Topic Content: Payroll, GST, & FBT (Topics 1 to 4)
Brian Pert owns Bronny Park, a horse-racing stable that is registered for GST. The customers purchase horses and send them to Bronny Park for training. The horse owners (customers) pay separate fees for training and agistment plus 50% of any prize money earned by the horses trained at the stable. Bronny Park also owns horses. During the June 2018 quarter they reported the following transactions:
Receipts (inclusive of GST where appropriate):
Training fees $82,698
Share of prize money from customers’ horses $55,000
Prize money from Bronny Park horses $16,500
Trophy from Brisbane Cup won by a Bronny Park owned horse $1,200
Trade-in of tractor previously used on the property $19,000
Hay and saddle blankets donated to local pony club (market value $100) $0
Expenses (inclusive of GST where appropriate):
Horse feed $8,800
Veterinary fees $7,700
Farrier (not registered for GST) $5,500
Accommodation for staff at race meetings (Hotel) $2,475
Lunch at local restaurant* $650
Airfares for staff to attend race meetings** $6,446
Bookkeeping services $2,640
First Aid courses for staff members $990
New tractor $43,990
Business loan repayment (interest $750, principle $275) $1,025
*Lunch at the local restaurant was for Brian, the owner of Bronny Park, and three customers whose horses are being trained at the stable. For income tax purposes this amount would be classified as entertainment and a deduction would be denied under s32-5 ITAA97.
**During the period Bronny Park paid for air fares for staff to attend a race meeting in Sydney where one of their prize horses was running. The horse incurred an injury a week before the race and did not run. Consequently, the staff did not attend that race meeting and $1,100 of the airfares mentioned above were not used. The airline did not refund this amount.
Bronny Park also imported saddles and other leather goods from Europe. The cost of the goods was $4,500 and the freight was $250 (Australian Dollars). The supplier in Europe did not charge GST on these goods.
Salaries & Wages:
Bronny Park employs 6 strappers. They are paid weekly. All employees are entitled to the tax-free threshold.
Sarah, Lauren, Marty, & Paul are all permanent employees. Their weekly pay is based on an annual salary: and paid salaries. Annual salaries are:
• Sarah: $52,000
• Lauren: $18,720
• Marty: $72,800
• Paul: $28,600
Kris and Sam are casual employees and their weekly wage is based on the hours they work. Their work hours are set out in the table below.
Employee/Week Kris $15/hour Sam $22/hour
Week 1 – April 8 10
Week 2 – April 7 10
Week 3 – April 10 15
Week 4 - April 12 15
Week 5 – May 0 10
Week 6 – May 0 10
Week 7 – May 5 15
Week 8 – May 12 15
Week 9 – May 10 10
Week 10 – June 12 10
Week 11 – June 8 15
Week 12 – June 8 10
Week 13 - June 8 0
Business Activity Statement:
The ATO has advised that Brian Pert, as the business owner, has a quarterly income tax instalment of $16,790. This amount is payable along with other liabilities on his June Quarter BAS.
In the last FBT year Fringe Benefits were provided to the head strapper. There is a FBT instalment showing on the BAS of $2,500. No Fringe Benefits have been provided in the current FBT year.
There are no liabilities for WET or LCT, and no fuel credits.
a) Prepare the schedule of payroll information for wages paid, including PAYG withholding deductions, and net wages for each employee by week. (12 Marks)
b) Calculate the employer’s statutory Superannuation Guarantee obligations for each employee for the quarter. (10 Marks)
c) Explain and classify each transaction item listed, including wages and superannuation, by the type of GST supply, and calculate any GST included in the price. (22 Marks)
d) Discuss what conditions need to be met before Bronny Park can claim input tax credits in relation to the expenses listed? Explain whether each of the acquisitions is a creditable acquisition. (16 Marks)
e) Prepare a fully labelled Business Activity Statement for the quarter ended 30 June 2018. (7 Marks)
Further information about the preparation of the Business Activity Statement will be discussed in tutorials.
Show all calculations and support all answers with references to legislation, case law and/or rulings. Up to eight (8) marks awarded for quality of explanations & referencing.