FNSACC601 & FNSACC603: Administering Tax for Legal Entities Task

This assignment solution for FNSACC601 and FNSACC603, part of the Diploma of Accounting, focuses on taxation for legal entities, plans, and obligations. It includes multiple activities based on "Advanced Income Tax Law" and covers topics such as calculating tax for prescribed persons, inter vivos trusts, allocation of partnership net income, and reconciliation of taxable income. The assignment requires students to determine excepted and eligible assessable income, calculate net tax payable, identify beneficiaries' entitlements in trusts, and reconcile accounting profit with taxable income, demonstrating competency in preparing and administering tax documentation and implementing tax plans.

FNS50215 Diploma of Accounting
Module 4.2 Assignment
Instructions:
 This assignment contains multiple Assessment Activities
 Please complete the Declaration of Authenticity at the bottom of this page
 Save this assignment (e.g. on your desktop)
 To complete the assignment, read the instructions for each question carefully.
 You may be required to refer to your learning materials or other sources to complete
this assessment.
 You are required to type all your responses in the spaces provided
 Once you have completed all parts of the assignment and saved it, login to the
Monarch Institute LMS to submit your assignment for grading
 To submit your assignment click on the file ”Submit Diploma of Accounting Module 4.2
Assignment” in the Module 4.2 section of your course and upload your assignment file.
 Please be sure to click “Continue” after clicking “submit”. This ensures your assessor receives
notification of your submission – very important!
Declaration of Understanding and Authenticity *
I have read and understood the assessment instructions provided to me in the Learning Management System.
I certify that the attached material is my original work. No other person’s work has been used without due
acknowledgement. I understand that the work submitted may be reproduced and/or communicated for the purpose
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Diploma of Accounting - Module 4.2 Assignment (2017, 14Ed) 1704 Page 1 of 34

Units Covered: FNSACC601 & FNSACC603
Important assessment information
Aims of this assessment
This assessment focuses on taxation for legal entities, plans and obligations.
Marking and feedback
This assignment contains multiple Assessment Activities each containing specific instructions.
You are required to attempt all questions.
This particular assessment forms part of your overall assessment for the following unit(s) of
competency:
 FNSACC601 Prepare and administer tax documentation for legal entities
 FNSACC603 Implement tax plans and evaluate tax obligations
Grading for this assessment will be deemed “competent” or “not-yet-competent” in line with
specified educational standards under the Australian Qualifications Framework.
What does “competent” mean?
These answers contain relevant and accurate information in response to the question/s with
limited serious errors in fact or application. If incorrect information is contained in an answer, it
must be fundamentally outweighed by the accurate information provided. This will be assessed
against a marking guide provided to assessors for their determination.
What does “not-yet-competent” mean?
This occurs when an assessment does not meet the marking guide standards provided to
assessors. These answers either do not address the question specifically, or are wrong from a
legislative perspective, or are incorrectly applied. Answers that omit to provide a response to any
significant issue (where multiple issues must be addressed in a question) may also be deemed
not-yet-competent. Answers that have faulty reasoning, a poor standard of expression or include
plagiarism may also be deemed not-yet-competent. Please note, additional information regarding
Monarch’s plagiarism policy is contained in the Student Information Guide which can be found
here: http://www.monarch.edu.au/student-info/
Diploma of Accounting - Module 4.2 Assignment (2017, 14Ed) 1704 Page 2 of 34

Units Covered: FNSACC601 & FNSACC603
What happens if you are deemed not-yet-competent?
In the event you do not achieve competency by your assessor on this assessment, you will be
given one more opportunity to re-submit the assessment after consultation with your Trainer/
Assessor. You will know your assessment is deemed ‘not-yet-competent’ if your grade book in the
Monarch LMS says “NYC” after you have received an email from your assessor advising your
assessment has been graded.
Important: It is your responsibility to ensure your assessment resubmission addresses all areas
deemed unsatisfactory by your assessor. Please note, if you are still unsuccessful in meeting
competency after resubmitting your assessment, you will be required to repeat those units.
In the event that you have concerns about the assessment decision then you can refer to our
Complaints & Appeals process also contained within the Student Information Guide.
Expectations from your assessor when answering different types of assessment questions:
Knowledge based questions:
A knowledge based question requires you to clearly identify and cover the key subject matter
areas raised in the question in full as part of the response.
Performance based questions:
A performance based question requires you to clearly demonstrate your ability to complete
certain tasks, that is, to perform these tasks.
Good luck
Finally, good luck with your learning and assessments and remember your trainers are here to
assist you 
Diploma of Accounting - Module 4.2 Assignment (2017, 14Ed) 1704 Page 3 of 34

Units Covered: FNSACC601 & FNSACC603
Assessment Activities
Short Answer and Worked Answer Questions
FNSACC601 Prepare and administer tax documentation for legal entities
FNSACC603 Implement tax plans and evaluate tax obligations
The following questions are based on the material in the textbook “Advanced Income Tax Law” by Peter Baker,
Geoff Cliff & Sonia Deaner, 14th Edition (January 2017)
Activity instructions to candidates
 This is an open book assessment activity.
 You may use a financial calculator or computer application to help calculate values
 You are required to read this assessment and answer all questions that follow.
 Please type your answers in the spaces provided.
 Please ensure you have read “Important assessment information” at the front of this assessment
 Estimated time for completion of this assessment activity: approximately 3 hours
Diploma of Accounting - Module 4.2 Assignment (2017, 14Ed) 1704 Page 4 of 34

Units Covered: FNSACC601 & FNSACC603
The following questions are based on the material in Chapter 1:
Q1.1.9.
(Comprehensive calculation for a prescribed person)
Ron Veldhuis is aged 16 and is currently studying full-time at high school whilst living with his parents.
During the 2016/17 tax year, Ron received the following amounts: $
Gross Wages from part-time job (PAYG tax withheld $800) 4,700
Gross Interest received on fund given by his parents (TFN withheld $4,900) 10,000
Income Distribution from Estate of Late Aunt 7,500
Income Distribution from Family Trust (tax paid by Trustee $1,500) 6,000
Unfranked Dividend from shares in QQQ Ltd (these were bought with funds from previous
Family Trust distributions) 1,200
Required:
(a) For the purposes of Div 6AA, how much excepted assessable income has Ron derived?
Excepted Income
Particulars Amount ($) Amount ($)
Gross Wages 4700
Income Distribution from Family Trust 6000
Income Distribution from Deceased Estate 7500
Total Excepted Income 18200
(b) For the purposes of Div 6AA, how much eligible assessable income has Ron derived?
Eligible Assessable Income
Particulars Amount ($) Amount ($)
Gross Interest received on Fund 10000
Unfranked Dividend from Shares 1200
Total Eligible Income 11200
(c) Calculate net tax payable by Ron for the 2016/17 tax year.
Eligible Assessable Income
Particulars Amount ($) Amount ($)
Gross Interest received on Fund 10000
Unfranked Dividend from Shares 1200
Total Eligible Income 11200
Tax on taxable Income (45%) 5040
Less: Low Income Tax Offset 445
Total Net Tax Payable 4595
Diploma of Accounting - Module 4.2 Assignment (2017, 14Ed) 1704 Page 5 of 34

Units Covered: FNSACC601 & FNSACC603
The following questions are based on the material in Chapter 2:
Q2.2.15
(Comprehensive, inter vivos trust)
The Alberts Family Trust, an inter vivos trust, had the following beneficiaries:
Candy (aged 45; entitled to 40% of trust income)
Dandy (aged 30; bankrupt; entitled to 35% of trust income)
Landy (aged 17; entitled to 20% of trust income)
The remainder of each year's income was to be retained or distributed at the Trustee's discretion.
During the 2016/17 tax year trust income was $195,000.
A discretionary amount of $7,000 was paid to Landy (this amount was in addition to Landy’s entitlement
under the Trust Deed).
The trust also had losses of $15,000 in the 2015/16 tax year. These were to be met out of the trust income.
Landy also received interest of $38,000 during the 2016/17 tax year from investments given to him by his
parents.
Landy is single and is not covered by private health insurance.
Required:
a. Complete the following table (covering all beneficiaries) nominating:
 Name of the BENEFICIARY
 Whether or not the beneficiary is PRESENTLY ENTITLED
 Whether or not the beneficiary is under a LEGAL DISABILITY
 WHO IS ASSESSED on each amount
 Which sections of the Act apply to make the income assessable
 The amount retained or distributed.
Beneficiary
Presently
entitled?
(Yes/No)
Legal
disability?
(Yes/No)
Who is
assessed? Section(s)
Applicable
Amount
$(Beneficiary
or Trustee)
Candy Yes No Beneficiary
Section 101
of the
ITAA 1936
78000
Dandy Yes NO Trustee
Landy Yes No Trustee
Subsection
95A (1) of
the ITAA
1936
Diploma of Accounting - Module 4.2 Assignment (2017, 14Ed) 1704 Page 6 of 34

Units Covered: FNSACC601 & FNSACC603
Balance 117000
Total 195000
b. Calculate tax payable by the trustee on behalf of Dandy, Landy and the balance of trust net income.
Tax payable by Trustee on behalf of Dandy:
Tax Payable by Trustee on Behalf of Dandy
Particulars Amount ($)
Assessable Income 0
Tax on Taxable Income 13728.25
Add: Medicare Levy 0
Total Tax Payable 13728.25
Tax payable by Trustee on behalf of Landy:
Tax Payable by Landy
Particulars Amount ($)
Assessable Income
Distribution of Trust Profits 39000
Discretionary Amount 7000
Receipt of Interest 38000
Total Assessable Income 84000
Tax on Taxable Income 18847
Add: Medicare Levy 1680
Less: Loss 3000
Total Tax Payable 17527
Tax payable by Trustee on balance of trust net income:
Tax Payable by Trustee on Net Income
Particulars Amount ($)
Assessable Income
Diploma of Accounting - Module 4.2 Assignment (2017, 14Ed) 1704 Page 7 of 34

Units Covered: FNSACC601 & FNSACC603
Balance Amount 117000
Tax on Taxable Income 30922
Add: Medicare Levy 2340
Total Tax Payable 33262
c. Calculate tax payable by Landy (only).
Tax Payable by Landy
Particulars Amount ($)
Assessable Income
Distribution of Trust Profits 39000
Discritionary Amount 7000
Receipt of Interest 38000
Total Assessable Income 84000
Tax on Taxable Income 18847
Add: Medicare Levy 1680
Less: Loss 3000
Total Tax Payable 17527
The following questions are based on the material in Chapter 3:
Q3.3.3
(Allocation of Partnership Net Income)
Sue, Prue, Lou and Emmet operate a transport company in the ratio 4:3:2:1.
Their assessable income for the 2016/17 tax year amounted to $780,000 while they had $300,000 of
deductions.
Their partnership agreement states that all profits and losses are to be shared in the ratio 4:3:2:1 after
adjusting for partner’s salaries, travel allowances and interest on capital.
The following data was extracted from their financial records:
Interest on Capital
Sue $ 12,000
Prue 15,000
Lou 5,000
Emmet 3,000
Partner’s Salaries
Sue 65,000
Prue 50,000
Emmet 20,000
Travel Allowances
Diploma of Accounting - Module 4.2 Assignment (2017, 14Ed) 1704 Page 8 of 34

Units Covered: FNSACC601 & FNSACC603
Sue 4,000
Emmet 6,000
Required:
Based on the above information, complete the table calculating each partner’s share of partnership net
income under the terms of the partnership agreement.
Sue Prue Lou Emmet Total $
Interest on capital 12000 15000 5000 3000 35000
Partners’ salaries 65000 50000 20000 135000
Travel allowances 4000 6000 10000
Share of Adjusted Net
Income 192000 144000 96000 48000 480000
Total $ 660000
Diploma of Accounting - Module 4.2 Assignment (2017, 14Ed) 1704 Page 9 of 34

Units Covered: FNSACC601 & FNSACC603
The following questions are based on the material in Chapter 4:
Q4.4.21
(Reconciliation of taxable income)
Trash Converters Limited, a small business entity, has prepared an income statement for 2016/17:
$ $
GROSS PROFIT 1,624,000
Add: OTHER INCOME
Unfranked Dividend 2,300
Fully Franked Dividends (company tax rate 30%) 7,700
Net Dividends from Spain - note 1 32,000
Gain on Sale of Shares - note 2 2,000 44,000
TOTAL OPERATING INCOME 1,668,000
EXPENSES
Depreciation - note 3 34,000
Fringe Benefits Tax 48,000
Payroll Tax 46,900
Superannuation - note 4 75,000
PAYG Instalments Paid - note 5 92,000
Other Deductible Expenditure 965,000 1,260,900
NET PROFIT 407,100
Note 1 The dividends from Spain have had $8,000 of tax withheld.
Note 2 Shares sold during the year were acquired in 1984 as an investment.
Note 3 Decline in value deduction is calculated as $28,000.
Note 4 Superannuation includes an amount of $30,000 paid to a director's spouse. This
$30,000 amount is deemed to be excessive.
Note 5 All of the PAYG tax instalments relate to the current year.
Required:
a. Complete the table reconciling net profit with taxable income for the 2016/17 tax year.
b. Calculate net tax payable by the company for the 2016/17 tax year. (For the purpose of this exercise,
assume a 27.5% small business entity company income tax rate, as per chapter 4.3 of your textbook).
Diploma of Accounting - Module 4.2 Assignment (2017, 14Ed) 1704 Page 10 of 34

Units Covered: FNSACC601 & FNSACC603
4 a. and 4 b.
Amount ($) Amount ($)
Net Profit per income statement $ 4,07,100
Add:
Franking Credits $ 5,390
Foreign Tax – Spain $ 32,000
Accounting Depreciation $ 34,000
Superannuation $ 45,000
PAYG instalments $ 92,000 $ 2,08,390
$ 6,15,490
Less:
Decline in Value $ 28,000
Accounting Gain on Shares $ 2,000 $ 30,000
Taxable Income $ 5,85,490
Tax on Taxable Income $ 1,61,010
Less:
Franking Tax Offset $ 2,310
PAYG Instalments $ 92,000
Foreign Income Tax Offset – tax paid $ 8,000 $ 1,02,310
Tax Payable $ 58,700
Diploma of Accounting - Module 4.2 Assignment (2017, 14Ed) 1704 Page 11 of 34

Units Covered: FNSACC601 & FNSACC603
Q5.4.27
(Franking Account)
Rudimentary Pty Ltd, a corporate tax entity, has the following transactions for the 2016/17 tax year:
Date Transaction $
30/06/16 Balance Nil
15/10/16 PAYG Instalment Paid 14,000
15/12/16 2015/16 Tax Refund Received 9,500
12/03/17 Fully Franked Dividend Received 3,500
08/05/17 Fully Franked Dividend Paid 7,000
Note – the benchmark franking percentage is 100%.
Required: Prepare the franking account for the 2016/17 tax year.
Date Transaction Debit Credit Balance
(state if DR or CR)
01-07-2016 Opening Balance $ -
15-10-2016 PayG Instalment Paid $ 14,000.00 $ 14,000.00
15-12-2016 Tax Refund $9,500.00 $ 9,500.00
12-03-2017 Fully Franked Dividend Received $ 3,500.00 $ 3,500.00
08-05-2017 Fully Franked Dividend Paid $7,000.00 $ 7,000.00
Diploma of Accounting - Module 4.2 Assignment (2017, 14Ed) 1704 Page 12 of 34