Tax Advice for J & D Partners, Joanne Tran, and Haufmann Pty Ltd

Name : Dewi Kartika
Student ID : 144016
Subject : CLWM4000
Introduction
Below are the three clients who required advice based on their cases.
 J & D Partners seeking advice on Partnership Net Income and each partner's taxable income
for 2022.
 Joanne Tran, who needed advice on the tax implications and taxable payable if the trust net
income were distributed to James and Lisa at 50% each
 Haufmann Pty Ltd requires advice on preparing its franking account for the 2021/22 tax year,
its net tax payable (refundable), and the tax consequences arising from its franking account
balance on 30 June 2022.
Case 1 - Partnership net income & distribution
Step 1 Partnership Net
Income
Assessable income
(ordinary income plus
statutory income)
$ $
Gross Income – Sales s.6-5 500,000
Less Allowable
Deductions
Cost of sales s.8-1;
s.70-35
200,000
Lease of the car (90%x$9,000) s.8-1 8,100
Other operating expenses s.8-1 60,000 268,100
Partnership Net Income (s.90) 231,900
Step 2 Adjustment to Net
Partnership Income
before the Distribution
Salary of Dustin 35,000
Interest on Capital Constitution – Jack 7,500
Interest on Capital Constitution – Dustin 7,500 50,000
Amount to be distributed 181,900

Step 3 Amount to be distributed to Partners Jack Dustin
50% ($) 50% ($)
Amount to be distributed (50% x $181,900) 90,950 90,950
Add Adjustments
Partner's salary 35,000
Interest on capital 7,500 7,500
Partner's Taxable Distribution of Net partnership income 98,450 133,450
Capital Gain on sales of Land
Capital Gain ($200,000-$80,000) $120,000
CGT Discount applies (50%) $60,000
Net Capital Gain to be distributed $60,000
Jack Dustin
Partnership Distribution s.90 ITAA36 $ 98,450 $ 133,450
Net Capital Gain ($60,000x50%) s102-5 ITAA97 $ 30,000 $ 30,000
Less Allowable Deductions
Partner's Personal Super Contributions -$ 4,000
Partner's Taxable Income $ 124,450 $ 163,450
Taxable Income 2022 for Jack and Dustin
According to Section 6-5(1) TAA97, ordinary concepts of income are not defined but are considered
what would normally be considered income by the average person, or what would fall within the
concept of common law income.
Under section 8-1 ITAA97, If the expense is incurred in the course of conducting business to gain or
produce assessable income, the deduction is allowed such as Cost of Sales, Lease of the car, and
Other operating expenses.
The Partnership Net Income (PNI) is calculated under section 90 of the ITAA 1936 as assessable
income, excluding capital gains, less all deductions except superannuation contributions and losses
realized previously.
Capital gains are not recognized by partnerships. Hence, each partner must declare their net capital
gains on their individual tax returns. When a capital gain is made by an individual, its cost base does
not bear indexation, and owned for at least 12 months, a CGT discount may be applied. The Land
was purchased 6 years ago, therefore, a CGT discount can be applied.

Case 2 - Trust income and distributions
Due to the fact that trusts are not separate legal entities, they do not have to pay taxes. The
beneficiary distribution must be documented on a tax return. There is no taxable income for the
trust; it calculates a net income or loss on the same basis as a resident taxpayer.
To calculate the Franking dividend, 30% was assumed to be the company tax rate for Joanne Tran
Family Trust.
Beneficiary Presentl
y
Entitled
Distributio
n %
Legal
Disabilit
y
ITAA
Sectio
n
Amount
Presently
Entitled
Tax Paid
by Tax Rate
James
18 years
Yes
(s.101) 50% No s97 (1) $ 31,571.43
Beneficiar
y
Marginal Rates of tax for
an Australian resident
individual
Lisa
16 years
Yes
(s.101) 50% Yes s98 (1) $ 31,571.43 Trustee
Tax will be paid by the
trustee at the rate of
45% under Division 6AA.
$ 63,142.86
According to Section 101, If the trustee distributes the trust to the beneficiary, the beneficiary is
considered to be presently entitled to the trust.
As stated in section 97(1), a beneficiary must be presently entitled to receive benefits and not legally
disabled. Beneficiaries are required to include this income in their assessable incomes.
In accordance with section 98(1), the beneficiary is presently entitled to and under a legal disability.
The beneficiary gets a tax credit from the trustee when the trustee pays tax on the beneficiary's
share of income. Taylor v FCT demonstrates the existence of a legal disability when the beneficiary is
unable to give the legal discharge for the benefit received. A person's age, insanity or bankruptcy
may be contributing factors. The legal age in Australia is 18 years old, James is 18 years old, so he is
not legally disabled. However, Lisa is 16 years old, and because of this she is under legal disability.
Net rental income $ 57,000.00
Fully Franked dividend $ 4,300.00
Franking credit ($4,300 x 30/70) $ 1,842.86
Net Trust Income s.95 ITAA36 $ 63,142.86