Reference no: EM133938655

Taxation Law

Assessment Case Study: Individual & Business taxpayer

Learning Outcome 1: Interpret residency and source rules including international transactions to evaluate tax liability.

Investigate the tax treatment of individuals, partnerships, trusts, companies and superannuation funds and recommend taxation strategies to a range of stakeholders.

Learning Outcome 2: Critically evaluate the roles of key stakeholders in the administration of the tax system and clarify the difference between tax planning, tax avoidance and tax evasion.

Assessment Task
In this assessment task you will prepare a scenario-based written report on tax implications, and recommendations, in relation to individuals, partnerships and trust. And prepare a scenario-based presentation on tax implications, and recommendations, of company franking accounts and dividends. This assessment task is designed to develop your skills and knowledge of processing tax returns for individuals, partnership, trust and companies, including a franking account return as per the statutory requirements. Get instant assignment help from top tutors.

Context
As a practicing tax agent you are required to provide advice to clients with suggestions and recommendations on tax implications, including how to reduce clients' taxable income and tax liabilities by evaluating various investment income from partnerships, trust and companies in accordance with Australian tax legislation and rules.

For the purposes of this assessment, you need to assume you are working as an assistant tax agent in an accounting firm. Your manager has been assigned 3 clients requiring tax advice (Clients A, B and C). Clients A and B have requested their tax advice be presented in writing, and Client C has requested their tax advice be explained to them in a presentation. To assist in preparing the tax advice your supervising tax agent has provided you with background information relating to the tax situations of Clients A, B and C and asked you to prepare 2 outputs for him to review:

PART A - A written report containing an overview of the relevant case law and legislation needed to provide tax advice for Clients A and B, and the tax advice you would provide to each of the clients.

PART B - A maximum 8-minute in class presentation supported by PowerPoint slides, outlining the tax advice you would provide to client C.

Instructions
PART A: Clients A and B Tax Advice - Written Report (1000 words, excluding calculations) +/- 10%

Introduction (200 words)
Write an overview of the relevant case law and legislation need to provide appropriate tax advice for clients A and B.

Client tax advice (800 words)
Based on the Background information for Clients A and B (outlined below) provide tax advice with reference to relevant legislation and/or case law that addresses the following points for each client:

Client A
Practical advice with recommendations to Client A with specifically addressing the following:

What is the ITAA36 s 90 net income of the partnership?
How much is to be allocated to each partner?
What is the taxable income for partners of the partnership?

Client B
Practical advice with recommendations to Client B with specifically addressing the following:

What is the ITAA36 s95 net income of the trust?
Calculate and advice the net tax payable by the trustee and each beneficiary.

4) Reference List
On a separate page provide a reference list covering all relevant legislation and/or case law and any other sources of evidence you referred to in your business letter using APA 7th style referencing.

Part B: Client C Tax Advice - Presentation (max 8 mins)
Based on the background information for client C (outlined below) prepare an 8-minute client presentation explaining your tax advice and recommendations. Your Presentation should be supported by a maximum of 10 PowerPoint slides (including a title slide and a slide with reference list) as a visual aid, including calculations, to explain your advice and recommendations to Client C. Your presentation needs to address the following points:
Construct the company's franking account for the 2024/25 financial year, and calculate the franking account balance as at 30 June 2025.
Advise the taxable income for Dusty Sheep Pty Ltd for 2024/25 including whether or not the company can claim all losses.
Advise the final tax payable or refundable for Dusty Sheep Pty Ltd for 2024/25and also advise any tax consequences arising from the franking account.

Client A - George and Trish (background information)

George and Trish, both 45 years of age, are equal partners in a business, "Parallel Movement" which is not an SBE. The accounts for the 2024/25 income year show the following. All amounts are GST exclusive.

Receipts
Trading income (Sales) $350,000
Interest on drawings ($1,500 by George and $4,500 by Trish) $6,000 Dividends received franked to 65% $10,000

Expenses

Purchases of trading stock $50,000
Partner's salaries - $12,500 each $25,000
Staff salaries $37,330
Interest paid on capital ($2,500 to George and $1,700 to Trish) $4,200 Superannuation - Employees ($3,000) Partners ($14,000 each) $31,000 Other deductible expenses (excluding the car decline in value) $61,000

The partnership made a loss of $30,000 in the previous year The dividends were received from a BRE

Other information

On 1 January 2025, the partnership purchased a new Ford Focus (with a 2000cc engine capacity) for $60,000 with a 4 year car loan. They disposed of the old car on the same date.
During the year, the car travelled 30,000 kilometres, of which Partners determined that 70% was on business from a valid log book. From their records, the costs associated with the car were as follows
Borrowing cost for loan $4,000
Registration $500
Petrol $14,000
Maintenance $1,200
Interest paid on loan $11, 400
Loan principal repaid $9, 200

Proceeds from sale of various assets during January 2025
Sale of Qantas shares held as an investment (a) $14,000
Sale of Telstra shares held as an investment (b) $3,000
Sale of land held as an investment (c) $115,000
Sale of old business car used for delivering goods (d) $17,000

Further information regarding the disposal of assets

Qantas shares were purchased on 1 July 2024 for $7,600
Telstra shares were purchased on 22 November 2022 for $9,100
Land was purchased on 8 May 2010 for $70,000
The old business car was purchased on 1 July 2021 for $50, 000 and decline in value was calculated using the Prime Cost Method and had an adjustable value of $31, 250 at the time of disposal on 1 July 2024. The business use was 100%

Opening inventory was $9,800 and closing inventory was $8,900

There were no debtors or creditors balances on 1 July 2024 and 30 June 2025.
The shares and land are all owned 40% by George and 60% by Trish

Required

What is the ITAA36 s 90 net income of the partnership?
How much is to be allocated to each partner?
What is the taxable income for partners of the partnership?

Client B - Sooty family trust (background information)
The Sooty family trust is an inter-vivos trust with three beneficiaries. The net income of the trust is distributed as follows.

Amy Jones (aged 25) 30%, Amy has other income (wages) $40,000
Helen Jones (aged 15) 30%, Helen attends school fulltime has a part time job and earned $13,000 Colin Jones (aged 17) 35%, Colin works as a full-time employee and earned wages $25,000 from his full-time job.

The following revealed by Scoot family trust for 2024/25 income year.
100% franked dividend received $11,000
80% franked dividend received $4,000
Proceeds from sale of Sydney rental property on 30 June 2025 $650,0000
Agent commission paid for sale of Sydney rental property $18,000
Net rental income $12,000

Other information
Rental property: it was purchased 1 July 2016 for $650,000. The building was completed during 2010 and the construction costs were $380,000. Sooty family trust claimed all possible deductions including capital works since 1 July 2016.
The trust has no income to which any beneficiary is specifically entitled.
The 100% franked dividend was paid by a company with a 30% tax rate, the 80% franked dividend was paid by a BRE.

Required

What is the ITAA36 s95 net income of the trust?
Calculate and advise the net tax payable by the trustee and each beneficiary.

Client C - Muddy Merino Pty Ltd (background information)

Muddy Merino Pty Ltd is a resident Australian company, it operated a business grazing sheep in Western Australia until 1 January 2024 when it changed business activities to running an adventure leisure expedition business in addition to grazing sheep. The adventure business is based around moving sheep along the Canning Stock route to new pasture.
The shareholders and income / losses for the years ended 30 June were as follows.

Referencing
Your analysis requires individual research using a range of tax resources, where applicable and be referenced using the APA Referencing style.