
Partnership Net Income
Assessable Income
$ $
Boat Hire Fees 491,000
Less: Deductions
Boat Operating Expenses 54,000
Salaries - employees 36,000
Superannuation - employees 3,000
Rent 41,000
Interest on Loan 1,000
Other Expenses 55,000
Lease of Boats 92,000 282,000
Partnership Net Income 209,000
Assets
Plant and Equipment 20,000
Liabilities
Bank Loan 15,000
DISTRIBUTION - PNI Matthew Lynn Helen TOTAL
Partners Salaries 60,000 18,000 78,000
Interest on Capital 14,000 11,000 6,100 31,100
Interest on Drawings (2,400) (1,800) (1,200) (5,400)
Share of Adj. Net Inc. 52,650 35,100 17,550 105,300
124,250 62,300 22,450 209,000
REQUIRED:
a) Complete the Partnership tax return for 2019
b) Attach a copy of the Partnership tax return to an email to Helen (the nominated
contact for the partnership) requesting she sign and return the form for
lodgment with the ATO

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QUESTION 6
Browns Pty Ltd, an investment company, paid the following dividends to shareholders:
 $35,000 fully franked on 15 July 2018
 $35,000 fully franked on 15 January 2019
 $21,000 unfranked paid on 15 July 2019 (declared on 20 June 2019)
Franking account balance at 30 June 2018 was $8,500 credit
REQUIRED:
Using the template provided:
(a) Prepare a franking account
(b) How much (if any) franking deficit tax will be payable by Browns?
(c) How much of the franking deficit tax can be used to offset future tax liabilities
(show calculation)?
DOCUMENTS TO BE UPLOADED
 Part A – Final Assessment document
 Part B Excel spreadsheet - Qu 1, 2, 3, 4, 6
 Part B Qu 5 – Partnership Return (PDF document)
 Part B Qu 5 – Email to Lyn (screen shot or PDF)