Case study

Page 1 Kaplan Business School Assessment Outline

Assessment 3 Information

Subject Code: CLWM4100

Subject Name: Taxation Law

Assessment Title: Case Studies

Assessment Type: Statement of Advice

Weighting: 30 %

Total Marks: 40

Submission: Via Turnitin on MyKBS

Due Date: Monday of Week 13 at 19:55 AEST

Your Task
Your task is to analyse client information outlined in the three different case studies below and
present the findings in three Statement of Advice (approximately 2,000 words).

You are required to prepare Border Pty Ltd’s taxation return.

1) You are required to provide advice and tax calculations to Cynthia and Andreas (directors of
Border Pty Ltd) regarding the tax payable by the company.

2) You are required to calculate the capital gains tax for Cynthia and Border Pty Ltd.
3) You are required to complete the franking account and tax implications on dividend received

by Border Pty Ltd shareholders.

For each question you are expected to:
1) identify the facts and issues for each case
2) apply the relevant legislation and/or case law.

Learning Objectives

After completing this Individual Assignment, you will be able to:
1) Research information about each question using tax cases and tax legislation.
2) Determine the main issues and make recommendations for each case.
3) Calculate taxes for an individual, a trust and a company.

Assessment Instructions

Statement of Advice 1 – Prepare a tax return for an entity (Australian private company)
(10 marks for technical and calculation accuracy and relevance and 10 marks for writing style;
refer to marking rubric for more guidance.)

In your current role, you are responsible for providing taxation services to individual/business
clients. You conducted an initial meeting with two (2) clients (Cynthia and Andreas Rafter, both
Australian residents) to obtain and document all the relevant information which is required to
prepare the relevant tax documentation.

Both Andreas and Cynthia are directors of Border Pty Ltd, an Australian resident private
company with a corporate tax rate for imputation purposes of 30% for the 2020/21 income year.

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The clients have requested that you evaluate their tax position and provide recommendations
relating to income tax liability and the optimum tax treatment.

Border Pty Ltd sells coffee machines using accrual basis accounting for tax purposes. Receipts
and payment details as at 30 June 2021 are as follows (ignore GST and small business
concessions).

Receipts
Cash received for Sales (note 1) $278,000
Dividend received (note 2) $8,720

Payments
Purchases of inventory (note 3) $97,000
Net wages paid to employees $57,890
PAYG withholding paid to the ATO $12,780
Superannuation paid (note 4) $4,987
PAYG instalment paid the ATO (note 5) $5,210
Fringe benefit tax paid to the ATO $11,210
Fully franked Dividend paid (note 6) $30,000
Purchase of motor vehicle (note 7) $52,000
Other deductible expenses $26,900

Notes

Note 1) All sales during 2021 income year were on credit. Account receivable balances were as
follows.

Date 1 July 2020 30 June 2021

Accounts receivable $17,600 $19,800

Note 2) Dividend income received by Border Pty Ltd for the year included:

• On 30/8/2020, a dividend of $3,600 received from Australian Bank Ltd (an Australian resident
public company for tax purposes) franked to 60%.

• On 28/2/2021, an unfranked dividend of $5,120 from Lowest Ltd (an Australian resident public
company for tax purposes).

Note 3) All inventory purchases during 2021 tax year were on credit. Account payable and
inventory balances were as follows.

Date 1 July 2020 30 June 2021

Accounts payable $5,280 $5,830

Inventory (trading stock) on 1 July 2020 $7,100

Inventory (trading stock) on 30 June 2021

– at cost $8,400

– at market selling $8,600

– at replacement $8,500

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Note 4) As per the ledger balances on 30 June 2021, Superannuation payable for June quarter
was amounted to $1,727. The payment is due by 28 July 2021.

Note 5) As per the ledger balances on 30 June 2021, PAYG instalment liabilities payment and
payable information are as follows.
24/8/2020 PAYG instalment paid for June quarter 2020 $ 860
25/11/2020 PAYG instalment paid for September quarter 2020 $1,450
28/2/2021 PAYG instalment paid for December quarter 2020 $1,450
26/5/2021 PAYG instalment paid for March quarter 2021 $1,450
June quarter 2021 was amounted to $1,450. The payment will be paid on 25 August 2021.

Note 6) The fully franked dividend was paid on 25 February 2021.

Note 7) The motor vehicle was used to deliver coffee machines. Andreas wishes to use the
taxation effective life to depreciate the machine.

Required

1) Andreas wishes to minimise the income tax for 2020/21. Calculate Border Pty Ltd’s net tax

liability in respect of the income that it derived in the tax year 2020-2021.

2) Advise assessability of receipts and deductibility of 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.

Statement of Advice 2 – Advice on company franking account and distributions (10 marks
for technical and calculation accuracy; refer to marking rubric for more guidance)

Cynthia and Andreas seeking your advice regarding Border Pty Ltd’s franking account. (Please
note: use all figures/information provided from Statement of Advice 1 above to construct the
franking account for 2020/21. Opening balance is provided below).

Required

1) 1 July 2020, the balance in Border Pty Ltd’s franking account was $7,158. Construct Border
Pty Ltd’s franking account for the 2020/21 financial year. You also need to calculate the
franking account balance as at 30 June 2021.

2) Border Pty Ltd wishes to pay a final fully franked dividend of $40,000 on 30 June 2021.
However, Andreas and Cynthia are concerned about the franking account to go into deficit.
Calculate and advise the maximum frankable distribution amounts that Border Pty Ltd can pay
as fully franked dividend. What are the tax consequences if Border Pty Ltd goes ahead and
pays $40,000 fully franked dividend on 30 June 2021?

3) Assuming Border Pty Ltd paid $40,000 fully franked dividend on 30 June 2022 (only dividend
paid for the year), comment on the tax treatment of the dividend to the following four (4)
shareholders:

• Cynthia & Andreas Rafter receive a dividend of $15,000 each. They are Australian

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residents at the highest marginal tax rate.

• $5,000 to Justin Rafter, the son of Cynthia & Andreas, who has been studying in London
for three years and is a foreign resident.

• $5,000 to Leaf Pty Ltd, an Australian private company with a 30% company income tax
rate.

Advise how each of the above four shareholders of Border Pty Ltd would be taxed on the
distribution received in 2021/22.

Statement of Advice 3 – Advice on net capital gains (10 marks for technical and calculation
accuracy; refer to marking rubric for more guidance.)

Since 1997 Andreas and Cynthia have invested in various Australian shares. Cynthia acquired
the shares in her own name whereas Andreas had his company Border Pty Ltd acquire his share
portfolio. On 20 August 2021 both Cynthia and Andreas made a decision to dispose of their
Australian shares and the proceeds and purchase prices information are as follows.

Cynthia’s share portfolio

Shares Purchase date Costs Proceeds

Mega Mining Ltd 1 April 1997 $8,000 $12,400

Global Media Ltd 10 June 2000 $15,000 $90,000

Watson Tel Ltd 17 May 2013 $34,000 $33,500

Qantas Ltd 8 January 2021 $17,900 $21,000

Border Pty Ltd share portfolio

Shares Purchase date Costs Proceeds

Xero Ltd 28 March 2018 $45,000 $62,000

Qantas Ltd 26 June 2021 $21,600 $28,800

Other information
Cynthia has a capital loss of $600 carried forward from sale of painting during 2018.

Required

1) Advise both Cynthia and Andreas on the CGT consequences of their share sales.

2) Calculate net capital gains for the 2021/22 tax year. You must provide all methods available

for her and choose the best method to minimise Lucy’s net capital gains.

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Important Study Information

Academic Integrity Policy

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of cheating, plagiarism and other academic offences under the Academic Integrity and Conduct
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What is academic integrity and misconduct?
What are the penalties for academic misconduct?
What are the late penalties?
How can I appeal my grade?

Click here for answers to these questions:
http://www.kbs.edu.au/current-students/student-policies/.

Word Limits for Written Assessments

Submissions that exceed the word limit by more than 10% will cease to be marked from the point
at which that limit is exceeded.

Study Assistance

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resources on the MyKBS Academic Success Centre page. Click here for this information.

Page 6 Kaplan Business School Assessment Outline

CLWM4100 Taxation Law

Assessment 3

Marking Rubric

/40 marks

Statement of Advice 1 (10 marks)
0 – 4 5 – 10 Achieved marks ( /10)

Has demonstrated limited achievement:

Correctly calculated some taxable income with
assessable income and allowable deductions items.

Stated recommendations for the best outcome of
taxable income in relation to credit sales, dividend
received, inventory, wages, PAYG
withholding/instalment, superannuation, fringe
benefit tax, dividend paid and purchase of motor
vehicle.

Struggled to articulate the correct taxable income.

Failed to address assessability and deductibility of
receipts and payments.

Has achieved all or most of:

Correctly calculated the taxable income with assessable
income and allowable deductions.

Stated recommendations for the best outcome of taxable
income in relation to credit sales, dividend received,
inventory, wages, PAYG withholding/instalment,
superannuation, fringe benefit tax, dividend paid and
purchase of motor vehicle.

Articulated the correct taxable income.

Addressed assessability and deductibility of each receipt
and payment.

Statement of Advice 2 (10 marks)
0 – 4 5 – 10 Achieved marks ( /10)

Has demonstrated limited achievement:

Either did not prepare or only partially prepared
Border Pty Ltd franking account for 2020/21. Failed
to enter correct the debit/credit entries with
running balances in the franking account.

Failed to identify any consequences arising from
Border Pty Ltd franking account balance as at 30
June 2021.

Failed to correctly address tax implications of
various shareholders.

Has achieved all or most of:

Correctly prepared Border Pty Ltd franking account for
2020/21. Correctly entered the debit/credit entries with
running balances in the franking account.

Correctly identified consequences arising from Border Pty
Ltd franking account balance as at 30 June 2021.

Correctly advised the taxation implications of various
shareholders.

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Statement of Advice 3 (10 marks)
0 – 4 5 – 10 Achieved marks ( /10)

Has demonstrated limited achievement:

Did not explain or failed to explain the CGT
consequences and CGT event.

Either did not correctly calculate or only partially
calculated correctly capital gains/losses per item.

Failed to state various CGT methods.

Failed to calculate the best outcome of net capital
gains.

Failed to advise on capital losses.

Has achieved all or most of:

Correctly explained the CGT consequences and CGT event.

Calculated correct capital gains/losses per item.

Correctly advised on various CGT methods.

Correctly calculated the best outcome of net capital gains.

Stated advice on capital losses.

All Statements of Advice Writing Style (10 marks overall)
0 – 4 5 – 10 Achieved marks ( /10)

Has demonstrated limited achievement:

Some sentences contain grammatical errors and
typos, there are noticeable inconsistencies in the
formatting, and the syntax makes some of the
answers difficult to follow.

Has achieved all or most of:

The document does not contain any grammatical errors or
typos, the formatting is consistent, and the syntax is
articulate and legible.