Prepare Tax Documentation for Individuals - FNSACC502 Assessment

This assignment solution addresses the requirements of the FNSACC502 unit, focusing on preparing tax documentation for individuals. It includes seven case studies covering a wide array of topics, such as deductions for salary earners and self-employed individuals, motor vehicle expenses, the Uniform Capital Allowances System (depreciation), capital gains calculations, audit activities, and dependent tax offsets. Each case study presents a scenario with specific financial data and requires the student to identify deductible amounts, calculate tax liabilities, and apply relevant tax regulations. The solution provides detailed workings, calculations, and explanations for each task, ensuring a comprehensive understanding of the subject matter. The assignment aims to assess the student's ability to apply tax principles to real-world scenarios and prepare accurate tax documentation.

FNSACC502: Prepare Tax Documentation for
Individuals Ed 4_5
LA021285 - Assessment 2 Template
What you have to do
You must satisfactorily complete all tasks in Assessments 1, 2, 3 and 4 before you can attempt the
Workplace Simulation Test.
There are seven tasks in this assessment. You need to satisfactorily complete all tasks. Each task addresses a
particular topic within the unit. To satisfactorily complete this assessment you must have no more than the
number of errors for each task indicated below.
You must provide your answers in the shaded areas and must submit this file on the OLS web site.
Task Topic No. of Errors
Case Study 1 Deductions for salary and wage earner 3
Case Study 2 Deductions for self employed 2
Case Study 3 Motor Vehicle Expenses 4
Case Study 4 Uniform Capital Allowances System (Depreciation) 5
Case Study 5 Capital Gains 6
Case Study 6 Audit Activity 2
Case Study 7 Dependent (Invalid and Carer) Tax Offset 3
LA021285 Template Assessment 2; FNSACC502 Ed 4 & 5 1
© New South Wales Technical and Further Education Commission, 2016 (TAFE NSW – WSI), Archive version 1, June 2016

Case Study 1 – Deductions for salary and wage earner (3 errors)
All expenses incurred in the current tax year $ $ Document
Luke is a salesman and was fined for speeding while
rushing to meet a customer. 500 0
Luke is a salesman and purchased a suit (which he wears
when he goes to see customers) 350 0
Luke is a salesman and incurs costs for laundering his suit 90 0
Luke is a salesman who has incurred expenses in
attending interviews for a new job (he wishes to leave his
present job for one that pays more)
170
0
Tax agents fees to lodge objection against prior year tax
assessment 450 450 Receipt
Tax agents fees to lodge current return 125 125 Receipt
Ian is a detective who makes subscriptions to the police
union 400 400 Receipt
Ian is a detective and makes Personal superannuation
contributions 2,800 2,800 Letter from
Super Company
Donations to public hospital 150 150 Receipt
Donations to local netball club 140 0
Ambulance officer uniforms 300 300 Receipt
Laundry of Ambulance officer uniforms 160 160 Receipt
GST remitted to the ATO 1,600
Michelle works as an accounts payable clerk and incurred
expenses travelling from her home to work in her own
car.
800
0
Michelle works as an accounts payable clerk and incurred
parking fees for her own car when she parks in a parking
station on the days she works back.
650 0
Donations to Salvation Army (Registered Charity) 1 0
Required:
Identify the amounts which can be claimed as a deduction by the taxpayer. Where the payment can be claimed
as a deduction; identify a source document which would substantiate the payment.
2 LA021285 Template Assessment 2; FNSACC502 Ed 4 & 5
© New South Wales Technical and Further Education Commission, 2016 (TAFE NSW – WSI), Archive version 1, June 2016

Case Study 2 – Deductions for self-employed (2 errors)
Pat is a self-employed landscaper in his own business and has incurred the following expenses in 2015/16 tax
year:
$
Subscription to local Golf club (Pat often meets with his most important
clients over lunch in the club to secure future jobs)
Borrowing expenses for loan to purchase new landscaping equipment
(loan was for 4 years and was incurred on 1/4/15) 249
Advertising for business in local paper 250
Purchase of protective overalls for his work 300
Personal superannuation contributions to a complying superannuation
fund 4,500
Subscription to Australian Landscapers Association 250
Entertainment expenses (lunches with clients in Golf club)
Laundry of protective overalls 110
Required:
Identify which amounts Pat is able to claim as deductions in the year ended 30 June 2016.
$
Subscription to local Golf club (Pat often
meets with his most important clients over
lunch in the club to secure future jobs)
Borrowing expenses for loan to purchase
new landscaping equipment (loan was for 4
years and was incurred on 1/4/16)
249
Advertising in local paper for his business 250
Purchase of protective overalls for his work 300
Personal superannuation contributions to a
complying superannuation fund
4,500
Subscription to Australian Landscapers
Association
250
Entertainment expenses (lunches with
clients in Golf club)
Laundry of protective overalls 110
LA021285 Template Assessment 2; FNSACC502 Ed 4 & 5 3
© New South Wales Technical and Further Education Commission, 2016 (TAFE NSW – WSI), Archive version 1, June 2016

Case Study 3 – Motor Vehicle Expenses (4 errors)
Daniel leased a 3000cc motor vehicle on 1 July 2014 and maintained a log book for 12 weeks during the
year. During the 12 week period Daniel travelled 5,000kms of which 1,200kms were business related. Costs
incurred during the 2015/16 year include
$
Petrol, oil and servicing 2,500
Lease payments 7,800
Registration and insurance 2,000
Speeding fines 350
TOTAL 12,650
Note that the car had a market value of $60,000 at the inception of the lease
Required:
Show all available methods of calculating the motor vehicle expenses and choose the most advantageous
method for Daniel for the year ended 30 June 2016.
Please include your answers in the template provided and check the assessment correction file on the
OLS web site before attempting this question.
The key things to consider when answering this question are
 Annualised business kms
 Maximum kms that can be claimed in cents per km method
 Depreciation calculation considering the car limit
4 LA021285 Template Assessment 2; FNSACC502 Ed 4 & 5
© New South Wales Technical and Further Education Commission, 2016 (TAFE NSW – WSI), Archive version 1, June 2016

LA021285 Template Assessment 2; FNSACC502 Ed 4 & 5 5
© New South Wales Technical and Further Education Commission, 2016 (TAFE NSW – WSI), Archive version 1, June 2016

Case Study 4 – Uniform Capital Allowances System (Depreciation)
(5 errors)
Liz operates a small restaurant. She does not wish to take advantage of the small business concessions.
Assets that Liz had acquired post 10 May 2006 and held at 1 July 2014 were shown in the Fixed Assets
Register below:
Asset Cost ($) Adjustable
Value 1/7/14
Effective Life
(years) Depreciation Method
Carpets 19,000 1,600 4 Diminishing Value
Freezer 9,000 950 3 Diminishing Value
Curtains 13,000 1,800 5 Prime Cost
Furniture 8,000 900 7 Diminishing Value
Coffee Machine 6,000 1,000 7 Prime Cost
Oven 7,500 800 6 Diminishing Value
Hot water service 4,000 1,300 8 Diminishing Value
Liz had also commenced the use of a low value pool on 1 July 2006. The pool balance as at 1 July 2016 was
$4,100.
Liz places all eligible assets into the Low Value Pool.
During the current tax year, Liz purchased the following new depreciable assets. The purchase price of the
assets included GST.
Asset Purchase Price ($)
Including GST Date of Purchase Effective Life (years)
Refrigerator 990 1/9/15 6
Notebook Computer 1,089 1/4/16 5
Cash Register 3,300 1/5/16 7
Required:
(a) Calculate the deduction for decline in value available to Liz in respect of the year ended 30 June
2016
(b) Calculate the value of the low value pool as at 30 June 2016
6 LA021285 Template Assessment 2; FNSACC502 Ed 4 & 5
© New South Wales Technical and Further Education Commission, 2016 (TAFE NSW – WSI), Archive version 1, June 2016

a)
PRIME COST
Workings Amount ($)
Curtains 1800/5 360
Coffee Machine 1000/7 143
Total 400
DIMINISHING VALUE
Carpets (1600/4)x2 800
Freezer (1300/8)x2 325
Furniture (3000/7)x2x2/12 143
Total 1,268
b)
LOW VALUE POOL
$ $
Opening value 4,100
Add Low value assets
Freezer 950
Furniture 900
Oven 800 2,650
6,750
Add Low cost assets
Fridge 900
Notebook computer 990 1,890
8,640
Less decline in value
Opening + Low Value 2,531
Low cost 354 2,886
Closing Balance 5,754
Total Depreciation (400+1,268,2,885) 4,553
TOTAL DEPRECIATION
Total $4,553
LA021285 Template Assessment 2; FNSACC502 Ed 4 & 5 7
© New South Wales Technical and Further Education Commission, 2016 (TAFE NSW – WSI), Archive version 1, June 2016

Case Study 5 – Capital Gains (6 errors)
Christine is a married resident taxpayer with no dependants. The following has been taken from her
taxation records as to property she owns or has sold.
Personal Residence
 Private residence purchased in March 1998 for $300,000
 Christine currently lives in the house and it has a current market value as at 30 June 2016 of $900,000
Rental Property in Cairns
 Purchased on 7/8/89 for $150,000 ( the property was built in 1971)
 Exchanged contracts for the sale of this property on 30 June 2016 for $850,000
 Settlement of the sale was finalised on 12 October 2016
 Legal expenses on purchase $4,000 paid August 1989
 Stamp duty on purchase $2,500 paid August 1989
 Additional room added to property paid for on 1 July 2012 for $20,000
 Landscaping to the property paid for on 1 July 2005 for $2,000
 Legal expenses on sale $5,000 paid June 2016
 Real estate agents commission on sale $4,500 paid June 2016
Shares
 Dragon Ltd shares sold on 11 February 2016 for $20,000, purchased on 1 May 1985 for $8,000
 Raider Ltd shares sold on 20 April 2016 for $11,000, purchased on 1 March 1993 for $10,000
 Eel Ltd shares sold on 2 August 2014 for $120,000, purchased 1 May 2006 for $30,000
 Tiger Ltd shares sold on 30 June 2016 for $40,000, purchased on 1 April 2016 for $16,000
Other information
 Christine has capital losses from sales of previous shares carried forward from the 2015 tax year of
$8,000
 Rental income from her Cairns property from 1 July 2014 to date of sale $12,000
 Total allowable deductions in respect of this rental income for the year ended 30 June 2016 was
$15,800 (including capital write off 2.5% x $20,000 = $500)
Required:
(a) Calculate the net capital gain for Christine for the year ended 30 June 2016
(b) Calculate the taxable income of Christine for the year ended 30 June 2016
8 LA021285 Template Assessment 2; FNSACC502 Ed 4 & 5
© New South Wales Technical and Further Education Commission, 2016 (TAFE NSW – WSI), Archive version 1, June 2016

a)
Investment Property - Cairns House $ $ Discount $ Other $
Sale 850,000
Less Cost of Sale
Purchase Price 150,000
Purchase Expenditure 6,500
Capital Improvements 22,000
Selling Expenditure 9,500 188,500
Capital works write off 500 661,500 50% 330,750
Indexed Method
Sale 850,000
Less Cost of Sale
Purchase Price 190,200
Purchase Expenditure 8,242
Cost of Extension 20,000
Cost of Landscaping 2,000
Selling Expenditure 9,500 229,942 620,058
620,058
Discount Method
Gain on Shares
Raider Ltd (Index Method) (178)
Eels Ltd 45,000
Tiger Ltd 24,000
Dragon Ltd (Pre CGT Asset) Nil 68822
Capital Losses -8,000
391,572
Assessable net capital gain = $391,572
LA021285 Template Assessment 2; FNSACC502 Ed 4 & 5 9
© New South Wales Technical and Further Education Commission, 2016 (TAFE NSW – WSI), Archive version 1, June 2016

b)
Assessable Income $ $
Net Capital gain 391,572
Rental Income 12,000 403,572
Less Deductions 15,800
Taxable Income 387,772
Case Study 6 – Audit Activity (2 errors)
Mr. Jack Cashman (senior) of 100 George Street Sydney lodges his own returns and does not have a
tax agent. On 1 February 2015, he received an amended assessment for the year ended 30 June 2013
from the Commissioner of Taxation as a result of an ATO audit.
The amended assessment included an amount of $6,500 omitted interest from an account No 246810
held at the St George Bank in Market Street. The amended assessment imposed an amount of $3,500
additional tax and penalties.
Mr. Jack Cashman has checked his records and has ascertained that this bank account does not belong
to him and he does not have any accounts at that Bank. However he knows that his son who has the
same name as himself i.e. Mr. Jack Cashman (junior) and the same address as him does have accounts
at that branch. He suspects that the account really belongs to his son.
Required:
Advise Mr. Cashman (senior) of his objection rights indicating what steps he has to take to ensure that
the objection is valid.
Mr Jack Cashman (Senior) can raise an objection regarding the income
tax affairs relating to the tax assessment made by ATO. As evident from
the circumstances, it is evident that ATO has wrongly included the
omitted interest into the Mr Jack Cashman (senior) that supposedly
belonged to his son.
Most of the tax individuals and small business having tax dispute can
make the use of the in-house facilitation service. Similarly, Mr Jack
Cashman (senior) can seek the in-house facilitation for addressing the
dispute caused from the wrongly inclusion of the omitted interest. The
in-house facility has the process of mediation where the impartial ATO
facilitator would meet with Mr Jack Cashman (senior) along with the ATO
case officer to address and identify the issue of dispute.
10 LA021285 Template Assessment 2; FNSACC502 Ed 4 & 5
© New South Wales Technical and Further Education Commission, 2016 (TAFE NSW – WSI), Archive version 1, June 2016

Furthermore, the valid objection raised by Mr Jack Cashman (senior)
would make the ATO case officer to consider alternatives and develop
options in order to reach the resolution. It is recommended that Mr Jack
Cashman (senior) must lodge the objection in writing to the in-house
facilitator for addressing the matter of amended assessment.
The in-house facilitation is the voluntary procedure and an ideal service.
The procedure is less complex and can be used to audit the assessment
along with the stage of litigation.
LA021285 Template Assessment 2; FNSACC502 Ed 4 & 5 11
© New South Wales Technical and Further Education Commission, 2016 (TAFE NSW – WSI), Archive version 1, June 2016

Case Study 7 – Dependant (Invalid and Carer) Tax Offset (3 errors)
For each of the following scenarios assess whether the taxpayer is entitled to claim any dependant tax
offset if so, calculate the relevant tax offset for 2015/16 tax year. You need to assess each question
separately.
a) John maintained his invalid brother James (aged 35) for the whole tax year. James is unable to work
and received a disability support pension of $7,000.
b) John also maintained his spouse’s parent Audrey who received a Special Needs disability support
pension of $5,500. Audrey’s total adjusted taxable income for 2015/16 was $11,000.
c) Andrew’s payment summary included gross wages of $105,000. In addition he received fully franked
dividends of $7,000. His work related expenses were $1,500 (all which are allowable deductions)
and his reportable superannuation contribution was $15,000. Andrew maintained his wife Kerri who
received an invalidity service pension of $5,000.
d) William supported his 80 year old father who lives in Canada permanently and received a Canadian
disability pension of $25,000.
a)
7,000-282/4=167,950 less Max/2,627= Claim $947.50
b)
Nil Income above limit
c)
Income over $100,000 cannot claim
d)
No father does not live in Australia / income to high
12 LA021285 Template Assessment 2; FNSACC502 Ed 4 & 5
© New South Wales Technical and Further Education Commission, 2016 (TAFE NSW – WSI), Archive version 1, June 2016