BFA714 – Australian Taxation Law
Due date 26 May 2019
Bill and Mary Wong are adult Australian residents. On 1 July 2003 they formed a partnership called ‘Hobart Sports Depot’ to run a sports supply business. The partnership supplies football clothing and equipment to football clubs in Australia. The business is registered for GST.
The partnership accounts for the business for the year ending 30 June 2019 disclose the following financial details:
The following receipts and expenses are exclusive of GST unless otherwise stated.
Gross trading receipts 900,000
Capital gain from sale of shares held in an Australian internet company 20,000
– see note (ii) below
Cash dividend from BHP 10,500
See note (iii) below
Interest income from Bank of China 11,250
See note (iv) below
Salary to Bill 40,000
Interest on loan of funds by Mary 10,000
Salaries paid to employees 250,000
Rent and power 60,000
Purchase of trading stock (see note (v) below) 120,000
Superannuation to staff 85,500
Superannuation paid on behalf of Bill 25,000
Superannuation paid on behalf of Mary 25,000
Purchase of treadmills and exercise bikes (see note (vi) below) 180,000
Interest on bank overdraft 18,623
Provision for long service leave (see note (vii) below) 25,984
Provision for bad debts (see note (viii) below) 122,000
Notes - additional information in respect of the partnership.
(i) The partnership agreement stipulates that Bill and Mary share profits and losses in respect of both income and capital gains and losses on the basis of 50% to Bill and 50% to Mary.
(ii) The partners purchased the Australian internet company shares in January 2004 and sold them on 31 May 2019.
(iii) The dividend was fully franked.
(iv) The Bank of China withheld AUD $1,250 from the gross interest
(v) Trading stock at the beginning of the financial year was $170,000. The trading stock at the end of the year was valued as:
Market value $160,000
Replacement value $184,000
(vi) Various items of equipment were purchased on 1 July 2018 for $65,000 and 1 January 2019 for $115,000. The effective life for the equipment is 4 years. The figures are exclusive of GST. The items are used 100% for business purposes. All individual items cost more than $20,000.
(vii) During the year the partnership paid out long service leave to staff of $13,507.
(viii) During the year the partnership wrote off as bad debts $36,849.
Calculate the net partnership income for the partnership for the year ended 30 June 2019.
Tim and Kim are the two directors of the private company, ABC Pty Ltd. The company acts as the trustee of the ABC trust. The Deed of Settlement establishing the ABC Trust was executed in 2017.
The trust accounts for the ABC Trust for the year ending 30 June 2019 disclose the following:
Consulting receipts 236,000
Interest see note (iv) 800
Exempt income 10,000
Capital gain from the sale of shares in an Australian company
– see note (v) 10,000
Dividend from ANZ Bank fully franked 6,500
Salaries to employees including 27,000
Salary to Tim 55,000
Salary to Kim 40,000
Payment of Tim’s golf club subscription 1,000
Superannuation contributions for Tim 5,674
Superannuation contributions for Kim 5,000
New computer system (effective life 4 years) 19,000
Notes - Additional Information
(i) The Trust is a discretionary trust and Tim and Kim have as the trustees full discretion as to how the net trust income will be distributed.
(ii) The trust is a Small Business Entity (SBE).
(iii) The Trust is registered for GST and all figures are exclusive of GST where appropriate.
(iv) Net interest of $1,800 from Singapore after withholding tax of $200 was withheld.
(v) The trust purchased the shares in January 2016 and sold them on 31 May 2019.
(vii) In the income year ending 30 June 2018, the trust made a loss of $12,000 in respect of the business.
Calculate the trust net income for the year ended 30 June 2019)
( 10 MARKS)
Not more than 1,000 words for the first assignment and 1,500 words for the second.
Where you include/exclude items in your calculations, you should say why (which will normally require a reference to a section, a case, a ruling or all 3. Use Harvard style references.
NOTE THIS ASSIGNMENT IS 20% OF YOUR FINAL RECORD .SO DO IT CAREFULLY TO PASS THIS UNIT.