Reference no: EM132220112 , Length: word count:2000

Taxation Theory, Practice & Law Assignment -

There will be case study questions and you can choose to follow the IRAC approach to answer the questions. You can follow this approach by laying out the issue to be discussed, the legal rule relevant to the issue, the analysis of the pertinent facts based on that rule, and the overall conclusion reached.

Question 1 - Daniel and Olivia Smith operate a mixed business called Brekkie and Lunch and OZ Bottle Shop at 50 York Street Sydney. They visit you in order to prepare their 2017 partnership tax return. During your first meeting they provide you with their cash receipts and cash payments journals, their business bank statements and a file contain all their business invoices and receipts relating to the transactions in their book. Details of the transactions are as follows:

Transactions $	$
Business Sales (Cash)	150,170
Debtors cash payments	32,800
Car expenses	3,310
Electricity bill	1,470
Council rates	517
Business insurance	1,250
Mobile bills	704
Union fees	284
Account charges ( ANZ Bank)	595
Repair expenses	1,490
Loan repayment	8,500
Drawings	6,000
Purchase of fixed Asset	3,500
Cash Purchases	31,155
Repayment to Credits	128,678

After careful consideration of the working papers from last year's return, you establish:

i.

	$
Debtors at 1st July 2016	3,925
Debtors at 30th June 2017	3,010
Creditors at 1st July 2016	6,500
Creditors at 30th June 2017	7,010
Stock on hand 1st July 2016	9,120
Stock on hand 30th June 2017	9,750

ii. Some of the creditors were paid directly from the cash receipts account. Overall, $31,155 of stock was purchased in this method. Additionally, $5,600 in cash has been used for private purposes.

iii. The owners have taken $3,200 from Bottle Shop items for private use.

v. There was a $3,000 reduction in the loan repayment, as this was the loan principal. The business loan repayment was $8,500.

v. The business has two cars: a van used 90% for business purposes and a SUV used 60% for business purposes. The cost of maintaining the van was $1,260 and the SUV $2,050.

vi. Repairs and maintenance expenses are as follows:

1^st October 2016- air-condition installation - $1,200

1^st December 2016- shop painting - $150

1^st April 2017- refrigerator motor replacement - $140

vii. Asset purchases are as follows:

1^st August 2016- new restaurant freezer - $3,500

A trade-in of $500 was permitted on the old unit.

viii. The depreciation schedule as at 30^th June 2017:

	Cost $	Adjusted value $
Restaurant freezer	8,000	1,480
Restaurant refrigeration	14,600	3,580
Shop fittings structure	7,800	2,965
Kitchen electrical appliances	3,900	754
Car - Van	16,500	1,550
Car - SUV	42,200	10,350

All of the above discussed business assets of Brekkie and Lunch and OZ Bottle Shop were purchased before 27 February 1992 and Daniel and Olivia Smith have chosen to use the depreciation rates published by the ATO. Any new assets will have a useful life of 10 years and the Daniel and Olivia's partnership business will use diminishing value method to depreciate their business depreciable assets.

ix. Daniel and Olivia live on the business properties, but 90% of mobile bills, 80% of electricity expenses and 60% of council rates relate to the Brekkie and Lunch and OZ Bottle Shop. The insurance premium paid is completely related to their business. Daniel and Olivia have a separate insurance for their personal goods.

From the information supplied, prepare the working papers and determine the net income for the partnership for the year ended 30 June 2017.

Question 2 - John is a senior executive with a printing company. As part of his remuneration package his employer pays for his child's school fees at a private school costing $15,000. His employer also provides him with accommodation in a Sydney apartment throughout the FBT year. John must pay $100 of rent per week for the apartment. The market value rent for the apartment is $800 per week.

Advise John's employer of the FBT consequences of John's remuneration package.