Case Study of FinForensics Analyses
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Added on 2019-09-26
Case Study of FinForensics Analyses
Added on 2019-09-26
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INDIVIDUAL ASSIGNMENT 2Description: Case Study requiring preparation of workpapers, calculation of taxable income and income tax payable, preparation of an individual tax return, and a letter of advice.Weighting: 35%Course Content: Focus on Topics 5-10, with knowledge of previous topics expected.Due: Week 11Remember: The purpose of an assignment is for you to demonstrate your knowledge and understanding of the topic. Make sure your answers are comprehensive enough to achieve this.NOTE: THIS IS AN INDIVIDUAL ASSIGNMENT.YOU SHOULD WRITE ALL WORK SUBMITTED YOURSELF AND ITSHOULD BE BASED ON YOUR OWN RESEARCH. EVIDENCE OFCOPYING FROM OTHER STUDENTS WILL BE TAKEN SERIOUSLYAND REPORTED.1
ASSIGNMENT INSTRUCTIONSEMPLOYMENT:Your client (use your own name as the client name) is the sole director of FinForensics Pty Ltd. The business employs five staff members, including your client who holds the position of managing director. FinForensics analyses financial information and provides investment advice to registered clients.The payment summary from FinForensics Pty Ltd shows the following:ABN 84 111 122 223Gross Payments$130,000Tax Withheld$38,376FinForensics also paid $99 a month for your client’s mobile phone account and additional superannuation contributions of $10,000 under a salary sacrifice arrangement. This amount is in addition to superannuation guarantee requirements. The phone payments related to a fixed monthly contract in the employee’s name and payments were made directly to the phone company by the employer.Your client owns an Audi Q5. They purchased the car on 1 June 2016 for $85,000. The car travelled 38,500 kms during the year and your client has indicated that about 75% is work related but they have not kept a log book. Your client pays for all the running costs for the vehicle. During the year these costs included:Fuel & Oil$5,950Servicing$1,200Registration$ 760Insurance$1,800Tyres$2,400Excess on insurance claim. The insurance company paid for the balance of the cost of repairs.$ 500Car Washing$1,300DIVIDENDS & INVESTMENTS:FinForensics Pty Ltd is a large company with two (2) shareholders, your client and theirspouse. Your client owns 60% of the issued shares in the company. The shareholders were paid a lump sum of $140,000 in April. They explained that the company had beenvery successful over the last couple of years and had accumulated significant cash reserves. They described this payment as a fully franked dividend. The proceeds were used to reduce the line of credit that was taken out to purchase the home in which they live. Interest paid on the home loan for the year was $15,000.2
The client also has a portfolio of shares that were inherited from their father. The father passed away on July 15, 2016. On finalisation of the estate the following shares were transferred to your client and the client received notification that all the shares had been transferred on 1 December 2016.ShareDate Purchased by FatherNumber of Shares PurchasedPrice Paid per Share at time of purchaseMarket Value at Date of DeathBHP4 Jan 19852,500$5.00$20.37CBA12 Sept 19912,000$5.40$75.94COH4 Dec 19951,000$2.90$124.77FLT1 Dec 19951,000$0.95$32.29MYR7 Nov 200910,000$4.10$1.21TLS3 Nov 19972,000$3.30$5.75The following fully franked dividends were received by your client during the year:CBA$1,990.00 COH$1,300.00FLT$ 400.00TLS $ 155.00The taxpayer sold the BHP and MYR Shares on 5 January 2017 to raise the deposit for the property purchase discussed below. The BHP Shares sold for $25.63 each and the MYR Shares for $1.35 each. The brokerage fee was based on a percentage of the sale proceeds for each parcel of shares and amounted to $113 for the BHP Shares and $30 for the MYR Shares. These amounts include GST.RENTAL PROPERTY: 4/285 Pacific Parade, Bilinga, 4225The taxpayer owns a unit on the Gold Coast which is rented to their daughter. A contract was entered into to purchase the property on 12 January 2017 for $500,000 and settlement took place on 1 March 2017. The taxpayer’s daughter moved in immediately. She pays rent of $400 on Wednesday each week. The first payment was made on the day she moved in. (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 originally constructed in 2005. A quantity surveyor’s report commissioned at the time of purchase shows the construction cost of the unit was $140,000. The quantity surveyor also identified the following items included in the purchase for depreciation purposes:3
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