Reference no: EM132296704

Rationale:

Accountants and Tax Agents are increasingly being required to deal with the ATO via electronic means.

The ATO forwards information to Tax Agents on a daily basis via the Internet. Regular e-mail bulletins are provided on a range of administrative and legal issues, which relate to the preparation of tax returns, or indeed the conduct of any business.

Tax law, ATO procedures and requirements are constantly evolving.

Students are required to demonstrate an ability to locate correct information within the huge amount of data located on various sites on the Internet.

This section of the work is not about a student being able to memorize a series of facts and repeat those facts on a test. Students are required to locate the answers to a series of problems and issues, making use of the Internet.

No written solutions will be provided, as in the real world an accountant or tax agent must stand or fall by his/her ability to locate information, and ensure the accuracy of that information.

A closed book short answer test will be given, together with an extended question on Fringe Benefits Tax, at the conclusion of these topics.

The preparation for this test will depend on the student's ability to locate answers to the exercises set in class. The accuracy of your answers will be the basis of your notes for the short answer test.

TASK 1

Log into the ATO website

1. 1 Using the Links hotlink at the bottom of the ATO website, locate the following websites and provide a brief description of what information each site contains.

Business Entry Point Australian
Prudential Regulatory Authority
Tax Agents Board
Tax Institute of Australia
Taxpayer's Australia
Board of Taxation
Australian Business Register
The Treasurer
Department of Treasury

TASK 2

Using the sites above locate answers to the following questions?

2.1 What is the ABN of McLean Roche Consulting Group Pty Ltd?

2.2 Is the company registered for GST?

2.3 Where is the head of the company located? (Hint use ASIC link)

2.4 Anthony M Wood of Balwyn is offering to prepare your taxation return for a fee.
Is this person a registered tax agent?

2.5 What is the registered address of SPECIALIST TAX CENTRE PTYLTD?

2.6 What is the name of the nominee for this tax agency?

2.7 You have always wanted to work in the Commonwealth Treasury. What is the name of the Federal Treasurer?

2.8 Locate a job vacancy in the Treasury Department and record its title, salary range and closing date for applications.

2.9 Do Treasury prefer to receive applications by surface mail or email?

2.10 An employee indicates that she has assessable income of $30,000 and Reportable Fringe Benefits of $5,000 for the year ended 30 June 2005. She has contributed $1,000 into her super fund.

2.11 Using the calculator available on the ATO website calculate her co contribution which the Government will pay.

2.12 What is the difference between the Tax Agent Portal and the Business Portal?

TASK 3.

Go to the Australian Taxation Office website.

A client engages in the umpiring of football matches on the weekend. He is part of the Southern Umpires Association. Umpires in the competition get paid a wage and a travel allowance each week for the work performed. The client has several questions.

Locate an appropriate Ruling from the ATO Legal Database and answer the following questions for the client.

3.1 Is the income received from this activity assessable?

3.2 Is the travel allowance received assessable income?

3.3 Can the umpire claim the cost of travel to games and laundry of white umpires clothing?

3.4 Will this ruling apply to the client's friend who umpires in the Australian Football League?

Using the ATO home page "Find What You Need"

Rulings and Law

Task 4

Lily has applied for a private ruling to help her determine a tax issue she has. She has been waiting for 65 days for a response and is becoming impatient. Lilly has a few concerns with regard to the process. Locate the answers for Lilly.

4.1. Does the Commissioner have to supply a private ruling for all applications?

4.2. Can a taxpayer object against a private ruling?

4.3. Should she have had a response by now?

4.4 Can a Private Ruling be withdrawn?

4.5 You have advised a client to seek a private ruling on a particular matter.

Locate the appropriate from to be completed and download a copy.

TASK 5

5.1 Briefly explain what is the function of a:

• Product Ruling
• Class Ruling

5.2 Locate and record the number of the following

• Tax Alert on personal services and partnership
• Practice Statement on expenditure on low cost items for business
• Tax Determination on subscription to share market information

5.3 The partners in a partnership wish to claim the interest incurred to borrow funds to pay their personal income tax expenses. Locate the relevant Taxation Ruling or Determination and advise them accordingly.

Review Questions

1. In November 2002 the Commissioner issued a public ruling in relation to the difference between an allowance and a reimbursement. During December 2002, a taxpayer entered into an agreement with his employer in relation to allowances to be paid. In August 2003 the Commissioner withdrew the original ruling. Advise the taxpayer

2. For each of the following, indicate the type of ruling that has been made by the Tax Office and the extent to which it is binding on taxpayers.

a) A ruling is issued by the tax office relating to an investment in a publicly available trust, that aims to breed 3-Legged Parrots. The prospectus claims that investors will be able to claim the cost of any units subscribed as an immediate tax deduction. In the ruling, the Commissioner has indicated that not only will there be no immediate deduction, but investors will be ineligible to claim any interest expenses in acquiring the units until the trust has commenced deriving sales.

b) Jenny Royal has applied for and received a ruling relating to her ability to claim a net medical expenses rebate for massage oils. The ruling states that she cannot include the oils in determining her rebate.

c) The Commissioner releases ruling that 'frequent flyer' bonuses received by employees as a result of employer expenditure are not subject to FBT.

d) Frank phones the ATO regarding a meal allowance that he receives from his employer. In the course of the phone conversation, he provides full identification and is advised by a tax officer that the allowance is assessable income

TASK 6

6.1. Do the following taxpayers need to lodge a tax return

• A 15 year old student who received $4,000 from his father's InterVivos Trust, and $ 3,000 from a part time job.

• A 19 year old student who earned $5,000 in wages
• A retired person whose only source of income was $20,000 in Franked Dividends
• A 28 year old housewife whose only income was $2,000 bank interest, which had TFN tax
deducted at source
• A 22 year old mother who does not work but wishes to claim the Baby Bonus
• A 22 year old student who receives $3,000 in wages and youth allowance of $4,000
• A 37 year old who received Newstart allowance of $5,000 and wages of $6,000.
• A 66 year old single pensioner who received $7,800 in Government pension and
$12,000 in other income,

6.2 What is the due date for an individual to lodge a return?

6.3 How can a return be lodged if the taxpayer is overseas on a holiday?

6.4 Can a taxpayer who is going on holidays in May 2007 lodge his 2007 tax return prior to leaving?

6.5 A taxpayer holidaying overseas arranges for his friend to lodge his tax return.
Can the return be lodged unsigned, or can the friend sign the return for the overseas taxpayer?

6.6 Briefly summarise the way in which Failure To Lodge penalty is imposed.

6.7 A taxpayer lodges a return late. He expects a refund. Will any Failure To Lodge Penalty apply?

6.8 A taxpayer receives a written notification of a FTL penalty. If the subsequent tax return when lodged is a refund, will he have the penalty remitted by the ATO?

6.9 An individual taxpayer is 47 days late in lodging his tax return. What will be the FTL penalty? What if the tax return was 300 days late?

6.10 Can the ATO take into consideration postal delays in FTL cases?

6.11 Will the ATO also charge interest on the FTL penalty?

6.12 Is FTL penalty a tax deduction to the taxpayer?

TASK 7

7.1. Does full self assessment apply to all types of taxpayers?

7.2. Must a taxpayer attend a desk audit?

7.3 Is a taxpayer allowed to be represented at a desk audit?

7.4 Can a taxpayer plead ignorance of the law if a mistake is made on his taxation return?

7.5 Can a taxpayer blame her tax agent for an incorrect claim on a tax return?

7.6 The ATO has issued a Taxation Ruling in respect of home laundry expenses of protective clothing, and substantiation of those costs.

What is the number of that Ruling? Briefly what does the ruling say?

7.6 Using the ATO Legal Database, access Draft Determination TR D2001/D4. Answer the following:

7.6.1 A taxpayer has credit card information on his computer which is encrypted for security reasons. Can the ATO demand this data be decoded for the purposes of an audit?

7.6.2 A taxpayer keeps records in the Cantonese Language. Can the ATO require these to be translated into English?

7.6.3 The ATO is investigating the tax affairs of a business taxpayer. Must the ATO secure a search warrant in order to examine the taxpayer's records?

7.6.4 Is a business under audit required to provide the ATO auditors with a desk at which to work?

7.7 How long should a taxpayer retain records?

7.8 What is meant by a "Shorter Period Of Review" (SPOR) taxpayer?

7.9 Who is eligible for a SPOR?

TASK 8

8.1 What are the time limits available to the Commissioner to amend an assessment increasing the taxpayer's liability?

8.2 A taxpayer has made an error on a return for which she has already received an assessment from the ATO. Explain to her the process to amend her return including the time limits that are involved.

8.3 Will any penalties apply?

8.4 How long should she be expected to wait for a decision?

8.5 How will she know of the ATO's decision?

8.6 Does the Commissioner have the power to change an assessment at a later date once it has been issued?

8.6 What options are open to the Commissioner if the taxpayer refuses to lodge a tax return. Hint (use the ATO Legal Database Refer Section 167 of the ITAA36)

8.7 A taxpayer altered a payment summary(group certificate) six years ago, to increase the amount of tax instalments shown. This resulted in a bigger refund. The taxpayer has now destroyed all records. Can the ATO still amend the return?

TASK 9

9.1 What is the standard processing time for a tax return lodged through the post?

9.2 What is the standard processing time for a return lodged electronically?

9.3 Can a taxpayer seek an extension to pay a tax debt?

9.4 How should this be done?

9.5 Can a taxpayer seek total release from payment on hardship grounds?

9.6 What constitutes hardship?

Undertake a Search on the ATO website for General Interest Charge (GIC)

9.7 Does interest apply from the date the tax was originally due or the date that the return was lodged?

9.8 Are there any situations where the ATO will not apply the GIC to a debt?

9.9 Can a taxpayer seek full or partial reduction in the GIC applied?

9.10 Where should application be made (address)?

9.11 What is the current rate of interest chargeable (April June 2007)?

9.12 Is this a simple flat rate or calculated daily and compounding?

TASK 10

10.1 If a taxpayer dies owing a tax liability, can the Commissioner recover it? Explain in particular if the estate is administered or nor administered.

10.2 Can Commissioner recover a taxpayer's tax liability from a Liquidator?

10.3 Can the Commissioner recover a Superannuation Guarantee Debt from the Liquidator

10.4 Tex Hunt has an outstanding tax liability, can the Commissioner recover the money from:

(a) Fish Enterprises, a debtor of Rex
(b) Trout Building Society where Rex has an account

Phil Lucky's business venture has failed and he had to sell his house to pay his outstanding creditors, and has been declared bankrupt. He is a sole trader. He is unable to pay tax the due.

10 5 How would you advise Phil?

Refer to Section 222NA to 222AQ(D) of the ITAA 36. and ATO Recoverables Policy

10.6 Is a company director personally liable for the unremitted PAYG tax withheld from staff wages?

TASK 11.

11.1 Outline the procedure for objecting against your assessment, including the time limits involved.

11.2 What right does a taxpayer have to an objection if lodged out of time?

11.3 What time frame does the Tax Office have to respond to the objection?

Once the Commissioner has made his decision regarding the objection, and the taxpayer is dissatisfied with the decision, he has the following appeal options:

TASK 12

12. 1. What is the role of the Tax Ombudsman

12.2 Tess, a taxpayer had reason to attend the ATO to discuss a matter with a tax officer. At the conclusion of the meeting she felt that the officer has made inappropriate advances to her, and had taken a copy of her home phone number. What should Tess do in regard to these matters?

TASK 13

13.1 Complete the following table by determining the percentage rates that would apply.

Review Questions

1 . Comment on how you believe the Tax Office would view the following circumstances with regard to penalties:

(a) Interest income of $750 was incorrectly and accidentally shown in the tax return as $75

(b) An elderly taxpayer omitted the imputation credit from dividend income received. The taxpayer did not understand the imputation system and thought only the cash dividend was assessable.
(c) Acting on the advice of a friend, he incorrectly claimed the cost of taxi fares from work to home after working night shift.

(d) A lecturer in accounting incorrectly calculated the depreciation deduction of a home office computer used partly for work. The taxpayer did not deduct a private usage proportion.

2. Does the Commissioner have the power to reduce any of the penalties imposed by the various sections of the Act? If so, under what circumstances may they be reduced?

3. Can a taxpayer appeal against a penalty imposed by the Commissioner?
4. J. Just refuses to lodge an income tax return. What penalty may be imposed under the TAA?

5. Ian Lye intentionally omitted cash income of $3,500 from his 2006 income tax return. During an audit, I. Lye said that the $3,500 was won by betting on the races. He showed some betting tickets as proof.
These tickets were later discovered to have belonged to someone else and that Lye had actually lost at the races. Discuss the implications for Lye.

6. Jason's 2006/07 tax return showed a taxable income of $56,200. He has been recently audited by the ATO. He was found to have recklessly omitted $15,000 from his part time job as a security guard, and to have hindered the auditor the course of her enquiries. Jason is single with no dependants and is not a member of a private health fund. Advise Jason of the likely ATO response to these matters.

Attachment:- Implement Tax Plans and Evaluate Tax Compliance.rar