Taxation Report: Australian Partnership Financials & Fringe Benefits

This report offers a detailed analysis of Australian taxation, specifically focusing on two key areas: the preparation of financial statements for a partnership firm and the calculation of fringe benefits provided by employers. The first part of the report elaborates on the components of an income statement for a partnership, including revenue, expenses, and cost of goods sold, using a case study involving Daniel and Olivia Smith's business. The second part delves into fringe benefit tax (FBT), explaining how it applies to benefits such as school fees and concessional accommodation provided to employees, with a practical example involving an executive named John. The report aims to enhance understanding of the Australian taxation system, particularly regarding partnership financials and FBT implications for both businesses and employees, providing insights into tax return preparation and the importance of fringe benefits in attracting and retaining employees.

Taxation
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Executive summary
The report contains assignment on two different problems and both of them are related to the
Australian taxation system. Answer 1 deals with the problem faced in preparation of financial
statement of the partnership firm and answer give details on the various provision of the
calculation of fringe benefit provided by the employers to its employee. The present assignment
is making the elaboration for the calculation of the net income and preparation of the tax return
for the partnership firm.
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Contents
Executive summary.........................................................................................................................2
Introduction......................................................................................................................................4
Answer 1..........................................................................................................................................5
Answer 2........................................................................................................................................13
Conclusion:....................................................................................................................................15
Reference:......................................................................................................................................16
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Introduction
In the given report explanation of the various elements of the financial statement of the
partnership firm has been given. The main purpose of preparation of the report is to increase the
understanding of various elements of the Australian taxation system. The fringe benefit is an
important aspect of the taxation system and should be understood by the individuals of the
Australia. In the present assignment the discussion will be made for the preparation of the
income statement of the partnership firm which is owned by the Daniel and the Olivia Smith
from the following information available. Fringe benefit also forms the part for the business
organization and is very useful for the organization in attracting the new employees in the
company.
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Answer 1
Preparation of partnership return
Partnership firm is a separate form of business organization than a company where all the
partners are personally liable for the liabilities of the firm. Unlike in company it is separate legal
person and can get into agreement with its own name the partnership firm does not have any
separate legal entity. The partnership is agreements where two or more person bring start a
business by bringing their capital together and do business and share the profit in proportion of
their capital contributed or at some agreed ratio. Just like company a partnership firm also
prepares statement of income statement and balance sheet for ascertaining the financial position
at the end of financial year and financial performance during the financial period (Robu, 2015).
Following are the financial statement prepared for the partnership firm of Daniels and Olivia
Smith.
Income statement
Income
Sales-Cash (1) 186925
Sales-Credit (2) 31885
Goods taken from stock 3200 222010
Less: Deductions
Cost of Goods Sold (3) 159713
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Motor Vehicle Running
Expenses (4)
2364
Power (80% of 1470) 1176
Rates (60% of 517) 310
Insurance 1250
Telephone (90% of 704) 634
Union Fees 284
Account Charges 595
Repairs and Maintenance
(5)
290
Interest on Loan (6) 5500
Depreciation(7)
1. Cash Sales
Cash deposited into bank 150170
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Add: Payment for Purchases 31155
Add: Withdrawals 5600
186925
2. Credit Sales
Closing Debtor Balances 3010
Add: Payment Received from Debtors 32800
Less: Opening Debtors 3925
31885
3. Cost of Goods Sold
Stock at beginning 9120
Add: Purchases
Cash 31155
Credit 129188
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169463
Less: Stock at End 9750
159713
Credit Purchases
Creditors at End 7010
Payment to Creditors 128678
135688
Less: Creditors at beginning 6500
129188
4. Motor Vehicle Running Expenses
Van (1260*90%) 1134
SUV (2050*60%) 1230
2364
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5. Repairs and Maintenance
Shop Painting 150
Refrigerator Motor Replacement 140
290
6. Interest On Loan
Total Repayment on Loan 8500
Less: Reduction in principal 3000
Interest Paid 5500
7. Depreciation
Origina
l Cost
Opening
Adjuste
d Value
Restaurant Refrigeration 14600 3580
Shop Fitting Structure 7800 2965
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Kitchen Electrical Appliances 3900 754
Car –Van 16500 1550
Car –SUV 42200 10350
Additions:
Restaurant Freezer (01.08.2016) 4000
Air Conditioner (01.10.2016) 1200
Disposal:
Restaurant Freezer 8000 1480
The income statement of the partnership represents all the revenue and expenditure which took
place during the given financial period. The main purpose of preparing the income statement is
to find the profitability of the firm and calculation of various profitability ratios. These ratios will
help in comparing the performance of the firm with past year performance or with the
performance of competitors firm. The income statement income all the revenue where cash or
credit which has been accrued during the year and all expenses whether fixed or variable. Income
testament is prepared on accrual basis of accounting.
Explanation of different components of income statement
Income
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The main objective behind set up of nay partnership firm is to make money. The partnership firm
is mostly generating its revenue from cash sale of electronics as compared to the credit sales of
the firm. The firm is also engaged in lending of electronic goods to its customer on hire basis.
The firm earned small proportion of its revenue from lending goods to its customers. For better
understanding detailed information is given below about the total revenue of the firm for the
financial period (McLaughlin, 2015).
Particulars Amount
Cash sales 186,925
Credit sales 31,885
Goods taken from stock 3,200
Expenses
Expenses incurred by the firm in operating the business activities as well as administration of
business activities. Expenses can be again fixed and variable basis on their occurrence with
respect to the relationship of the expenses with the production selling of the goods. The operating
expenses of Daniel and Olivia Smith have been given separately. The main operating expenses
of denial and Olivia Smith is power expenses with have been incurred in the given financial year
of 2,364 dollars.
Cost of goods sold
Cost of goods sold is referred as the cost of acquiring goods from the third party or cost of
making the goods in house. Cost of goods sold will include only those expenses which are
directly attributable to the production of goods or acquiring of goods. The formula for
calculation of cost of goods sold is opening inventory added with the purchases and then total
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closing inventory will be subtracted from it. In the present situation the company is also involved
in the production of the electronic goods so the total expenses incurred by the firm in production
process for around 159713 dollars (Pavić, 2017).
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Answer 2
Calculation of the Fringe Benefit Tax
The employees of the organization get some value added services in addition of the salary they
receive in course of their employment. Sometimes the employees have Fringe benefit tax is paid
by the employers on behalf of the employees for the services that is provided by the employers to
its employee in the course of his or her employment. Fringe benefits can be available in the form
of the car parking, low interest loans and the payments for the private expenses of the employees
(Carvajal, 2016).
The fringe benefit can be given either free of cost or at concessional rate. The fringe benefit of
the employees can be measured by comparing the market value of such benefit and then
subtracting the value received by the employee of the company. In the given case the John is a
senior executive with the printing company. John is getting school fees of his child for the
financial year worth $15,000. In addition to the school fees of his child John receive
accommodation in Sydney at concessional rate. The house is available for John for a rent of 100
dollars per week whereas the actual value of rent as per market condition of the house is 800
dollars per week.
Calculation of fringe benefit of the school fees
The employer of John is providing full school fees therefore the fringe benefit will be the total
amount provided by the employer of John which is $15,000.
Fringe benefit of Accommodation
In this case the accommodation is provided to the John at a concessional rate and not free of cost.
Therefore the fringe benefit tax which is charged on the value should be which is paid by the
employer.
Fringe benefit = Value of Rent of that house – rent given by John
= $800 - $100
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= $700
This is fringe benefit for one week so fringe benefit for whole year will be = $700 * 52
= $36,400
Total fringe benefit of John = $15,000 + $36,400
= $51,400
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Conclusion:
The report contains information about fringe benefit system and the preparation of financial
information of a firm. Once the individual achieved the residential status of the Australia has
required making the application for the Tax filling number of Australia. In the present report the
conclusion is made on the preparation of the Income statement of the partnership firm for the
evaluation of the tax return of the firm. Further the report is also making the conclusion for
adoption of the fringe benefit in an organization and its tax implication and benefit for the
attracting the new employees in the company.
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