Answer Happy

This is an individual assessment that aims to enable you demonstrate your understanding of individual tax return process. This assessment assesses your research skills, your ability to synthesise an original piece of work to specific content requirements and your ability to produce a comprehensible piece of advice addressing the client's needs. You are working as a tax accountant at a medium sized accounting firm, and a client requests that you examine and analyse various taxation scenarios. You also conduct a critical analysis of that business, with reference to relevant tax laws and literature. You will then provide their client with two pieces of work. The first Part A is a report and tax return forms, the second Part B a presentation to the client providing advice and recommendations you have prepared. PART A (22 marks) The taxpayer's assessable income, allowable deductions must be identified and recorded in the 2021 Individual Tax Return Form also 2021 Business and Professional Items Schedule Form where applicable. In addition, a report (Word document, approx. 1,500 words) must be submitted advising to the client the assessability of receipts and deductibility f payments with explanations (Sales, Dividend income, Trading Stock, PAYG withholding, PAYG instalment, Superannuation guarantee, Fringe Benefit Tax, dividend paid and motor vehicle purchase). Include section numbers and/or cases in your explanations. Client's information Cynthia Andreas, a resident taxpayer, runs a sole trading business selling imported food items. She also works on a casual basis as an import/export agent at Extreme Marlin Pty Ltd (ABN: 89 125 678 968). Name: Cynthia Andreas TFN: 300 001 000 Date of Birth: 15 July 1974 Address: 23 Market Street, Newtown NSW 2200 Contact: 0456 587 987 (Work: 02 9578 3648) Bank account: BSB 225887 Account 378458 Cynthia is not covered by a private hospital cover.

Receipts/Payments for 2020/21 (ignore GST) • Gross wages $11,200 (PAYG withheld $360) • Fully franked dividend received $6,450 • She also received $700 uniform allowance and $230 reimbursement for work related items purchased from his employer. During the year, Cynthia has had the following transactions in relation to sales, purchases, and inventory (trading stock). Cynthia did not choose Small Business Entity option. Cash received from trade debtors for credit sales. $95,000 Cash paid to trade creditors for purchases of stock $38,000 Ledger balances were as follows Trade debtors Trade creditors (trading stock only) 1/7/2020 30/6/2021 $17,600 $19,800 $5,280 $5,830 Inventory (trading stock) on 1 July 2020 Inventory (trading stock) on 30 June 2021 see below - at cost - at market selling - at replacement $7,100 $8,400 $8,600 $8,500 • Cynthia has taken home some food items from the stock purchased for consumption by his family at total value of $2,500 Additional cash receipts included: • Insurance recovery from the insurance company due to extensive damage caused by a hailstorm and included compensation for loss of income $7,400 • Cash boost payment from the ATO $20,000 • Jobkeeper payment from the ATO $8,000 Other Cash payments included: • Fines for breach of Australian Customers regulations $900 • Net wages to employees $34,000 • PAYG withheld from employees and paid to the ATO $4,700 • Superannuation for employees $1,230 • PAYG instalments for Cynthia's personal tax commitments $3,700 • Business insurance paid $1,800 covering the period 1/4/2021 to 30/9/2022 • Other tax-deductible operating expenses $9,200 • Purchased a delivery motor vehicle (100% business use, useful life 8 years) on 1 July 2020 for $49,000

Required 1) Cynthia Andreas wishes to minimise her income tax for 2020/21. In the report, calculate her net tax liability in respect of the income that it derived in the tax year 2020-2021. Include all possible tax offsets available for her including Medicare levy and Medicare surcharge (if applicable). • advise assessability of receipts and deductibility of payments with explanations (Sales, Dividend income, ATO Covid subsidies, Trading Stock, purchases, insurance recovery and the decline value in the delivery motor vehicle). Include section numbers and/or cases in your explanations. 2) Complete the following forms (Ignore SBE option) • Individual Tax Return 2021 Form • Business and professional items schedule for individuals 2021 PART B (8 marks) Cynthia is considering choosing the small business entity (SBE) option. Cynthia requested you to deliver a 5-minutes PowerPoint presentation (or video conference) on the following. 1) Eligibility of small business entity 2) What kind of benefits and can Cynthia obtain immediately in regards to her tax liabilities for 2021 by choosing the SBE option? 3) Advise how much tax can be saved on what items.