Financial Processes, Accounting and Taxation in Australia

This assignment solution delves into key aspects of finance and accounting within the Australian context. It begins by addressing probity and accountability in public procurement, emphasizing factors like officer expertise, conflict of interest management, and internal controls. The solution then outlines fundamental accounting principles, including monetary unit, economic entity, time period, and cost principles, as well as revenue recognition. The assignment further explores Australian laws impacting businesses, focusing on competition, consumer, product liability, environmental, and privacy laws. It provides a detailed explanation of Goods and Services Tax (GST) in Australia, including registration, tax invoices, and tax rates for different entities. The second part of the assignment analyzes a company's financial performance, examining cash inflows, financial policies, revenue-generating resources, and compliance with Australian taxation requirements, including capital gains tax and corporate taxes. It concludes with an assessment of the company's financial processes and suggests the use of a Management Information System (MIS) for improved decision-making.

Task 1:
Answer to question 1 a:
It is of utmost importance that any public entity has the ability to demonstrate its commitment
towards conducting its various procurement activities with high quality of probity and
accountability. Some of the key factors that ensure that high standard of probity and
accountability are being maintained by a public entity are as follows:
i) The officer entrusted with the relevant duties possesses the requisite knowledge,
skill and experience.
ii) It is necessary that the concept of conflict of interest is well understood within the
entity. In addition to this it must endeavour to ensure that standards and
procedures are kept in place to mitigate these potential issues.
iii) There is a certain kind of behaviour that is expected from the personnel of the
entity. Hence there must be method to ensure that they are well articulated and
enforced.
iv) Sufficient amount of checks and internal control must be integrated within the
entire process of procurement.
v) The communication that is being undertaken with the suppliers is continuous in
nature. At the same time it must be ensured that the processes must not prove to
be an advantage or disadvantage to specific suppliers.
vi) The security of the confidential information in respect FO the suppliers and the
process of evaluation must be ensured.
There are many reasons for ensuring probity by a public entity. Some of the most significant
ones are as follows:

I) Proper identification and mitigation of the concept of conflict of interest is
undertaken. Probity ensures that any sort of conflict in interest is recognised and
dealt with at the earliest and with utmost effectiveness and efficiency.
II) There is a significant presence of intellectual property in case of procurement
processes. It is therefore necessary to ensure the security of such information that
is gathered by the entity over the period of time while conducting these processes
and evaluations. Probity ensures that the security related to this information is
handled carefully.
III) There are certain published criteria that are needed to be adhered to in such
processes. Probity ensures that the objectivity and consistency in these processes
are maintained so as the adherence to these is not hampered.
Answer to question 1 b:
There are certain principles that are needed to be followed by every entity engaged in
maintaining accounts and there is a proper financial system present within its organisational
structure. Some of the basic globally recognised principles are laid down by GAAP also
known as generally accepted accounting principles. Some of the most significant accounting
principles are listed below:
i) Monetary unit assumption:
The transactions should be such that they are measured in monetary value. Only
such transactions should be recorded in monetary terms.
ii) Economic entity assumption:
This principle ensures that the owner’s transactions are kept separate from the
entity’s transactions.

iii) Time period assumption:
Under this principle the entire life of the entity is divided into short intervals of
time like annually or monthly.
iv) Full disclosure principle:
As per this principle all the information that might affect the decision making
process of the stakeholders must be included in the financial statements.
v) Cost principle:
This principles states that the amount to be shown in the financial statements
should be historical cost amounts.
vi) going concerns principle:
This principle assumes that the company is not going to liquidate in the
foreseeable future.
vii) Matching principle:
This principle states that accrual basis should be used. In other words the revenue
should be matched with expenses.
viii) Revenue recognition principle:
This principle state that the entity will record the revenue once the product is sold
or service is provided irrespective of whenever the payment is received for it.
ix) Materiality:
Under this principle some other accounting principle can be violated in case the
amount involved is very insignificant in nature. For e.g. instead of writing off a
capital expenditure over the period of its life (Matching concept), the accountant
may choose to write it off at once if the amount is very insignificant.
x) conservatism:

Under this principle it is said that in case of availability of more than one way of
treating a transaction, such method should be used that will result in reporting of
less net income for the relevant period.
Answer to question 1 c:
Some of the most significant laws affecting the entities operating in Australia are as follows:
a) Competition laws:
These laws ensure that fair trade practices for both the traders and the consumers are
being carried out. The same is monitored under Australian Competition and
Consumer Commission.
b) Consumer laws:
The same is monitored under Australian Consumer Law. Some of the areas covered
under this act include consumer rights; unfair terms of contract, safety laws relating to
products, penalties and fines etc.
c) Product Liability Regulation:
These are enforced under Australian Competition and Consumer Commission. Under
these provisions the marketing of harmful substances are not allowed within the
country.
d) Environmental legislation:
All the levels of government i.e. Australian government, the state and the local
government jointly monitor the concept of environmental protection.
e) Privacy Laws:
These standards are being currently enforced by the Office of Australian Information
Commissioner (OAIC). These standards regulate the various ways in which personal

information of the individuals can be collected, accessed and stored by the business
entities
Entities.
Answer to Question 1 d.
In Australia, whatever the goods or the services that are either purchased or sold come under
the umbrella of the Goods and Service tax (herein after shall be mentioned as GST for the
purpose of brevity). This GST in Australia has been broadly marked at 10 per cent. As per the
rules of the government, any organization, whether commercial or non-noncommercial, first
needs to register itself as per the specific requirements of GST. Thereafter, the organization
shall be entitled to implement GST in their invoices while invoicing to the purchasers or the
customers based on what goods or services are bought by the consumers from the
organization or company. The government of Australia would then allow these companies or
industries to take credit of the GST they have paid against the goods or the services provide
by them as part of their business transaction. Once the credit for the GST on the goods and
the services delivered by them has been taken, the net GST that needs to be paid will have to
be cleared on or before the last cut-off date to the Australian Treasury. This is important since
failure to deposit will result in penalty or initiation of the penal process.
Given below are the detail of the requirements that are mandatory as per the GST law of the
country as laid down in the instructions of the ATO (Australian Taxation Office):
 The assesse is required to find out whether the nature of the sale or business
transaction is taxable or not.
 It is mandatory for all goods and service providers to issue the tax invoice for all
taxable sale and business transaction.
 Businesses / Companies / Industries need to maintain a separate account for GST
purpose.
 The activity statement must be updated regularly and it has to be lodged as well.

For the income year 2016-17, the following rates would be chargeable in the case of company
tax:
And, in the case of trustees, corporate limited partnerships, strata title body corporates, trust
of public trade and corporate units:
 The rate of tax for the small business entities is 28.50 per cent. Otherwise, the tax
rate would be 30 per cent.
 In the case of life insurance companies, the applicable rate of tax on the taxable
income for the ordinary class public would be 30 per cent.
 In the case of the super class, the applicable rate of tax on the taxable income
would be 15 per cent.
 For incomes that are as per no TEN contribution, there would be an additional
applicable tax and the rate would be 34%.
 Other than the life insurance companies, those that offer RSA services would be
required to pay tax as per the rate of 15 per cent on the RSA portion of the
income.
 For no TEN contribution incomes, the applicable tax would be 34 per cent.
 In the case of small credit unions with small businesses especially those that are
below USD 50,000 the tax will be charged at the rate of 28.50 per cent.
 For the rest of the business entities, the rate of applicable tax will be 30%.
 In the case of small credit unions having business turnover above USD 50,000 and
up to USD 1,49,999 the tax will be charged at the rate of 42.75 per cent.
 For the rest of the entities, the tax rate would be 45 per cent.
 For large size credit unions, those having turn over above USD 1,50,000 the
applicable rate of tax will be 28.50 per cent.
 As for the rest, tax will be charged at the rate of 30 per cent.
Task 2
Answer to 2 a:
The primary source of cash inflow of the company comprises of Casual Attendance,
Memberships and equipment and clothing sales. It can be easily ascertained that all the three
sources of income have generated profits for the company. Each of the sources has performed

better than the budgeted income of the company for the relevant period. The highest source of
income for the relevant period comes from the Memberships. The reason for the same is that
the entity has been providing consistent services thus increasing the number and amount
thereof from the memberships.
Answer to 2 b:
Some of the key elements of the financial policy of the entity are as follows:
a) Development of procedures that will ensure that records of all financial transactions
are being kept.
b) Effective utilisation of a budget to ensure that financial objectives of the entity are
being made.
c) Procedures to ensure that income and expenditure of the company are duly audited
every year.
From the prepared budget it is clear that the company has kept record of all the transactions
that have been undertaken by it during the relevant period. In addition to this it has made
effective utilisation of the budget too. Hence it can be said that all the objectives and
requisites of the financial policy of the company have been adhered to.
Answer to 2 c:
Some of the key resources that will be responsible for generating revenue in the recent
coming years are as follows:
a) New fitness facilities will be introduced. Several places have been taken on lease thus
increasing the number of centres and the customer base too.
b) Introduction of more resistance equipment. For the purpose of providing better
services to the customer the company has decided to include more equipment.

c) The marketing strategy of the company is focussing on providing more customised
services to its customers than its big competitors.
Answer to 2 d:
Some of the requirements of the Australian taxation office are as follows:
a) Capital gain tax:
This tax is imposed in case of capital gain made in the process of disposal of any
asset.
b) Corporate taxes:
This is the tax that the corporates and companies are needed to pay on their income.
c) Goods and services tax:
It is a tax that is levied by the federal government on supply of most of the goods and
services by the business entities.
The company diligently follows all the requirements under the provision of tax.
Answer to 2 e:
Based on the information gathered it can be said that the overall financial processes of the
company are pretty strong. The reason for this is that they have effectively utilised the
benefits of the budget and ensured that they perform better than their set target performance.
In addition to this the company can make use of Management Information System. The
reason for the same is that it will enable it to gather relevant, accurate and timely information.
Based on this information the management of the company can make sure that it takes the
most appropriate decision.
Answer to 2 f:

The software that is being utilised is MYOB. It is the most appropriate tool for the purpose.
The reason for the same is as follows:
a) It is fully capable of handling multiple bank accounts.
b) It is proficient in handling foreign currency too.
c) It is capable of tracking records of each of the sub business groups or departments
operating within the entity.
d) The system is fully compatible with other computer systems that are available on the
internet.
Task 3
Answer to 3 b:
Some of the key financial indicators of the company are as follows:
i) Increasing the sales of the company every year by 10%.
ii) The market share of the company has to be increased on quarterly basis.
iii) To ensure that the image of the company is that of the long term wellness program
provider.
As per the budget that has been provided by the company for the relevant period along with
the financial policy and business plan, it is clear that the company has been able to meet all
these targets quite effectively and efficiently.