Financial Planning: Tax and Estate Strategies for Herbert and Dorothy

This report analyzes the financial situation of Herbert and Dorothy, focusing on tax and estate planning strategies. It includes calculations of their net tax payable, evaluates the potential benefits and drawbacks of merging their businesses into a partnership, and suggests strategies for improving their financial affairs. The recommended strategies include superannuation contributions, estate planning with wealth management, insurance coverage (income protection, critical illness, and life cover), and debt reduction through balance transfer credit cards. The report emphasizes the importance of considering both short-term and long-term financial goals to enhance their overall financial position. Desklib offers similar solved assignments and resources for students.

Running head: TAX AND ESTATE PLANNING
Tax and Estate Planning
Name of the Student
Name of the University
Authors Note
Course ID

1TAX AND ESTATE PLANNING
Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................3
Options of merging versus not merging:....................................................................................5
Options of merging:...............................................................................................................5
Options against merging........................................................................................................6
Answer to question 3:.................................................................................................................6
Superannuation:......................................................................................................................7
Estate planning:......................................................................................................................7
Insurance:...............................................................................................................................8
Debt reduction:.......................................................................................................................8
References................................................................................................................................10

2TAX AND ESTATE PLANNING
Answer to question 1:
Calculations of Net Tax Payable for Herbert:
Calculations of Net Tax Payable
In the Books Herbert
For the year ended 2018/19
Particulars Amount ($) Amount ($)
Assessable Income
Gross Income 241000
Australian Sourced Rental Income (Herbert share (1/2)) 13500
Receipts from Term Deposit (Herbert share (1/2)) 563.75
Total Assessable Income 255063.75
Allowable Deductions
Rental property loan interest 8320
Motor vehicle loan 2240
Repayment of car 7020
Expenses Incurred 43000
Total Allowable deductions 60580
Total taxable income 194483.75
Tax on Taxable Income 60614.8
Add: Medicare levy 3889.675
Total Tax payable 64504.48
Calculations of Net Tax Payable for Dorothy:
Calculations of Net Tax Payable
In the Books of Dorothy
For the year ended 2018/19
Particulars Amount ($) Amount ($)
Assessable Income
Gross Income 85000
Australian Sourced Rental Income (Dorothy share (1/2)) 13500
Australian sourced dividend income
Fully Franked 1417.5
Franking Credits 607.5 2025
Receipts from Term Deposit (Dorothy share (1/2)) 563.75
Total Assessable Income 101088.75
Allowable Deductions
Rental property loan interest 8320
Expenses incurred 12000
Total Allowable deductions 20320
Total taxable income 80768.75

3TAX AND ESTATE PLANNING
Tax on Taxable Income 18882.31
Add: Medicare levy 1615.375
Less: Franking credit offset 607.5
Total Tax payable 19890.19
Answer to question 2:
In the modern day of business the most practical perspective relating to the strategic
partnership is that it turns out to be the association among the two companies through which
they agree to work collectively in order to attain the strategic goals (Barkoczy 2014). This is
regarded as one of the only main reasons for merging operations. Here for Herbert and
Dorothy merging the business into the partnership would help in promoting strategic
partnership. From sharing of management to savings of cost could turn out to be the strong
reasons for merging their business into strategic partnership.
The rationale for is largely alluring for Herbert and Dorothy as they can create more
competitive and cost saving company (Brokelind 2015). Merging their business into strategic
partnership would help Herbert and Dorothy in gaining greater market share with the
objective of attaining greater efficiency. The below stated are some of the reasons why
Herbert and Dorothy should merge their business into partnerships;
Penetration into new market:
Business that are successful have recognized the need of marketing and they aspire to
meet those needs. An identical business that wants to share its market gains much benefit
from merger (Grange, Jover-Ledesma and Maydew 2014). For Herbert and Dorothy merging
their business into the partnership would help in gaining new geographical areas or
alternatively specific niche in a particular industry. The strategy of merging for Herbert and
Dorothy could work both in the large scale as well as for small scale. Merging their

4TAX AND ESTATE PLANNING
respective business into partnership would help in creating a strong chain and would help in
building larger brand.
Economies of scale and competitive advantage:
For any business size is a matter of fact. Whether purchasing of the inventory or new
corporate systems, when a bigger company places orders they can save more on the costs.
Mergers would Herbert and Dorothy in translating improved purchasing power to purchase
the equipment or office supplies. For Herbert and Dorothy when placing larger orders, the
companies would have better ability of negotiating the prices with their respective suppliers
(James 2013). On the other hand mergers would help in promoting completive advantage for
Herbert and Dorothy. In the modern business world for companies to stay on the top they
must undertake technological developments in their business applications. Herbert and
Dorothy can merge their respective business into partnership so that they can share their
technological business aspects for maintaining and developing a competitive edge.
Enhanced market research and industry visibility:
Companies usually merges with other companies in order to reach new marketplace
and attain growth in their revenues as well as earnings. Merging the companies could help
Herbert and Dorothy in increased marketing and distribution that would help them in
providing newer sales opportunities (Jover-Ledesma 2014). Furthermore mergers can help
both Herbert and Dorothy in improving the standing position of the company through greater
community investment as bigger firms have an easy time in increasing their capital than the
smaller firms.
Financial power:
When the companies grow they are able to attain the benefit of the economies of
scale. This implies for Herbert and Dorothy that the cost involved in producing and

5TAX AND ESTATE PLANNING
distributing the items is reduced when the market share increases (Kenny, Blissenden and
Villios 2018). Furthermore, when the companies merge the overall revenue also increases
that ultimately makes the end company much stronger in terms of financially to obtain greater
credit facilities, strategic association and financiers. For Herbert and Dorothy merging their
business into strategic partnership would help in meeting any major requirement of business
loan to revenues which would ultimately create a positive flow of cash as well as credit
scenarios for the companies. This would enable Herbert and Dorothy to grow their merged
companies faster with improved capital investment for marketing, talent and development.
Options of merging versus not merging:
The options for merging against the options of not merging is dependent on the new
companies short and long term strategies as well as effort (Kenny 2014). This is mainly
because of the factors such as market environment, business culture variations and changes in
the financial power ultimately surrounds the captured business. For Herbert and Dorothy a
comparison against the options of merging against not merging is given below;
Options of merging:
a. One of the most common reason for Herbert and Dorothy to merge their business into
partnership is the options of gaining better power and control over the markets.
b. Another options for merging is synergy that would act as the power and would
ultimately allow Herbert and Dorothy to increase the value efficiencies of their
business with better enriched returns and cost savings (McCouat 2018).
c. The union of two business would result in overall savings of costs and would provide
a competitive advantage for Herbert and Dorothy. This options can be considered
feasible because it would help Herbert and Dorothy in increased purchasing power
and long run of productions.

6TAX AND ESTATE PLANNING
d. Perhaps the most important options of merging is gaining tax advantage for both
Herbert and Dorothy. The options of tax benefit would help in instigating the financial
advantage for Herbert and Dorothy. Merging their business to partnership would help
in providing tax shields, better monetary advantage and better utilization of alternative
tax advantage.
Options against merging
a. As the result of the merging the employees of one of the merging companies might
require exhaustive reskilling.
b. Herbert and Dorothy may face the difficulties from the internal competition that might
take place among the staff of the united firms (Morgan, Mortimer and Pinto 2015).
There may be risk of having surplus amount of employees in some of the
departments.
c. There may be uncertainty in relation to the approval of the merger from the adequate
assurance.
d. There can be an instance of increased costs that may not result in right management of
modification.
After taking into the account the above discussion it can be stated Herbert and
Dorothy should merger their respective business into the partnership as this would in gaining
vital market resources with better superiority in quality (Sadiq 2018). Merging their business
would help in gaining tax advantage and would the business with better monetary advantage
and better utilization of alternative tax advantage.
Answer to question 3:
Herbert and Dorothy could possibly arrange their financial affairs in more efficient
manner and consider the strategies that may well help in enhancing their both short and long

7TAX AND ESTATE PLANNING
term position. Below listed are some of the strategies that Herbert and Dorothy can consider
for their financial affairs;
Superannuation:
Superannuation contribution can be regarded as the simple way for Herbert and
Dorothy to reduce their amount of tax that they pay every year. By setting up the salary
sacrifice Herbert and Dorothy can arrange their rate of income tax which they originally pay
for their earnings with the lower amount of superannuation contribution of 15% per year
(Sadiq et al. 2018). The super funds works as the effective tax wrapper for an individual’s
investments. Incomes derived from the investment made outside the marginal tax rate in the
name of the taxpayer such as shares or property would be taxed at the normal marginal tax
rate. However for Herbert and Dorothy making an investment in the superannuation would
ultimately result the income from those assets to be usually taxed at the lower rate of 15%
and capital gains at the rate of 10% for the assets that are owned for a minimum of 12
months.
Estate planning:
Herbert and Dorothy can consider estate planning with the start-up wealth
management. The estate planning can be tailored particularly with the family situation
particularly the future goals. The estate planning would form the integral part of the Herbert
and Dorothy overall financial plan (Taylor et al. 2018). They can protect their assets and
reduce the risk of conducting business as estate planning would help in minimizing the
burden of taxation. It is recommended that Herbert and Dorothy should start up with wealth
management. While in the current environment of uncertainties it is not always possible to
predict the financial future goals but with estate planning Herbert and Dorothy can structure
their investment and their retirement savings by significantly reducing the risk and would

8TAX AND ESTATE PLANNING
ultimately help in attaining their respective goals. Herbert and Dorothy can consider creating
Trusts as the means of minimizing tax burden.
Insurance:
Among the numerous life insurance plans that are available to the Australians there
are types of insurance cover that Herbert and Dorothy can consider enrolling themselves.
a. Income protection insurance: The income protection insurance can be termed as the
type of insurance that pays a steady amount of income on the monthly basis. Herbert
and Dorothy can contribute around 75% of the gross monthly income or may be in the
different manner depending upon their contributions (Woellner et al. 2018). Such
benefits would cover both the illness and injury.
b. Critical illness Insurance: Critical illness insurance is also regarded as the trauma
insurance. Herbert and Dorothy can consider enrolling themselves for the critical
trauma insurance as it falls under the category of the living insurance. As this fall
under such category, it would provide both Herbert and Dorothy with the benefit of
leading the quality life. Such insurance would provide both Herbert and Dorothy with
the lump sum payment when either or both the member faces any critical illness.
c. Life cover: The life cover helps in easing the burden of the extra amount of
expenditure that might cause the finance of Herbert and Dorothy by paying them with
the lump sum during the event of the death (Robin 2017). Furthermore, it would help
both Herbert and Dorothy to adapt to the mental and emotional changes that happens
because of the death or disability from the financial benefit that Herbert and Dorothy
can receive from such events. Rather than being financially or emotionally hurt by the
sudden misfortunes the life cover helps in assuring that both Herbert and Dorothy can
enjoy the same lifestyle.

9TAX AND ESTATE PLANNING
Debt reduction:
Balance transfer credit cards: It is noticed from the case study that Dorothy uses credit
cards. There may be an instances where debt accumulation may occur or the holder of credits
may struggle to manage the repayments or the higher rate of interest (Blakelock and King
2017). It is recommended that Dorothy can consolidate the credit card accounts under a
single balance transfer account. Multiple number of balance transfer credit cards are available
that may help Dorothy in moving the debt to the new credit or taking the advantages of the
introductory period. For instance managing the credit card under one account may led to
payment of 0% interest on the balance transfer for the first six months.
The recommendations provided may help in serving the purpose of the Herbert and
Dorothy as they are aimed at reducing structure of debt and also aimed at improving both the
short and long term position.

10TAX AND ESTATE PLANNING
References
Barkoczy, S 2014. Foundations of taxation law.
Blakelock, S. and King, P., 2017. Taxation law: The advance of ATO data
matching. Proctor, The, 37(6), p.18.
Brokelind, C. 2015. Principles of law.
Grange, J., Jover-Ledesma, G. and Maydew, G. 2014. 2014 principles of business taxation.
James, S. 2013 The economics of taxation.
Jover-Ledesma, G. 2014. Principles of business taxation. Cch Incorporated.
Kenny, P. 2014. Australian tax.
Kenny, P., Blissenden, M. and Villios, S. 2018. Australian Tax.
Martin, F. and Connor, M., 2017. Using Blended Learning to Aid Law and Business
Students' Understanding of Taxation Law Problems. J. Australasian Tax Tchrs. Ass'n, 12,
p.53.
McCouat, P. 2018. Australian master GST guide 2018.
Morgan, A., Mortimer, C. and Pinto, D. 2015. A practical introduction to Australian taxation
law.
Robin, H., 2017. Australian taxation law 2017. Oxford University Press.
Sadiq, K. 2018. Australian taxation law cases 2018. Pyrmont, NSW: Thomson Reuters.
Sadiq, K., Coleman, C., Hanegbi, R., Jogarajan, S., Krever, R., Obst, W., Teoh, J. and Ting,
A. 2018. Principles of taxation law 2018.

11TAX AND ESTATE PLANNING
Taylor, C., Walpole, M., Burton, M., Ciro, T. and Murray, I. 2018. Understanding taxation
law 2018.
Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D. 2018. Australian taxation
law 2018.