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Prepare income tax returns

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					                 Prepare income tax returns
This unit covers the competency to prepare income tax returns for
individuals in accordance with statutory requirements.

Content
This unit is made up of four elements.

Gather and Verify Data: This element deals with the process of
gathering and verifying data, to ensure it provides an appropriate base for
the preparation of Income tax and other statutory returns.

Prepare Tax Returns where you trace the stages of income tax return
preparation. (Includes worksheets for Capital Gains and rental and
business income)

Prepare Statutory Returns where you trace the stages of statutory
return preparation. (Includes: Goods & Services Tax, PAYG and Fringe
Benefits Tax obligations to the Australian Taxation Office and company
returns and reporting obligations to the ASIC)

Review Compliance: This element deals with the process of reviewing
compliance, in relation to Australian Income Tax legislation, The New Tax
System and some aspects of Corporations Law.

Important: Before undertaking this unit it is recommended you view this
document (Excel 20 KB) in order to determine the best pathway to take
through this course.

Introduction
This element deals with the process of gathering
and verifying data, to ensure it provides an
appropriate base for the preparation of Income tax
and other statutory returns.

This area covers:

     The legislative requirements of record keeping in current income tax
      and fringe benefits tax, and Goods and Services Tax legislation.
        o An overview of additional legislative tax record keeping
            requirements is introduced and demonstrated.
        o You are shown the process for keeping appropriate tax
            records
     The process of reviewing accounting information, to determine
      income tax implications, and ensuring appropriate additional
      information is recorded.
         o The process of collecting and analysing accounting
            information for tax consequences is demonstrated.
         o The preparation and purpose of tax working papers and
            records is illustrated
     The process of preparing tax records and working papers.
         o Differences between tax and accounting Valuations are
            discussed and illustrated.
         o Income tax adjustments to accounting income and
            expenditure are introduced and illustrated.

This structure of this element is:

  1. KEY PRINCIPLES
       o An introduction to the record keeping requirements within the
          tax legislation.
       o Discussions of the specifics required within each statute
       o Students are introduced to the differences between
          accounting profit and taxable income.
       o Tax treatment of specific expenses and income items is
          explained and illustrated.
       o Students are asked to consider some practical and
          interpretation issues.
  2. LOOKING and WORKING
       o A practical business situation is introduced and used to
          illustrate the process of reviewing accounting information, to
          determine income tax implications.
       o Capital gains tax asset registers are illustrated and discussed.
       o An introduction to the process of researching information
          outside the accounting records, using a practical example as
          an illustration.
       o Practical examples requiring the student to prepare working
          papers and make decisions and calculations.
       o A case study is set up requiring the student to follow the
          processes illustrated in order to:
               examine the implication of accounting/tax valuations,
               determine differences between accounting and tax
                 expenses and income,
               prepare tax working papers,
               prepare records in accordance with capital gains tax
                 requirements,
               complete FBT records to maximize options within the
                 legislation.
Key principles - Overview
The records of a business need to be adequately
maintained to ensure that they adequately meet
the obligations imposed by both internal and
external Authorities. In many instances the
data required to satisfy the requirements of
external bodies will be different or in addition to
that required by internal management.

This element identifies some of the external bodies that impose record
keeping requirements and highlights both the additional details required
and the reasons for their retention.

The Australian Securities and Investment Commission is an external
authority, specifically relevant to Australian Corporations including
companies. It imposes record keeping and reporting requirements on
companies. These record keeping requirements will be covered in this
element.

The Taxation Office is another such external authority. It imposes record
keeping requirements in many areas of taxation not just income tax. The
Australian Taxation Office provides detailed information regarding the
record keeping and legislative requirements imposed on individuals and
businesses. This information is available to the public free of charge and it
is expected that individuals and business follow the guidelines provided.




       Activity

Peruse the ATO website. Find out where you can find guides to

      Fringe Benefits Tax (FBT),
      Capital Gains Tax (CGT)
      Goods and Services Tax (GST)

Where can you find income tax return forms for Companies?

Where can you find specific advice regarding legal issues?

Bookmark this site or add it to your favourites. (You will need to refer to
this site often.)

There are significant differences between accounting profit and taxable
income. In order to quantify these differences there must be specific
information available. This element will help you identify the significant
differences and highlight the specific data required to quantify them as
required by taxation legislation.




       Activity

In what areas does the Taxation Office impose record keeping
requirements?

Key Principles - Overview
Answer to Second Activity

The areas in which the Taxation Office imposes specific record keeping
requirements include those in relation to: Income Tax, Capital Gains Tax,
Fringe Benefits Tax, Goods & Services Tax.

Accurate records - Overview
The records and procedures of a business are often designed to satisfy
the internal requirements of the management of that business. This is not
always sufficient to satisfy external requirements. This element will help
you identify additional records and procedures that may be needed.

If the auditors, if any, of the business are satisfied and the books of the
business are accurately maintained for internal purposes, there are
further questions you should ask:

      Is the business free to dispose of the source documents and prior year records?
      Would the internal business information be sufficient to satisfy obligations to the
       Taxation Office?
      What obligations does a business have to the Taxation Office?
      What other external bodies impose record keeping procedures on businesses?
      What degree of detail is specified by these external authorities?

This element will assist you in answering these and similar questions.

Is the business free to dispose of the source documents and prior
year records?

No, the Australian Taxation Office (ATO) and the Australian Securities and
Investments Commission (ASIC), dictate time periods for the retention of
documents and records. The time periods vary depending on the
particular record being considered. Some of the specific requirements are
discussed under separate headings.
Would the internal business information be sufficient to satisfy
obligations to the Taxation Office?(top)

Not necessarily, the records and procedures must also be sufficient to
satisfy the obligations imposed by authorities external to the business.
The particular details required would not always be collected in the
normal course of business unless specific provision was made.

What obligations does a business have to the Taxation Office?(top)

The Taxation Office imposes specific record keeping requirements in
relation to:

      Income Tax Obligations
      CGT (Capital Gains Tax)
      Fringe Benefits Tax
      PAYG (Pay As You Go)
      GST (Goods and Services Tax)

What other external bodies impose record keeping procedures on
businesses?

The Corporation's Law requires businesses to keep records for various
State Government Departments and the ASIC - as well as the ATO.

What degree of detail is specified by these external authorities?

The degree of detail required is discussed under separate headings.

Income tax requirements
In addition to the legal aspects, the deductibility of an item for taxation
purposes is also subject to the availability and retention of the required
records.

Income Tax Legislation imposes data requirements on both type of data
and the period of retention. Taxation rulings provide additional clarification
and guidance on specific aspects of the legislation.

Those responsible for preparing income tax returns will need to ensure
that the appropriate records are kept and are accessible.

Specific details of what is considered appropriate records are included in
the legislation and related tax rulings. Specifically the legislation includes
details required in relation to:

      SUBSTANTIATION of work related expenses, including motor vehicle
       and travel expenses, and
      GENERAL RECORD KEEPING REQUIREMENTS, which apply to all the
       taxes administered by the Australian Taxation Office.

In addition to the legislation, the Taxation Office has issued a ruling,
TR96/7, which provides a detailed explanation and examples of the types
of records needed to be retained by businesses.

Among other significant points this ruling explains that a person carrying
on a business must keep records:

      to explain all transactions relevant to the business's income and
       expenditure,
      of any elections or estimates made when assessing its liability to
       taxation, and
      keep these records for five years after the transaction.




       Activity

Peruse this and external sites to answer these questions.

   1. A busy shop accumulates many cash register rolls. Must it keep
      these cash register rolls? If so, for how long must they be kept? Is
      there any alternative?
   2. What is the statutory term which generally applies to record
      keeping?
   3. What is classed as acceptable documentary evidence?

Post your response to the discussion board

Substantiation required to receive a deduction
Employment deductions must be substantiated by receipts or other
reasonable independent evidence. The components of the receipt or
evidence are specified in Division 900 of the Income Tax Assessment Act,
which can be viewed on the ATO website's legal database. The major
principles of Division 900 have been summarised in the documentary evidence
page .

Motor Vehicles subject to specific rules

Motor Vehicle and travel expenses are subject to specific substantiation
rules, which also apply in relation to Motor Vehicle Fringe Benefits. These
substantiation requirements apply regardless of whether the expense is
incurred in the capacity of an employee or as a self employed person. A
business will also need to satisfy these requirements.
Motor vehicle expenses can be claimed on the basis of one of four
methods. Each method has different substantiation requirements. The
details of each method are included on the ATO website, and in the
current taxpack, and are available via a Fax from Tax (contact numbers
are supplied in the References/External/Tax section).

Keeping records increases options

A business or individual taxpayer should keep sufficient records to enable
the claim under each of the methods to be calculated. The taxpayer then
has the option of claiming the most advantageous deduction. If the
records of the business are not adequate the options available are
substantially reduced.




      Activity

Access one of the external references referred to determine:

  1. What are the four methods of substantiation of Motor vehicle
     expenses?
  2. What records or data, in addition to that collected in the ordinary
     course of business, would a business need to retain in order to
     satisfy each of these methods?
  3. Do your requirements change if the vehicle is a truck rather than a
     car?

General record keeping requirements
Throughout the income tax legislation and most of the other taxes
administered by the Australian Taxation Office the following minimum
record keeping requirements exist.

     Records are to be kept in English or readily accessible and
      convertible into written English, (thus computer code may be
      acceptable).
     Records must enable the person's liability to be readily ascertained.
     They must be kept for 5 years after they were prepared, or
      obtained, or for 5 years after the completion of the transactions, or
      acts to which they relate, whichever is the later.

ss 466, ss 102AAZG(3) and s262A of the Income Tax Assessment Act

Capital Gains Tax requirements
CGT within income tax legislation
In addition to other income tax obligations, individuals and businesses are
liable to Capital Gains Tax (CGT). While Capital Gains Tax falls within the
income tax legislation, there are provisions of the legislation that require
specific records to be kept for specified periods.

Capital Gains Tax applies to the disposal of a very broad definition of
assets. For a detailed explanation of the CGT regime please refer to one
of the External References. The Taxation Office issues a detailed booklet
on Capital Gains Tax. It may be downloaded in PDF format from the ATO
website.

The records need to be sufficiently detailed to determine the taxpayer's
obligation to CGT. This involves keeping and recording details of all capital
outgoings in relation to assets held. As the CGT regime applies to most
assets - not just those used in relation to earning income, records need to
be kept for most assets.

General record keeping provisions apply

As the Capital Gains Tax provisions fall within the income tax legislation
the general provisions in relation to record keeping apply to the Capital
Gains Tax events.

The application of general record keeping provisions means that a person must
keep all receipts and original source documents in relation to capital
expenditure for 5 years from the date of disposal (which may be several
years or decades after the expenditure) of the asset to which the
expenditure relates.

This could involve voluminous records for assets held for long periods of
time. The legislation was amended to allow an alternative - the CGT Asset
Register.

CGT Asset Register

From 1 January 1998, taxpayers have been allowed to enter information
in relation to capital gains expenditure into an asset register. The entries
in the register must be certified by an approved person (for example a
registered tax agent).

Providing the legislative conditions are met, the original receipts and
documents need only be kept for 5 years from the date of entry in the
register. The register must then be kept for 5 years after the disposal of
the asset. Full details in relation to asset registers can be found in Tax
Ruling TR98/D10 or by doing a search within the For Business section of
the ATO website.
       Activity

 Answer the following questions. What is an CGT Asset register?

    1. What information is transferred to the register?
    2. What is the purpose of a CGT Asset Register?

Fringe Benefits Tax requirements
Employers are liable to pay Fringe Benefits Tax (FBT) on certain benefits
paid by them or their associates, to their employees or associates in
relation to their employment.

In order for the employer to ascertain and substantiate their liability they
need to ensure particular information is obtained and retained. The general
record keeping provisions apply to Fringe Benefits Tax records.

In addition, if the employer fails to keep statutory evidence for the
required retention period, the employer is deemed never to have received
the statutory evidence.

The most prevalent fringe benefit is the motor vehicle fringe benefit. There
are two methods available for valuing car fringe benefits, the statutory
formula method and the operating costs method.




       Activity

In relation to car fringe benefits, review the formulae for calculating the
FBT payable and identify:

   a. What information (in addition to that available within a business's
      normal accounting records) would need to be collected to
      determine the FBT payable, and
   b. What type of records would need to be kept to substantiate this
      information?

Answer

Information to substantiate FBT on motor
vehicles
Just as the FBT payable on motor vehicles is dependent upon the method
selected, so is the information necessary to substantiate and calculate
the FBT.

Statutory Method

If Statutory Formula Method is selected a business would need to
determine:

      The total number of kilometres travelled.
      The number of days during the year where the vehicle was
       privately used or available for private use.
      The contribution if any the recipient made to the vehicle expenses.

The employer would need a log book specifying at least the odometer
reading at the beginning and end of the FBT year. This may take the
form of a declaration by the employee in the appropriate format. The
odometer readings would enable the total number of kilometres travelled
to be determined.

Operating Cost Method

The business would need a log book substantiating the business use
proportion of the expenses.

Information Common to Both Methods

The FBT payable under both methods is reduced by amounts paid by the
employee. Therefore, under either method, the employer would also
need to have been supplied with documentary evidence (receipts or
invoices) from the employee to substantiate any expenses paid. (A
declaration in the approved form is acceptable for fuel and oil expenses).

A checklist for employers is included in the Guide to Fringe Benefits issued by the ATO. This
checklist should be consulted to ensure all aspects of record keeping and evidence gathering are
complied with.


Reducing the FBT

The fringe benefits tax payable may be reduced by the amount that would
otherwise be deductible to the employee. In order to deduct the amount
the employer must be able to substantiate the reduction. This
substantiation involves

      receipts;
      petty cash book entries;
      travel diary; and
      car odometer and log book records.

Declarations to be kept

The employee payment needs to be supported by a declaration in the
approved format by the employee. The approved format is specified in
ATO publications. The declarations are subject to the general record
keeping requirements, and must be obtained by the due date of the FBT
return.




GST record keeping requirements
The Goods and Services Tax Legislation details the GST record keeping
requirements for business. The Australian Taxation Office has issued
several guides and information booklets on the Goods and Services Tax.
They are available free of charge from the ATO. The following details relate
to those businesses registered or required to be registered for GST.

There are two significant parts to GST record keeping, the accounting
records and the source documents.

Accounting Records

The accounting records of a business must enable the following information
to be retrieved each tax period (either monthly or quarterly).

      Income from all supplies made;
      Income from any GST-free supplies;
      The amount of GST included in the supplies (sales) made;
      The amount of income from taxable supplies (excluding GST); and
      The total amount paid for business acquisitions, which needs to be further
       split into, the total amount paid for acquisitions with GST and the total
       amount without GST.

Source Documents

The source documents need to record and provide the information required
for the business itself and for its customers, and they need to comply with
the legal requirements.

In relation to the source documents the business uses, the most critical for
GST purposes is that the business issue GST compliant Tax Invoices.

To be compliant a Tax Invoice must include the following basic information:
      the words Tax Invoice prominently displayed;
      the ABN (Australian Business Number) of the business and the business
       name;
      the name and address (or ABN) of the recipient (Unless the supply was for
       less than $1000);
      the issue date of the invoice;
      the GST-inclusive price of the supply;
      a brief description of each good or service supplied;
      the quantity of each good or service supplied (if the supply is for $1000 or
       more);
      a statement such as the total price includes GST, the GST payable is exactly
       1/11 of the total price) or the GST amount;
      if the invoice includes some GST free or input taxed supplies the invoice
       must identify which items are taxable; and
      the total amount payable

Adjustment notes to be issued

The business will need to ensure that your system can record and issue
compliant adjustment notes which adequately record the GST impact of
any returns, credits and discounts.

Many of these terms have specific legal meaning and external references should be
consulted for clarification.

Corporations law requirements

In addition to Tax obligations, those businesses that are companies must
also comply with the Corporations Legislation. The legislation and guidance
sheets can be viewed on the Australian Securities and Investment
Commission's website. You will find a link to this website in your external
references (under Regulatory Bodies).

Those sections of the legislation that are particularly relevant to record
keeping include:

Section 286(1) which states that a company must keep written financial
records that:

   a. correctly record and explain its transactions and financial position and
      performance; and
   b. would enable true and fair financial statements to be prepared and audited

Financial records are defined in section 9 of the Law as including:

   a. invoices, receipts orders for the payment of money, bills of exchange,
      cheques, promissory notes and vouchers; and
   b. documents of prime entry; and
   c. working papers and other documents needed to explain:
        (i) the methods by which financial statements are made up; and
        (ii) adjustments to be made in preparing financial statements.

Financial records may be kept electronically and there are numerous accounting
software packages available for this purpose. Section 288 of the Law states that if
financial records are kept in electronic form, they must be convertible into hard
copy. Hard copy must be made available within a reasonable time to a person
who is entitled to inspect the records.

Notes

   1. Although the Law does not require small proprietary companies to prepare
      financial statements, unless requested by ASIC or shareholders, they are
      considered a valuable tool for managing your company and checking its
      progress and financial position and may be helpful if you are contemplating
      raising finance.
   2. Section 286(2) of the Law requires financial records to be kept for seven
      years.

The ASIC issues several useful guidance sheets and checklists on recordkeeping and
obligations of registered companies. You should view the 'Checklist for registered
companies and their officers' - find this form by doing a search for it on the ASIC
website.

 Tax valuations
 Just as profit for accounting purposes follow accounting principles rather
 than taxation law, so does the valuation and recording of assets. A
 business's assets are recorded in accordance with accounting standards,
 whereas those taxation claims that relate to assets are based on income
 tax legislation not accounting standards.

 Income tax legislation generally relates to income and expenses,
 therefore the valuation of assets only impacts on those areas which have
 an impact on taxable income. These areas include:

        depreciation
        amortisation
        gain or loss on sale of depreciable assets
        capital gains or losses, and
        trading stock

 This section covers some of the issues relating to the valuation of assets
 generally, and also in the more specific area of the valuation of trading
 stock.
       Activity

List at least two assets that may be treated differently for tax purposes
than accounting purposes.

Answer

Suggested answers could include:

      Goodwill, and intangible assets
      Stock
      Structural Improvements
      Fences, roads and dams.

Stock valuations
The taxation legislation gives a taxpayer options as to the valuation of
trading stock. If a different method is chosen for accounting purposes,
there will be a variation in the value of trading stock for tax purposes and
the value for accounting purposes.

Tax valuation at year end

For tax purposes a taxpayer must value trading stock on hand at:

      its cost;
      its market selling value; or
      its replacement price

Changing methods

A taxpayer can vary the method of valuation from one year to the next,
or have different items of stock valued under different methods. The
overriding condition is that the closing stock of one year must equal the
opening stock of the next.

Choice of method gives flexibility to Taxable Income

As the taxpayer has a choice of valuation methods, they can effectively
use the stock valuation to increase or decrease taxable income. If the
value of closing stock is higher a smaller deduction is allowable for tax
purposes and vice versa. This will result in a timing difference in when tax
is payable (this year or next).

Determining cost of stock on hand
The stock must be valued at cost, which is the actual cost of the stock
plus those charges that are necessary to get it to the place at which it is
located. Only that stock that is actually on hand is included in the
valuation of trading stock.

The accounting methods of first-in-first-out, average cost and standard
cost are only acceptable if, those situations exist e.g. the goods are sold
on a first-in-first-out basis.

Standard costing is acceptable only if the standards are reviewed
regularly. Many of the external references have full discussions on the
acceptable methods of valuing stock-on-hand. You should refer to them
for details.

Asset valuations
Accounting standards dictate to a business the principles for recording the
value of assets and the basis upon which those assets can be written
off. Generally assets are recorded for accounting purposes at historic cost
and revalued in accordance with accounting standard
AASB1010 Revaluation of non-current assets. Goodwill is valued,
recorded, and written off in accordance with accounting standard
AASB1013 Goodwill.

Assets valued are at cost for tax purposes

For taxation purposes historic cost is the usual basis for valuing assets,
although there are exceptions to this.

Exceptions

There are exceptions to the historic cost basis, which occur when the item
has been purchased or disposed of at an inflated or deflated value as part
of

   a. a tax avoidance scheme or arrangement, or
   b. because the acquisition or disposal was not made 'at arms length'

If either of these occur the value of the asset will be adjusted for taxation
purposes to the 'arm's length' value.

On subsequent resale of an item, the Commissioner has the discretion to
restrict the total depreciation on an item of plant to its original cost. In
the absence of either of the exceptions listed above, the Commissioner
does not generally exercise this discretion and accepts the cost price as
the value for depreciation purposes.
Depreciation deductions limited to cost price.

Depreciation deductions (if applicable) can be made (in the absence of the
exceptions listed above), only on the basis of cost. Revaluations, even in
accordance with accounting standards do not affect the depreciation
amount deductible for taxation purposes.

Further deductions for asset write-offs can only be made within the
provisions of the income tax legislation.

Intangible assets

Goodwill, patents and other intangible assets do not fit within the
definition of an item of plant and are therefore not depreciable for
taxation purposes. Furthermore they do not fall within the definition of
Structural Improvements and are therefore not able to be amortized for
taxation purposes.

They do however fall within the definition of an asset for capital gains tax
purposes and any gains or losses on disposal will be subject to those
provisions.

Income tax adjustments
The specific provisions of the income tax legislation determine taxable
income. This is a separate concept to accounting profit. There are several
specific areas where the taxable income calculation differs from
accounting principles.

This section highlights the following common variations between
accounting profit and taxable income.

      Prepayments
      Depreciation and capital acquisitions
      Accounting provisions and bad debts.

The accounting records of a business are kept to reflect accounting profit.
These records will need to be reviewed and where necessary, adjustments
made to the figures contained therein in order to correctly identify the
taxation impact of the expense or income item. These adjustments are
made for taxation purposes and would not be recorded in the accounting
books of the business.

Reconciliations of accounting profit to taxable income would need to be
kept with the taxation working papers, and is required to be detailed on
some income tax returns.
Prepayment adjustments
In certain limited circumstances some businesses and individuals are
entitled to a deduction for prepayments. The deduction can result in a
significant timing difference in when tax is payable. The tax would be
payable in a later year rather than the one in which the prepayment is
made and is thus an advantage.

Small business and non-business taxpayers are entitled to a deduction in the
year of payment for prepayments made for a service that will be provided
within 13 months of the date of the expenditure.

Law change

The law change relating to all prepayments made after 11.45 on 21 Sept
1999 effectively means that a deduction for

      expenditure for a thing that will not be wholly done within 13
       months (This rule applies regardless of the size of the taxpayer or
       whether they are in business or not); or
      expenditure by a taxpayer carrying on a business, (other than a
       small business taxpayer), for doing a thing that will not be done
       wholly within the income year in which the expenditure is incurred,
       i.e. is any prepayment;

will need to be spread over the period in which the services are to be
provided. (There are transitional rules that apply to expenditure for a
thing done within 13 months, and there are a few exceptions.)

This law effectively eliminates the tax advantage of prepayments (for all
but small business and non-business taxpayers). Even for small business
and non-business taxpayers the deductibility of the prepayment in full in
the year it is incurred is restricted to prepayments for a thing to be done
within 13 months and there are further legislative amendments to prevent
a deduction for even these amounts if they are made under 'tax shelter
arrangements'.




       Activity

Review the external references and identify from the list below the types
of advance expenditure which will continue to be fully deductible in the
year incurred. (This list includes the exceptions referred to above).
Question                                        Answer
Expenditure for Salary and Wages.                  Deductible
                                                   Not deductible
Expenditure to Government or Government            Deductible
Authorities.
                                                   Not deductible
Where the prepayment is required under             Deductible
contract.
                                                   Not deductible
Where the amount of the expenditure is less        Deductible
than $2000.
                                                   Not deductible
Where the prepayment is required by law or         Deductible
court order.
                                                   Not deductible
Where the amount of the expenditure is less        Deductible
than $1000
                                                   Not deductible
Expenditure on interest in relation to a           Deductible
rental property paid by a non-business
taxpayer and relates to a thing that will be       Not deductible
provided within 13 months.
Expenditure by a business taxpayer with an         Deductible
average annual turnover of $1.2m that
relates to a prepayment of services which          Not deductible
will be provided within 13 months.




Answers to Activity

Prepayment Adjustments

Expenditure for salary and wages is deductible. This is one of the specific
exclusions from the provisions.

Expenditure to Government or Government authorities is deductible. This
is one of the specific exclusions from the provisions.

A prepayment that is required under contract is not deductible, unless the
payment is made by a small business or non-business taxpayer and is for
a thing that will be done within 13 months.
Expenditure that is less than $2,000 is not deductible, unless made by a
small business or non-business taxpayer and is for a thing that will be
done within 13 months.

A prepayment that is required by law or court order is deductible. This is
one of the specific exclusions from the provisions.

Expenditure that is less than $1,000 is deductible. This is one of the
specific exclusions from the provisions. The amount of less than $1,000 is
specified.

Expenditure on interest in relation to a rental property paid by a non-
business taxpayer and that relates to a thing that will be provided within
13 months is deductible because the thing is to be provided within 13
months and the taxpayer is non-business.

Expenditure by a business taxpayer with an average annual turnover of
$1.2 million that relates to a prepayment of services that will be provided
within 13 months is not deductible.




Small business taxpayers
Small business taxpayers are entitled to favourable treatment under
several provisions of the Taxation Legislation. These provisions include
those in relation to:

      prepayments, and
      depreciation

For these purposes, a small business taxpayer, is one that

      carried on a business during that year, and
      had an average turnover* (excluding GST) for the year of less than $1m

*Average turnover is the turnover for the year of income and the two preceding
income years, (if the taxpayer was not in business for the two preceding years an
average of the years in which the taxpayer has been in business is used).

There are provisions to prevent taxpayers splitting their businesses into
smaller groups in order to qualify for the favourable treatment.

Depreciation adjustments
Accounting standards dictate how a business accounts for depreciation
whereas the taxation legislation determines what items are deductible
when calculating taxable income. What differences are there?
The accounting standards are concerned with matching the revenue of a
period with the expenses of the period. The taxation provisions generally
follow this principle, but provide a definition of several key components
within the calculation.

Tax Legislation dictates allowable deductions for depreciation

The provisions of the Income Tax Legislation dictate the deduction
allowable for depreciation. They also specify some capital items to be
deductible in full and others not to be depreciable at all. The amount of
the deductions and the method of calculation are determined by the
effective life of the asset and the applicable rate of depreciation in force at
the time the asset was acquired.

The tax office issues applicable rates of depreciation for various items of
plant. A taxpayer has the option of using those suggested in these lists or
using a more appropriate rate. If the taxpayer chooses this option they
must be able to justify their selection to the taxation office. The record
keeping and procedural aspects involved in this process often mean the
rates issued by the taxation office are used instead.

Alternative method

The Taxation Office allows an alternative method of accounting for
depreciation using asset pooling. If the asset pooling option is selected for
taxation purposes, it would still be prudent for a business to maintain an
individual asset register in order to exercise control over and track
individual assets.

If the depreciation rate applied for taxation purposes differs from the
accounting rate, a variation will occur.

The records of a business in relation to assets must be sufficiently
detailed to enable the taxation consequences of items to be determined.
This record keeping obligation will extend over the life of the asset.

In practical terms many accounting packages account for depreciation on
an individual asset basis, with the depreciation being automatically
calculated. For recording and verifying purposes the asset register should
be reviewed to ensure that any assets acquired or sold are recorded
correctly.

An asset pooling arrangement would necessitate a different and therefore
additional record keeping requirement.

Record keeping for taxation purposes:

      Assets acquired are allocated the taxation depreciation rate applicable at
      time of acquisition.
     Once an asset is allocated a depreciation rate, that rate is retained for the
      life of the asset, or until its disposal.
     Asset registers are reviewed at year end to ensure a) all new assets have
      been correctly recorded and allocated the rate applicable at the time of
      acquisition, and b) all assets that have been disposed of have been
      removed from the register.
     Pro rata depreciation is calculated on all assets disposed of and acquired .
     Taxation consequences of assets disposed of during the year are
      determined. This may mean a balancing charge calculation.
     If the pooling option is applicable and selected the assets are allocated to
      the correct pool and depreciation calculated accordingly.




      Complete the following activity




      Activity
Review the ATO depreciation rates schedule or other external references
and decide which of the following items are deductible in full or not
depreciable at all.

Question                                            Answer
Reference Book costing ninety dollars                   Fully deductible
                                                        Depreciable
                                                        No depreciation
Landscaping at a cost of $3 200                         Fully deductible
                                                        Depreciable
                                                        No depreciation
Replacement hand tools                                  Fully deductible
                                                        Depreciable
                                                        No depreciation
Motor Vehicle                                           Fully deductible
                                                        Depreciable
                                                        No depreciation
Computer                                                Fully deductible
                                                       Depreciable
                                                       No depreciation

Answers to Activity

A reference book costing ninety dollars is fully deductible.

Landscaping at a cost of $3,200 is not depreciable at all. Landscaping is
an item of capital expenditure but not an item of plant. Therefore it is not
depreciable.

Replacement hand tools are fully deductible.

The motor vehicle is depreciable, but not fully depreciable.

The computer is depreciable, but not fully depreciable.

Adjustments due to provisions
Accounting profit is calculated on the principle of matching expenses with
revenue for the period. Often this means creating a provision for
anticipated expenses in future periods. Examples of provisions often
created when determining accounting profit are:

      Bad debts/provision for doubtful debts, and
      Employee entitlements, long service leave, holiday pay/provision for
       employee entitlements

For income tax purposes only those expenses that have actually been
incurred can be deducted against income. Therefore the provision
accounts need to be reviewed to determine how much of that expense
was actually paid out during the year.

The steps for determining the amount incurred (and therefore the tax
deductible amount) could follow:

   1. Review the change in the provisions in the balance sheet
   2. Check whether there are any transfers due to consolidation or
      amalgamation.
   3. Determine the changes that relate to amounts used (or paid out) from the
      provision. These can be claimed. (Increases to the provisions cannot be
      claimed.)
   4. Prepare and keep a working paper to reconcile the accounting expense to
      the taxation expense.
Looking - Income tax
requirements
The business records of Aussi Cossi are kept in
accordance with taxation law. All source
documents are archived and bank reconciliations
are completed regularly.

Last year Andrea Cossi, the Owner of Aussi
Cossi, claimed she used her vehicle for business
purposes.

Have a look at her personal tax file (look under businesses / sole proprietor /
accounting records / personal tax file) and see how that claim was calculated.

Looking - Capital Gains Tax registers
A business or individual can collate all their asset information into a
Capital Gains Tax register. This allows for compact records and also
(providing the appropriate certifications are made), allows for the original
documents to be disposed of after 5 years.

Andrea Cossi adopted the Asset Register approach to her CGT record
keeping. Look through the CGT Asset Register, paying particular attention to:

      the dates the expenditure way incurred, and
      the date the entries were made.

Both are significant. The date of entry in the register is The date of the
expenditure is significant because of the potential to apply an indexation factor
to the item when the asset is sold. Refer to Income Tax returns / Capital Gains
Tax / Costbase, for details of indexation.

Capital Gains Tax registers
This file contains registers for the following assets:

Page 1 - Land at Clark Drive

Page 2 - Land/ building - Nyora Street

Page 3 - Office Building - Radan Avenue




Capital Gains Tax registers (1)
                                                                      Page 1

Asset: Land at 3 Clark Drive          Date Acquired:06/05/88

Identification No: TR 213454          Date Disposed:
Lot7258

Transactions


Date       Date        Description $ Cost Indexed Certification
Acquired   Entered     of Item of         Amount and
                       Expenditure Amount         Comments

06051988 01061998 Contract               65000                  DRC CPA
                  price Land

06051988 01061998 Stamp Duty                1300                DRC CPA
                                                   �

06081988 01061998 Construction           15000                  DRC CPA
                                                   �
                  payment

20101988 01111998 2nd Payment            25000                  DRC CPA
                                                   �
                  Construction

18011999 01021999 Final                  50000                  JFT NIA
                                                   �
                  Payment

10111999 01121999 Swimming               30000                  JFT NIA
                                                   �
                  Pool
                  Installation




Capital Gains Tax registers (2)

                                                                                 Page 2

Asset: Land at Nyora Street                        Date Acquired:24/06/91

Identification No: RP 213454 Lot7258               Date Disposed:

Transactions


Date           Date            Description of      $ Cost        Indexed   Certificatio
Acquired       Entered         Item of             Amount        Amount    n and
                               Expenditure                                 Comments

24/6/91        1/1/1998        Deposit                  15000              DRC CPA

20/7/91        1/1/1998        Stamp Duty                5000              DRC CPA

5/8/91         1/1/1998        Purchase price          135000              DRC CPA
                             (balance)

5/8/91         1/1/1998      Solicitors fees        2000                DRC CPA

23/1/2001      23/1/2001     Agents fees            6500                JFT NIA

23/1/2001      23/1/2001     Solicitors fees        8000                JFT NIA



Capital Gains Tax registers (3)

                                                               Page 3

Asset: Unit 1 Radan Avenue       Date Acquired:20/4/94

Identification No: RP 445498     Date Disposed:
Lot4564

Transactions


Date        Date      Description      $ Cost Indexed Certification
Acquired    Entered   of Item of       Amount Amount and
                                                           Comments
                      Expenditure

20/05/94    1/1/1998 Purchase          2166682             DRC CPA

18/5/94     1/1/1998 Stamp Duty        4600                DRC CPA

06/06/94    1/1/1998 Solicitors fees   1129                DRC CPA

15/09/96    1/1/1998 Refurbishment 1800                    DRC CPA
                     of car park

15/11/96    1/1/1998 2nd            2000                   DRC CPA
                     Instalment car
                     Park




Looking - Fringe benefits tax requirements
Open the preliminary FBT file for VOC Enterprises Ltd (look under the
businesses link). Notice the type of information that must be extracted
and collected for Fringe Benefit Tax purposes.

Notice that the expense records are only one part of the file. The majority
of the file is additional details and evidence.

These other pieces of information that have be collected to ensure that
there are sufficient details available to meet the Company's FBT
obligations.

Looking - GST record keeping requirements
Look at the General Journal, Cash Payments Journal and cash receipts
Journal of Jim's Electrical (in the business site, under the financial
records), notice how in each journal GST has been recorded. In this case
all the supplies made have been taxable supplies.

Now look at the tax invoice for VOC Enterprises Ltd (below). Notice how it
has all the components required of a Tax Invoice. This invoice would
therefore be tax compliant.

Looking - GST Record Keeping Requirements
Tax Invoice

The tax invoice includes the following text.

Text found in the top half of the tax invoice:

      PO Box 121 Yass NSW
      VOC Enterprises Ltd
      ABN: 32 123 456 000
      Date:
      To:

The lower part of the invoice contains a table with the following columns:

      Column   1:   Qty
      Column   2:   Description of supply
      Column   3:   Price
      Column   4:   Total

Below the columns are two rows:

      Total amount payable
      Total includes GST of
Looking - Tax valuation for stock
Aussi Cossi valued its main inventory for the year ended 30 June 20AB
using the three valuation methods.

Working Paper Aussi Cossi Year 20AB (Extract)
Stock records indicate:

        Valuation Method                                  Value
        Cost                                                       32731
        Replacement                                                34000
        Market                                                     36500

This year has been a good income year. Therefore aim to minimize the
tax payable this year. The lowest value of stock (cost) was selected.

The method adopted for the year is Cost - Value $32731


Looking - Asset valuation
Review the financial statements of VOC Enterprises. Have any assets been
revalued?

You can see from the Reserves section of the balance sheet that some
assets have been revalued. You would need to refer to the specifics of the
revaluation to determine whether these assets are depreciable or not.

Depreciation is limited to the cost price of an asset not its
revalued amount.

Refer now to the general journal of Aussi Cossi for the year 20ab. Notice
how a motor vehicle was transferred into the business with a value of
$30,000 (on May 1). The vehicle was sold one and a half months later for
$15000. You would need to consider whether the value of the vehicle was
inflated when transferred in. Was the vehicle purchase not at arm's
length?

Depreciation is restricted to cost - or if part of a non-arm's length
transaction - to the arm's length value.

Furthermore, if the vehicle had an inflated value, the loss on its disposal would
not be deductible.
Looking - Tax adjustments for depreciation
When tax adjustments are made, a tax working paper needs to be
prepared. This working paper is kept on the tax file for future reference.

Look at the Depreciation Tax Working Paper for Aussi Cossi, you can find
it in the Businesses / Financial Records / Personal Tax file.

You will find full workings to support the paper in the workings tab.

Here is an extract from another tax working paper. Refer to the working
tab for illustrations of how these amounts are determined.

Year 20AC - Tax Adjustment for Depreciation

        Accounting depreciation                                  4775
        Tax Depreciation                                         2513
                                       Tax Adjustment           2262


Looking - Tax adjustments for provisions
When tax adjustments are made, a tax working paper needs to be
prepared. This working paper is kept on the tax file for future reference.
When determining Tax adjustments you need to look at the financial
records of a business to determine what needs to be adjusted.

      Look at the Provisions - Tax Working Paper for Aussi Cossi, you
       can find it in Businesses / Financial Records / Personal Tax file. You
       will find full workings to support the paper in the working tab.
      Look at the extract of the Provision - Tax Working Paper for VOC
       Enterprises. You can find it in Businesses / Financial Records /
       Personal Tax file. You will find full workings to support the paper in
       the workings tab.

Working - Income tax requirements
Andrea Cossi has come into your office asking you to help her determine
her claim for motor vehicle expenses for the year ended 30 June 20AD.
She is sure she did at least as many business kilometres as last year, and
suspects she did more this year but didn't keep a log book. She hands
over receipts for the following expenditure:

Oil                        50 Registration              1000
Insurance              1200 Insurance                    480
She knows she only gets 8 km per litre of petrol and that the average
cost of petrol in her area was $0.80c per litre. The only other information
she can tell you is that her odometer reading at the end of the year was
54700, and she is driving the same car as last year.




        Activity

Preliminary Evidence review
Examine the prior year Motor Vehicle claim calculation by searching the
client documents for Andrea Cossi. After reviewing that file, the above
information, and if necessary external references, decide whether Andrea
satisfies the substantiation requirements for the different calculation
methods.

Log book method                                    Yes     No
One third Expenses Method                          Yes     No
12% Market Value Method                            Yes     No
Set rate per Km                                    Yes     No

Additional feedback on the answers

View the text alternative here.

Motor vehicle expense components - Explanations
The minimum requirement to substantiate all methods of motor vehicle
expense calculations are, substantiation of expenses, a valid log book and
odometer readings. Receipts are not required to substantiate all petrol.

Fuel Expense The law allows fuel and oil expenses to be estimated on a
'reasonable basis'. Calculate a cost per km from the reliable information
provided. Apply this rate to total kilometres.

Cost per Km=Cost per litre divided by Kilometres per litre

Log Book It is not necessary to keep a log book every year. If the
pattern of usage has not changed, a log book remains current for 5 years.
Therefore, you can use the business percentage determined in the valid
log book.
Total Kilometres You can work out total kilometres (and from there
business kilometres, and fuel expense) if you have opening and closing
odometer readings. Use the closing from last year to give this year's
opening.

Working - Income Tax Requirements
Answers to the Preliminary Evidence Review Activity

Log book calculation method: Andrea does satisfy the substantiation
requirements for this calculation method.

One third expenses method: Andrea does satisfy the substantiation
requirements for this calculation method.

12% market value method: Andrea does satisfy the substantiation
requirements for this calculation method.

Set rate per km method: Andrea does satisfy the substantiation
requirements for this calculation method.

Collating the Information

Having determined the appropriate method/s to use, you must ensure
you have the all the necessary figures. Match the action to the task to
ensure you are gathering the correct information.

Total km times cost
calculated from details                    Log Book %
supplied.
Apply same rate as last
                                           Petrol expenses
year
                                           Business
Use last Year's figure
                                           Kilometres
Calculate using last
year's closing figures and                 Total Kilometres
details supplied.

Creating New Records

Using last year's calculation as a guide determine the maximum claim (if
any) Andrea can make for using her motor vehicle.

The most advantageous method Andrea can use is
    Log book method
    One Third Market Value Method
    Set Rate per Km Method
    One Third Costs Method

The maximum claim Andrea can make is

    $2793
    $2512
    $4368
    $3724

View the text alternative here.

Check your Workings
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Htm Format

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Answers to Activity

Working - Tax Valuations for Stock

The most advantageous method Andrea can use is the log book method.

The maximum claim Andrea can make is $2,512.

Workbook

 Motor Vehicle Expense Claim Calculation
 Vehicle        Model         Rego            Price    Eng type       Eng Cap
                                                                      1601-
 Mazda                  626   FCQ558          36400    ordinary       2600cc
 Log Book                                              Set
 kept           Yes           Log Book Yr     20AC     Rate/Km*          54.9
                              Odometer
 Period start   01/07/20ac    Start           36400    Business %      25.00%
                              Odometer                 Business
 Period End     30/06/20ad    End             54700    Kms               4575

 Expenses                     Services          1000   Depreciation      6594
 Fuel & oil           1900    Rego/CTP           480   Other
 Insurance            1200    Lease pay'ts
 Repairs                      Tyres/battery            Total Exps       11174
Claims - Alternatives
                        Total Expenses x Business
Log Book                %                              2793.5
12% Market Value        12% of Cost (price)         cannot
One third Costs         1/3 x Total Expenses        claim
Set Rate Per Klm        Business km x set rate           2512



Working - Capital Gains Tax records
Review Asset Register
Andrea is concerned that she has accumulated too much paper
work. Locate Andrea's CGT Asset Register from her business files. You
review page one of the registry, to determine the earliest dates she can
dispose of each of the original documents.

Looking at the first page of the register you see the earliest the
documents can be disposed of are for the first 3 items 1/6/2003, the 4th
1/11/2003, the 5th 01/02/2004 and the documents regarding the final
entry need to be kept until 01/12/2004.

Note: The original documents must be kept for 5 years from the date of
entry into the register.




      Activity

Review the second page of the register and indicate the earliest date each
original document can be disposed of in the worksheet below. (Drag the
dates on the right into the disposal date column and note that dates can
be selected more than once)

Working - Capital Gains Tax Records
The information contained in the second page of the CGT Asset Register
is:

Item 1

Date Acquired: 24/6/91, Date Entered: 1/1/1998, Description of Item of
Expenditure: Deposit. What date can the document be disposed of?



Item 2
Date Acquired 20/7/91, Date Entered: 1/1/1998, Description of Item of
Expenditure: Stamp Duty. What date can the document be disposed of?

Item 3

Date Acquired: 5/8/91, Date Entered: 1/1/1998, Description of Item of
Expenditure: Purchase price (balance). What date can the document be
disposed of?

Item 4

Date Acquired: 5/8/91, Date Entered: 1/1/1998, Description of Item of
Expenditure: Solicitor's fees. What date can the document be disposed of?

Item 5

Date Acquired: 23/1/2001, Date Entered: 23/1/2001, Description of Item
of Expenditure: Agent's fees. What date can the document be disposed
of?

Item 6

Date Acquired: 23/1/2001, Date Entered: 23/1/2001, Description of Item
of Expenditure: Deposit. What date can the document be disposed of?

Now check your answers.

Answers

Item   1   -   1/1/2003
Item   2   -   1/1/2003
Item   3   -   1/1/2003
Item   4   -   1/1/2003
Item   5   -   23/1/2006
Item   6   -   23/1/2006




Working - Fringe benefits tax
       Activity

1. You have been given the task of reviewing the preliminary FBT records
of VOC Enterprises Ltd. Find the records in your businesses file. The
records the company appear adequate, but you have discovered that
other employees received benefits during the year.

Determine whether each these is a fringe benefit:

Allen Lyle, the marketing manager has a car         Yes       No
provided
8 members of the counter staff were given           Yes       No
$80 Movie Ticket Booklets as a Christmas
bonus
Bruce Farrell their supervisor received a           Yes       No
$500 cash bonus.
Phillip Holt (client support officer) was given     Yes       No
free accommodation (at a value of $800) by
a customer of the company in appreciation
of his support during the year.


Working - Fringe Benefits Tax
Answers to Activity

Determine whether each of these is a fringe benefit

Allen Lyle's car is a fringe benefit.

The $80 movie ticket booklets are a fringe benefit.

The supervisor, Bruce Farrell's $500 cash bonus is a fringe benefit.

Phillip Holt's free accommodation is a fringe benefit.

2. Allen Lyle insisted that the vehicle supplied as part of his package had
several modifications made to it. The table below lists these modifications.
Indicate which of the below would be included in the cost price of the
vehicle.

Modification                                Cost          �
A towbar to tow the Company display      $1200          Included
stand
                                                        Not included
Heavy duty air-conditioning              $800           Included
                                                        Not included
A six stack CD player & speakers         $2000          Included
                                                        Not included
Mag Wheels                               $1800          Included
                                                        Not included
Mobile phone car kit (business use)      $350           Included
                                                        Not included


Working - Fringe Benefits Tax
Answers to Activity

Which items would be included in the price of the vehicle?

A towbar to tow the Company display stand, cost $1,200, would be
included in the vehicle price.

Heavy duty air-conditioning, cost $800, would not be included in the
vehicle price.

A six stack CD player speakers, $2,000, would not be included in the
vehicle price.

Mag Wheels, $1,800, would not be included in the vehicle price.

Mobile phone car kit (business use), $350, would be included in the
vehicle price.

Updating Records:

You have been able to extract the following information from the company
records, and have not been able to contact Allen for further information.

Cost Price of Allen's Vehicle (before modification) was $22000. The
vehicle is a Ford Laser (Registration Number 962GYP) and was purchased
new on 1 February 20AD. At the end of March 20AD the car had an
odometer reading of 2200.
Use this information and any other relevant information included above to
determine (where possible) how the FBT records of the company would
reflect the above benefits.

The answer:

Your new records should have been included in

      The Summary of Fringe Benefits Provided, for Allen Lyle and
       Phillip Holt.
      Details of expenses relating to each benefit - Motor Vehicle
       Section (Cost $25800), and other benefits section Holiday
       accommodation $800
      Odometer Reading Record - completed for Ford Laser (Log book
       % nil)

The other items do not constitute fringe benefits.

Working - Tax valuations for Stock
Aussi Cossi valued its main inventory for the year ended 30 June 20AB
using the three valuation methods.

Stock records indicate:

        Valuation Method                             Value
        Cost                                                 32731
        Replacement                                          34000
        Market                                               36500

This year has been a good income year. Therefore aim to minimize the
tax payable this year. The lowest value of stock (cost) was selected.

The method adopted for the year is Cost - Value $32731

The business has determined the Valuations of the accessories for that
year to be.

Accessories Stock Record

        Valuation Method                             Value
        Cost                                                  4808
        Replacement                                           5300
        Market                                                3650
      Activity

Review all the above information and select the most appropriate
valuation of valuing Accessories Stock.

Working - Tax Valuations for Stock
Answers to Activity

The market value of $3,650 would be selected, as it is the lowest value.
This would result in adjustment to the accounting value of stock of
$1,158: accounting value of $4,808 less market value of $3,650.

Working - Asset valuations
Open the asset valuation example. Review the information in relation to asset
values.




      Activity

Determine the acceptable value for tax purposes. (The acceptable
depreciation rate for Motor vehicles is 22.5%)

Asset valuations - an example
A business person purchased business assets, from his/her spouse. The
assets purchased were a computer, a motor vehicle and office furniture.

The items were valued at $500 for the computer, the motor vehicle was
originally purchased four years ago at a cost of $28000, and the office
furniture had been in the family for at least twenty years (although it was
still in good condition). Furthermore the business person bought a second
hand desk for $200 and spent 50 hours restoring it.

As the items were now going to be used for business the items were
valued highly to reflect the total cost to the new business and to
maximize the tax deduction.

The values allocated to the items were:

        Computer                                                 2000
         Motor Vehicle                                               15000
         Office Furniture                                             1000
         Desk                                                         2000

The items were depreciated at the following diminishing value rates.

Year 20AC

         Item                   Value         Rate        Deprn    Closing
         Computer                      2000          40      800       120
         Motor Vehicle               15000       22.5       3375     11625
         Office Furniture              1000          20      200       800
         Desk                          2000          20      400      1600

Year 20AD

         Item                   Value         Rate        Deprn    Closing
         Computer                      1200          40      480      1200
         Motor Vehicle               11625       22.5       2615      9010
         Office Furniture               800          20      160       640
         Desk                          1600          20      320     12   0
Working - Depreciation adjustments
When Tax adjustments are made a working paper needs to be prepared
for the tax file. It will be referred to when preparing current and future
year tax returns. Depreciation Adjustments can occur in two ways.

      Depreciation Rate Differences, and
      Capital Cost Variation Differences

Depreciation Rate Differences (Top)

Refer to the Journals of Aussi Cossi 20AB (These are available from the
business site). On the 30th June the computer valued at $4090 was
depreciated at 17% straight Line for 1.5 months. The result was an $87
claim for depreciation.

The allowable Straight line (or prime cost) rate for depreciation, for a
small business taxpayer is 27%.

Working Paper Preparation
Tax depreciation

Item               Value      RatePrime cost Depreciation          Closing
Computer               4090                 27               138      3952
Total                                                     $138

(Note the asset is being depreciated at prime cost rates).

Compare the Accounting depreciation figures with the depreciation value,
to determine the difference. This is the tax adjustment.

Year 20AB - Tax Adjustment

Accounting depreciation                                                    87
Tax Depreciation                                                          138
                                           Tax Adjustment             (51)




        Activity

Prepare the tax working paper for this asset for Aussi Cossi for the 20AC
year.

Email your facilitator with your result.



Capital Cost Variation (Top)

Refer to the Asset Valuation example, as the assets have been allocated
unacceptable values for tax purposes the depreciation amount is also
unacceptable.

Working Paper Preparation

The tax values for the assets should be

Computer (actual Value)                                                   500
Motor Vehicle WDV refer Calculation                                  10101
Office Furniture                                                           nil
Desk (cost price)                                                        200

Tax depreciation

Item                       Value          Rate        Deprn        Closing
Computer                           500           40         200          300
Motor Vehicle                    10101         22.5       2273          7828
Office Furniture
Desk                               200           20           40         160
Total                                                     2513

Compare the Accounting depreciation figures with the depreciation value,
to determine the difference. This is the tax adjustment.

Year 20AC - Tax Adjustment

Accounting depreciation                                                 4775
Tax Depreciation                                                        2513
                                         Tax Adjustment                2262




        Activity

Using the information above and that in the Asset valuation example, prepare
the tax working paper for the Year 20AD.

Asset valuations - an example
A business person purchased business assets, from his/her spouse. The
assets purchased were a computer, a motor vehicle and office furniture.

The items were valued at $500 for the computer, the motor vehicle was
originally purchased four years ago at a cost of $28000, and the office
furniture had been in the family for at least twenty years (although it was
still in good condition). Furthermore the business person bought a second
hand desk for $200 and spent 50 hours restoring it.

As the items were now going to be used for business the items were
valued highly to reflect the total cost to the new business and to
maximize the tax deduction.

The values allocated to the items were:

       Computer                                                   2000
       Motor Vehicle                                             15000
       Office Furniture                                           1000
       Desk                                                       2000

The items were depreciated at the following diminishing value rates.

Year 20AC

       Item                 Value         Rate        Deprn    Closing
       Computer                   2000           40      800      1200
       Motor Vehicle            15000        22.5       3375     11625
       Office Furniture           1000           20      200       800
       Desk                       2000           20      400      1600

Year 20AD

       Item                 Value         Rate        Deprn    Closing
       Computer                   1200           40      480      1200
       Motor Vehicle            11625        22.5       2615      9010
       Office Furniture             800          20      160       640
       Desk                       1600           20      320      1280
Working - Provision adjustments
When Tax adjustments are made a working paper to keep on the tax file
needs to be prepared. It is referred to when preparing current and future
year tax returns.

Principle

Only the amounts actually written off are deductible. The amount of
increase in the provision is the tax adjustment. Provision for Doubtful
debts adjustments

Refer to the Journals of Aussi Cossi 20AB. On the 30th June a provision of
$756 for doubtful debts was created.

Working Paper Aussi Cossi Year 20AB
Provisions

Bad Debts Written off. $2160

Provision for Doubtful Debts created $756

Year 20AB - Tax Adjustment - Doubtful Debts

 Accounting - Bad & Doubtful Debts                     1404
 Tax - Bad Debts                                       2160
                                Tax Adjustment        (756)




Working Paper Preparation VOC Enterprises Ltd
Provisions

Bad Debts Written off. $428,000

Additional Provision for Doubtful Debts created $200,000

Year 20AB - Tax Adjustment - Doubtful Debts

 Accounting - Bad & Doubtful Debts                  628000
 Tax - Bad Debts                                    428000

                            Tax Adjustment       (200000)




      Activity 1

Review the books of Aussi Cossi for the 20AC year and prepare the
working paper for Doubtful Debts.




      Activity 2

Using the information in the financial statements of VOC Enterprises,
prepare the tax adjustment working paper for the provision for long
service leave for the Year 20AB.
Introduction
This element deals with the process of income tax
return preparation.

This area covers:

      The basic principles of the current income
       tax legislation

A broad overview of the assessment process is provided.

You are introduced to the concepts of assessable income, allowable
deductions, rebates, Medicare levy and capital gains.

You are shown the process for determining net taxable income, and
calculating net tax payable.

You are introduced to the process of checking for current legislative
changes, rates, rulings and guides.

      The process of reviewing accounting information, to determine
       income tax implications.

The process of collecting and analysing accounting information for tax
consequences is demonstrated.

The preparation and purpose of tax working papers and records is
illustrated.

      The process of researching information outside the accounting
       records.

The process of gathering and analysing other information for tax
consequences is demonstrated.

The legislative requirements for substantiation of claims are discussed.

The preparation and purpose of tax working papers and records keeping
is covered.

      The preparation of income tax returns and statements of Taxable
       income.

The structure of tax returns is analysed.

Taxable income is calculated.
The process of preparing income tax returns in accordance with statutory
requirements is demonstrated.

This element covers the following areas:

KEY PRINCIPLES

     An introduction to the basic principles of the current income tax legislation
     Discussions of definitions and references within the legislation
     Capital gains tax is introduced and explained
     Students are asked to consider some interpretation issues

LOOKING and WORKING

     A practical business situation is introduced and used to illustrate the
      process of reviewing accounting information, to determine income tax
      implications.
     An introduction to the process of researching information outside the
      accounting records, using a practical example as an illustration.
     Practical examples requiring the student to prepare working papers and
      make decisions and calculations.
     Income tax returns and statements of Taxable income are prepared.
     Discussion and illustration of differences between partnership, company
      and individual income tax returns.
     A case study is set up requiring the student to follow the processes
      illustrated in order to:
          o make decisions and calculations
          o prepare tax working papers,
          o determine assessable capital gains,
          o calculate taxable income,
                 o prepare a complex individual
                     income tax return

Prepare Statutory Returns -
Introduction
This element deals with the process of
preparing Statutory Returns other than income
tax.

This area covers:

     The basic principles of other current tax legislation including
      the New Tax System

You are given overviews of the Goods and Services Tax system and PAYG
withholding and PAYG Instalments.

You are given an overview of the Fringe Benefits Tax regime.
You are introduced to the common fringe benefits and shown how the
taxable value of benefits is determined.

You are shown the process for determining net GST payable.

You are introduced to the process of checking for current legislative
changes, rates, rulings and guides.

      The process of reviewing accounting records to determine
       goods and services tax implications.

The process of collecting and analysing accounting data for GST purposes
is demonstrated.

The preparation and purpose of relevant sections of the BAS is illustrated.

      The process of reviewing accounting and additional tax
       records to determine fringe benefits tax implications.

The process of collecting and analysing accounting and tax information for
fringe benefits tax consequences is demonstrated.

The preparation and purpose of FBT working papers and records is
illustrated.

      The preparation of fringe benefits tax returns and Business
       and Instalment statements.

The structure of the returns/statements is analysed.

Fringe Benefits Tax payable is calculated.

The process of preparing the returns in accordance with statutory
requirements is demonstrated.

      The basic Corporations law obligations and requirements for
       small companies.

The structure and requirements of the annual return/statement is
discussed.

Notifiable changes are detailed and explained.

The requirements for preparing and lodging the forms and returns in
accordance with statutory requirements are discussed and demonstrated.

      State tax obligations
This structure of this element is:

KEY PRINCIPLES

            An introduction to the basic principles of the current tax
             legislation
            Discussions of definitions and references within the New Tax
             System legislation
            Fringe Benefits tax is introduced and explained
            Statutory return/form requirements of Corporations Law are
             discussed
            Obligations under State legislation are discussed

LOOKING and WORKING

            A practical business situation is introduced and used to
             illustrate the process of reviewing accounting information, to
             determine GST implications.
            An introduction to the process of researching information
             outside the accounting records, using a practical example as
             an illustration of FBT.
            Practical examples requiring the student to prepare working
             papers and make decisions and calculations.
            Fringe benefits tax returns and Excerpts from the BAS
             (Business Activity Statement) are prepared.
            Examples are set up requiring the student to follow the
             processes illustrated in order to:
                 o make decisions and calculations,
                 o prepare GST working papers,
                 o determine taxable value of fringe benefits,
                 o prepare FBT return,
                 o calculate PAYG withholding,
                 o complete relevant sections of BAS


Key Principles - Overview
In addition to the Income Tax Return covered in
the previous element, business and individuals
may have other statutory obligations. This
element introduces you to the process of
determining which other taxes and obligations
apply to businesses/ individuals at a State level
and at a Commonwealth level.

The Australian Taxation Office administers many taxes and charges, in
addition to Income tax. Many of these require the completion and
submission of returns (and usually involve payment).
Other Statutory Returns at commonwealth level include those companies
are required to prepare. The Australian Securities and Investments
Commission (ASIC) administers the Corporations Law, and oversees
compliance with that Act. This element introduces some of the
Corporations Law Statutory returns.

Taxes and charges are also levied by State Governments. These taxes
usually involve the completion of a return or form of some type. The
types of taxes vary between the States. However there are many State
taxes that are common throughout Australia, although they may be
charged at different amounts, and/or on a different basis.

Local Governments may also levy charges but these are not covered in
this element.




       Activity - Exploration

Refer to the websites (or other external references) for the

      Australian Taxation Office, and
      The Office of State Revenue (OSR) in your State,

and from each of these sites, identify at least two (2) taxes (other than
income tax), administered by that office.

Search the sites/references and determine where the relevant tax return
form (or guide) can be accessed.

ATO Administered Taxes
The Australian Taxation Office has a network from which many federal
taxes and charges are administered. These taxes include the:

      Goods and Services Tax (GST)
      Fringe Benefits Tax(FBT)
      Pay as You Go (PAYG)
      Higher Education Contributions Scheme (HECS)
      Superannuation Guarantee Charge

Fringe benefits tax involves the completion of a separate annual FBT
return. The payment of the FBT is made with the lodgement and
completion of a Business Activity Statement (BAS) The BAS is also used to
record obligations and entitlements under GST and PAYG.

This element introduces critical aspects of the first three taxes on the
above list, including how to calculate the various components (for
example, fringe benefits tax payable.) The completion of the BAS itself is
covered in the Review Compliance element.

The Tax Office has an extensive education budget and numerous
booklets, guides, videos, CD's and advice from support officers available
at no cost. You are advised to supplement this resource with publications
from the ATO. Guidance as to how to obtain, or access these publications
is included in the References/Tax tab below.

Goods and Services Tax
GST is a broad-based tax of 10 per cent on the supply of most goods,
services and anything else consumed in Australia.

How does GST work?

GST is paid at each step in the supply chain, with registered businesses
charging GST in the price of goods, services or anything else they supply.

However, if you are registered for GST, you can claim input tax credits
from the Australian Taxation Office (ATO) for any GST included in the
price you pay for goods, services and anything else you buy for your
business or enterprise.

As registered businesses remit GST and claim it back in the form of input
tax credits, GST liability flows along the supply chain. It is finally included
in the price paid by the consumer (who cannot claim input tax credits).

Registering for GST

If a business has an annual turnover of $50000 or more, it must register
for GST. Once registered, the business will be allocated an ABN number.

If the annual turnover is less than $50000, the business can choose not
to register. Unregistered businesses can not charge GST when they
supply goods or services, nor will they be required to remit GST to the
ATO. However, they will not be able to claim input tax credits for GST
paid. Enterprises that are carrying on an enterprise (such as a business)
in Australia, can register for an ABN, even if they do not register for GST.

GST entitlements and obligations are reported on a Business Activity
Statement. The records of a business need to be able to provide specific details
of supplies and acquisitions in order to correctly complete the BAS.

Further information on GST are covered in tax sheets, booklets, and
guides issued by the ATO. They are available on the ATO web site at
www.taxreform.ato.gov.au. or by requesting a Fax from Tax, or by phone. A
general overview of the GST system can be accessed here (PDF 58 KB).
Details are included in the tax references linked below.

Introduction to BAS
The BAS or Business Activity Statement

The BAS is the form GST-registered businesses will now use to report
most of their tax obligations. Businesses not registered for GST will use
an Instalment Activity Statement instead.

The BAS allows businesses to report and pay their obligations for:

      GST;
      Pay As You Go instalments and withholding;
      fringe benefits tax instalments, and company and fund instalments

They can also use the BAS to report and pay the new wine equalisation
tax and luxury car tax (if applicable).

Businesses have been sent comprehensive instructions about how to
complete the BAS.

BAS are required to be lodged (with payment) on the 21st day after the
end of the tax period. Most businesses have a quarterly obligation,
although they could choose to lodge monthly. Large businesses with over
$20m turnover must lodge monthly.

Relevant ATO publications are the BAS instructions, sample BAS forms and a
question and answers document available from the tax reform website at
www.taxreform.ato.gov.au. Alternatively these publications can be ordered by
phoning The Tax Reform Information Line for Business on 13 24
78. There is also a “how to” video available about the BAS.
Required Details of Supplies & Acquisition
In order to be in a position to complete the Goods and Services section of
the BAS a business needs to collate the following information.

                   Supplies Made                             Acquisitions Made
G1 Total sales/supplies               G10 Capital Acquisitions
G2 Exports (GST free)                 G11 Other acquisitions (Purchases)
                                            Total acquisitions (add G10 +
G3 Other GST free Supplies            G12
                                            G11)
                                            Acquisitions for input taxed
G4 Input taxed supplies               G13
                                            supplies
   Total GST and Input taxed
G5 supplies (add G2 + G3 +            G14 Acquisitions with no GST in price
   G4)
                                          Total estimated Private use of
   Total taxed Supplies (G1 -
G6                                    G15 acquisitions & non tax deductible
   G5)
                                          acquisitions
                                            Total non creditable acquisitions
G7 Adjustments                        G16
                                            (Add G13 +G14+G15)
     Total Taxable supplies after           Total creditable acquisitions (G12
G8                                    G17
     adjustments (G6 + G7)                  - G16)
G9 GST PAYABLE (G9/11)                G18 Adjustments
                                            Creditable acquisitions Total after
                                      G19
                                            Adjustments (G12 - G16)
                                      G20 GST CREDIT (G19/11)

The shaded boxes represent calculations required.




Fringe Benefits Tax
Fringe Benefits Tax is a separate tax payable by employers. The calculation of the
FBT payable is dependant upon the grossed up value of the benefit provided.

What constitutes a Fringe benefit?

According to the FBT legislation, a fringe benefit is a benefit which is
provided in respect of employment. Both of these terms have broad
meanings for FBT purposes.
Benefit includes any right, privilege, service or facility. Common fringe benefits
are the use of Motor vehicles and the provision of low interest loans.

A benefit provided in respect of employment effectively means a benefit
provided to somebody because he or she is, or was, or will be an
employee.

A benefit that is not provided in respect of employment is not a fringe
benefit.

A fringe benefit may be provided by another person on behalf of the
employer. It may also be provided to another person on behalf of the
employee (e.g. a relative).

FBT is paid by the employer.

This is the case whether or not the employer is the actual supplier of the
benefit, e.g. where the benefit is provided by an associate or under an
arrangement with a third party.

Generally, employers may claim as income tax deductions the cost of
providing fringe benefits and the amount of FBT paid.

FBT and the cost of providing the benefit are deductible to the
Employer

The cost incurred in providing a fringe benefit is an allowable income tax
deduction, (just as other expenses such as wages are deductible), and
any employee contribution is assessable income of the employer.

The amount of fringe benefits tax paid by the employer is also generally
allowable as an income tax deduction. If an employee reimburses the
employer for fringe benefits tax paid, then the reimbursement is
assessable income to the employer. However, it is not an allowable
deduction for the employee.

A fringe benefit is exempt income in the hands of the recipient.

The ATO issues several booklets/guides on Fringe Benefits and the
calculation of Fringe Benefits Tax Liability. The publications are available
on the ATO website.

FBT Calculation

The Fringe Benefits Tax Payable by an employer can be calculated using
the following procedure.
Step Work out the taxable value of each of the individual fringe benefits
1     provided to each employee;
Step obtain the aggregate fringe benefits amount by summing up all of the
2    taxable values;
Step obtain the fringe benefits taxable amountby `grossing-up' the aggregate
3    fringe benefit amount;
Step calculate the amount of tax payable as a percentage of the fringe
4    benefits taxable amount.

Step 1 - work out the taxable value of the benefit

The taxable value of a fringe benefit depends on the type of fringe benefit
it is. Each type of Benefit has a different set of rules.

In most categories, if the employee makes a payment to the employer (as
a contribution towards the cost of providing the fringe benefit), the
taxable value of that fringe benefit is reduced by that particular payment.
Such a payment is referred to as an employee contribution (or recipient's
contribution). Refer to the Motor Vehicles Fringe Benefits Formula to see how
the employee's contribution reduces the taxable value of the benefit.

Step 2 - the aggregate fringe benefits amount

The aggregate fringe benefits amount is the sum of the taxable values of
all of the fringe benefits provided by the employer during the year.

The Fringe Benefits Tax Return form requires totals of benefits of different
types to be shown. However, the Reportable Fringe Benefits arrangements
require that the taxable value of each individual employee's fringe
benefits be calculated, and recorded. Therefore calculations should be
done on an individual employee basis, then added.

Step 3 - the fringe benefits taxable amount

The fringe benefits taxable amount is obtained by `grossing-up' the
aggregate fringe benefits amount, to a tax-inclusive amount, to ensure
that fringe benefits are taxed on the same basis as salary or wages.

The taxable amount is calculated by:

Dividing the Aggregate Benefits by (1 - 48.5%)

(The 48.5% may change as tax rates change - It is calculated as the
highest marginal tax rate plus Medicare levy)

Example

The employer's aggregate fringe benefits amount is $3000. If the rate of
tax is 48.5% , then the employer's fringe benefits taxable amount is
calculated as follows:

$3000 divided by (1- 48.5%) = $3000 / 51.5% = $5825

Step 4 - Calculate the tax payable

The tax payable is the fringe benefits taxable amount multiplied by the
rate of tax.

Example

If the fringe benefits taxable amount is $5825, and if the rate of tax is
48.5%, then the tax payable is $2825 (i.e. $5825 48.5%).

There is a label on the FBT return relating to rebates. The rebate of 48%
of the tax payable is only available to certain non-profit, non-government
employers.

Pay-As-You-Go Withholding
There are two components to the PAYG system, PAYG Instalments,
whereby you pay your own expected tax liability as you go, by
instalments, and the PAYG Withholding system.

The PAYG Instalment system will be covered in the compliance element

The PAYG Withholding system, is when tax is withheld from other
taxpayers.

The obligation to withhold tax can occur in the following ways.

      If you are in business, and a business that supplies goods or
       services to you does not quote an ABN on the invoice or other
       document relating to the supply, you will have to withhold 48.5%
       of their payment.
      If you have employees you need to withhold tax (in accordance
       with the instalment schedules issued by the ATO) from their wages.

You will need to remit the amounts withheld to the Australian Taxation
Office, and complete details on an Instalment Activity Statement (IAS) or
a Business Activity Statement (BAS).

Other obligations regarding PAYG (Withholding)

      you must register for PAYG withholding (if you were not a
       registered group employer under the previous PAYE system)
      you must give an end-of-year payment summary to payees
      you must send tax file number declarations to the ATO
      you must report annually to the ATO on all amounts withheld

The relevant ATO guide for this topic is the Guide to Pay As You Go for
Business.

Instalment Activity Statement
An Instalment Activity Statement (IAS) is only completed by taxpayers
who are not registered for GST.

Taxpayers may have obligations to complete a IAS if they have PAYG
Instalment obligations, or if the have PAYG Withholding obligations.

PAYG Instalment obligations will occur when individuals are required to
meet their expected income tax liability on investment income, or on GST
unregistered business income.

PAYG Withholding obligations will occur when the taxpayer has employees
but is not in business (e.g. employing a nanny).

Instalment Activity Statements will usually be submitted quarterly, (with
payment), but some taxpayers have the option of submitting and
remitting payment annually.

Introduction to BAS
The BAS or Business Activity Statement

The BAS is the form GST-registered businesses will now use to report
most of their tax obligations. Businesses not registered for GST will use
an Instalment Activity Statement instead.

The BAS allows businesses to report and pay their obligations for:

      GST;
      Pay As You Go instalments and withholding;
      fringe benefits tax instalments, and company and fund instalments.

They can also use the BAS to report and pay the new wine equalisation
tax and luxury car tax (if applicable).

Businesses have been sent comprehensive instructions about how to
complete the BAS.

BAS are required to be lodged (with payment) on the 21st day after the
end of the tax period. Most businesses have a quarterly obligation,
although they could choose to lodge monthly. Large businesses with over
$20m turnover must lodge monthly.

Relevant ATO publications are the BAS instructions, sample BAS forms and a
question and answers document available from the tax reform website at
www.taxreform.ato.gov.au. Alternatively these publications can be ordered by
phoning The Tax Reform Information Line for Business on 13 24
78. There is also a “How To” video available about the BAS.

State Taxes Charges
In addition to the returns required to comply with Federal Government
laws, there are also returns required by State Governments. These
returns are usually the basis of some tax or levy, although they may be
required for information gathering.

Many of the State taxes are levied annually, on a pre-printed
individualised form. Only a few taxes require the completion of a return or
form of some kind. However, the degree to which states use personalised
forms may vary.

In this section you are introduced to two types of State taxes, common
throughout Australia - although they may be charged at different
amounts, and/or on a different basis.

You are also guided into areas where you may determine other
taxes/returns required in your State.

Land Tax
Land tax is a State Government levied tax applied to rateable land. It is
applied on land owned at midnight on a certain day of the year. In some
States the applicable date is 31 December and in others it is 30 June.

Most states use the Valuer General's price for land tax purposes. The
value of the land considered is the unimproved value. Reclamation,
excavation and draining are considered part of the land.

All States have some type of exemption before applying the tax. Some
offer exemptions for land owned by charities, some also offer exemptions
to primary producers.

The States have different treatments of land held jointly.

A business should be aware of the potential liability of land tax when
considering the purchasing of land.
Review the website of the Office of State Revenue (OSR) in your State to
determine the exemptions and rates applicable to land holdings.

Payroll Tax
Payroll tax is a State Government tax levied on wages and benefits paid
to employees over a defined threshold. All States charge payroll tax,
however each has a slightly different definition of taxable wages.

Furthermore each State applies a different rate of tax on a different basis.
While the basic principles mentioned below apply in all States, the
definitions of the various components are different. It is recommended
that you refer to the Office of State Revenue in your State to obtain
specifics.

The rate of tax payable on the wages paid by the group in one State is
dependant upon the wages paid by the group in other States.

When is pay-roll tax chargeable?

Pay-roll tax is chargeable when the total yearly Australian taxable
wages of an employer, or those of a group of related employers, exceed
the exemption threshold.

Who is liable to pay?

Employers or groups of related employers are liable if their total
Australian taxable wages or those of the group exceed the exemption
threshold.

Calculating pay-roll tax

Refer to your own State Revenue Office or the texts listed in the
References/external for formula relevant to your State.

Payment of Payroll tax

Payroll taxes are payable monthly, although some smaller payers are, in
some States, eligible to pay annually.

Other Taxes
In addition to Payroll and Land tax, States also apply other taxes and
duties. These include stamp duty and in most States transactions Duty.

Stamp duty on marketable securities is being abolished as part of the
New Tax System, however stamp duty on other transactions remains.
Stamp Duty

Stamp duty is a tax imposed on written documents relating to certain
types of financial or legal transactions. In addition, stamp duty is also
charged on certain written statements required to be completed for a
number of specific transactions where no written documents exist.

Generally, every person who signs or executes an appropriate written
document or statement is liable to pay the stamp duty chargeable.

Other State Taxes

Most States impose a duty on financial transactions. Debit Tax is one of
the most common. It is applied on all debits made to accounts held with
banks or non-bank financial institutions where the account has either
cheque-drawing facilities or payment order accounts. Some States also
apply a Debits tax to all withdrawals.

Please refer to the Office of State Revenue, or State Revenue Office in
your State, or visit their website to obtain details of these and other taxes
and charges levied in your State.

Statutory Returns Required by Corporations Law
Many of the Statutory returns referred to so far involve the payment of
taxes or levies.

Those covered in this section involve the gathering and lodgement of
information required by the Corporations law. There are no taxes involved
- just registration or lodgement fees.

The primary return required by the Australian Securities and Investments
Commission (ASIC) is the Company Annual Return. This section
introduces that return and some other required statutory lodgements.

Company Annual Return
Companies must lodge an annual return each year.

Information can be lodged electronically through EDGE, the ASIC's
Electronic Lodgement system, or E-REGISTERS which allows the
lodgement of annual returns, and other information, through the internet.

Companies, who do not lodge their return electronically, are mailed a pre-
printed paper annual return with information downloaded from the ASIC
database. There is no obligation for ASIC to mail this return and
companies must lodge an annual return on time whether they have
received a pre-printed annual return or not.

This pre-printed annual return contains a copy of information currently
held about the company in the ASIC database.

Information on return must be correct

If any of the pre-printed information has changed, the correct details
must be shown on the annual return in the space provided next to the
pre-printed information.

If the change is a notifiable change you must make the changes necessary so
the return is correct (You will have to pay late fees if the return is lodged
outside the time limit for notification of that change, and the company has
not already notified the ASIC of the change.)

Ideally, the company would have notified the ASIC when the notifiable
changes occurred. (Refer to the section on notifiable changes).

All of the information in the annual return must be correct as of the date
that the annual return is signed.

Must be lodged by 31 January

The annual return can be lodged at any time during the year, but it must
be lodged by no later than 31 January of the following year, unless
alternative lodgement requirements have been agreed to between the
companies and ASIC.

Lodgement of the return must be accompanied by the appropriate
fees.

If a company fails to lodge its annual return with the fee by the due date
late lodgement fees will also apply.

Information on Annual Return
The annual return has the following components.

A Declaration of solvency.

Under section 346 of the Corporations Law the directors of a company are
required to make a resolution regarding the solvency of the company.
This resolution must be:

(i) made by the directors of the company within one month prior to the
lodgement of the annual return, or
(ii) included in the director's declaration attached to an annual or semi-
annual financial report lodged with ASIC in the 12-month period prior to
the annual return being lodged The annual and semi-annual report
requirements are discussed in the Other requirements section

Pre-printed Information Components

The following items are pre-printed on a return.

   1. Australian Company Number
   2. Annual Return Year
   3. Registered Office Address
   4. Principal place of Business
   5. Ultimate holding Company
   6. Company officers - showing Name, residential address, Date and
      Place of birth, Office held and date appointed (eg director)
   7. Issued Shares and Options - Class of Shares, Total number
      issued, Total amount paid, total amount unpaid, Options - number
      of unissued shares subject to options.
   8. List of members (shareholders) - details about the 20 members
      holding the greatest number of shares in each class of share.The
      details required for each member are:Name, for companies and
      registered Australian bodies, the registered name and the A.C.N. or
      A.R.B.N, Address of member The total number of shares that the
      member holds in each share class whether or not the shares are
      fully paid; whether or not the shares are beneficially owned.

Changes can be made by striking out the detail printed and
printing the correct information.

Notifiable changes/Events
In the ASIC 'Checklist for registered companies and their officers' (see
footnote), the following changes are listed as notifiable. There are no
charges for the notification of most of these changes, unless the
notification is made outside the required time. There is a fee involved in
changing a company name.

Change/Notification                      Time to Notify              Form
Registered office of a company           within 14 days of change    203
Principal place of business              within 14 days of change    203
Company officers and particulars
including (appointments/cessations,      within 14 days of change    304
changes to officers name/address)
Officeholder resignation or retirement   any time after resignation
                                                                    370
(in addition to form 304)                or retirement
Share Issue                               within 1 month of change 207
Share Cancellation                        within 1 month of change 284
Office hours (not proprietary
                                          before change occurs         203
companies)
Company Name (if new name                 within 14 days of special
                                                                       205
available) & Fee Charged                  resolution
                                       within 3 months, if a
Copy of financial statements & reports disclosing entity or
(if required). To be attached to form  managed investment       388
388                                    scheme. Otherwise within
                                       4 months.

Additional information on how to obtain forms and find out about late fees,
and alternative notification methods.

*The checklist is available for viewing or downloading from the ASIC
Website/Information for Companies Section. (Back to top of page)

Notifiable changes/Events
In the ASIC 'Checklist for registered companies and their officers' (see
footnote), the following changes are listed as notifiable. There are no
charges for the notification of most of these changes, unless the
notification is made outside the required time. There is a fee involved in
changing a company name.

Change/Notification                       Time to Notify               Form
Registered office of a company            within 14 days of change     203
Principal place of business               within 14 days of change     203
Company officers and particulars
including (appointments/cessations,       within 14 days of change     304
changes to officers name/address)
Officeholder resignation or retirement    any time after resignation
                                                                     370
(in addition to form 304)                 or retirement
Share Issue                               within 1 month of change 207
Share Cancellation                        within 1 month of change 284
Office hours (not proprietary
                                          before change occurs         203
companies)
Company Name (if new name                 within 14 days of special
                                                                       205
available) & Fee Charged                  resolution
Copy of financial statements & reports within 3 months, if a
                                                                       388
(if required). To be attached to form  disclosing entity or
388                                       managed investment
                                          scheme. Otherwise within
                                          4 months.

Additional information on how to obtain forms and find out about late fees,
and alternative notification methods.

*The checklist is available for viewing or downloading from the ASIC
Website/Information for Companies Section. (Back to top of page)

Additional Information re Notification of Changes
Notification of change on annual return

The notification of the first three items in the table can also be made on
the annual return, (form 316), without penalty, if the annual return is
lodged within the 14 days of the change occurring.

If any of these changes are notified to ASIC on an annual return more
than 14 days after the change has occurred then the company will be
charged late fees for each late item. These late fees will be charged in
addition to any late fees that may be payable on the annual return itself.

The late fees are applied on a graduated scale with an up-to-one month
late fee and a more-than-one-month late fee. The current fees are posted
on the website in the Information for Companies/fees section.

All the relevant forms (with the exception of form 316 - the annual
return) are available for downloading from the ASIC website.

Other Requirements
In addition to the lodgement of an annual return and the notification of
changes, the Corporations Law imposes extra reporting requirements on
Public and Large Proprietary Companies.

Some of the additional reporting requirements for Large
Proprietary and Public companies are:

Semi annual financial statements

Annual statements

Audited accounts

Notification of auditors.
In addition to these reporting requirements, the Corporations Law also
imposes additional administrative and record keeping requirements. Refer
to the texts listed in References/External/Regulatory Bodies Tab for
details.

Looking at ATO Administered Taxes
A business may have an obligation to pay or collect several taxes or levies
administered by the Australian Taxation Office.

In this section we shall look at some extracts of returns prepared by
businesses. These extracts and the full returns from which they come
would be supported by extensive working papers prepared and kept in
accordance with tax office requirements.

The Gathering and Verifying element covers the information collection and
recording, and basic working papers.

The working section of this element will introduce you to the calculations
and the completion of the relevant sections of the returns forms. A fuller
view of the return forms can be obtained be requesting or downloading
the appropriate forms from the ATO.

The Tax Office has numerous booklets, guides, videos; CD's and advice
from support officers are available at no cost. You are advised to
supplement this resource with publications from the ATO. Guidance as to
how to obtain, or access these publications is included in the tax
references linked below.

Goods and Services Tax
The GST return is incorporated into the Business Activity statement.

For discussion purposes the GST panel has been divided into Supplies Made
and Acquisitions Made.

On the BAS these panels are side by side.

The figures used in this Statement are from Aussi Cossi for the month
ending 31 May 20AD. You can trace the figures by referring to the
journals mentioned in the explanations. The Financial records of Aussi
Cossi are in the Office.
                           Supplies Made                     Explanations
                                                      Cash Receipts & Sales
G1 Total sales/supplies                      70144
                                                                    Journal
                                                      Cash Receipts & Sales
G2 Exports (GST free)                        27700
                                                                    Journal
G3 Other GST free Supplies
G4 Input taxed supplies
     Total GST and Input taxed supplies
G5                                           27700
     (add G2 + G3 + G4)
G6 Total taxed Supplies (G1 - G5)            42444
G7 Adjustments
     Total Taxable supplies after
G8                                           42444
     adjustments (G6 + G7)
G9 GST PAYABLE (G9/11)                     3858.54

Acquisitions Made - Details extracted from Cash payments, Purchases and
purchases returns Journals (top)

                  Acquisitions Made
                                                Include the GST
G10 Capital Acquisitions                   8350 component if a tax
                                                invoice is held. (or <$50)
                                                  Do not include salary and
G11 Other acquisitions (Purchases)        20819
                                                  wages
      Total acquisitions (add G10 +
G12                                       29169
      G11)
      Acquisitions for input taxed
G13
      supplies
      Acquisitions with no GST in
G14                                         194 Bank fees & interest
      price
    Total estimated Private use of
G15 acquisitions & non tax
    deductible acquisitions
      Total non creditable acquisitions
G16                                         194
      (Add G13 +G14+G15)
      Total creditable acquisitions
G17                                       28975
      (G12 - G16)
G18 Adjustments
G19 Creditable acquisitions Total         28975
      after Adjustments (G12 - G16)
G20 GST CREDIT (G19/11)                     2634.09

The yellow panel is for explanation purposes only and does not form part
of the Business Activity Statement.

The tax office has issued an comprehensive guide to the completion of the
BAS, including the GST component. Further information on the GST is
covered in tax sheets, booklets, and guides issued by the ATO. They are
available on ATO web site at www.taxreform.ato.gov.au or by requesting a Fax
from Tax, or by phone. Details are included in the tax references linked
below.

Fringe Benefits Tax
Refer to the Finalised FBT file for VOC Enterprises Ltd, open last year's FBT
return.

Notice how the various components are transferred on to the return form.
The calculations for the current year will be worked through in the
working section.

The Fringe benefits taxable amount shown at f was the total fringe benefit
amount (e) times (1-48.5%), with the 48.5% being the highest marginal
tax rate.

The Total amount of tax payable (g) is the Fringe Benefits taxable amount
(f) times the tax rate (48.5%).

The Total Reportable Fringe Benefits Amounts for all employees (l) would
need to be determined after considering the total benefits each individual
employee received, and whether they reached the reportable threshold.

The ATO issues several booklets/guides on Fringe Benefits and the
calculation of Fringe Benefits Tax Liability. The publications are available
on the ATO website.

Last Year's FBT Return
Extract from FBT return

                Number     Number of   Gross
                                                                              Taxable
    Type of     of         employees   Taxable    Employee       Value of
                                                                              value of
    benefit     Benefits   receiving   Value of   contribution   reductions
                                                                              benefits
                provided   benefits    benefits

    Motor car
a   Statutory          3           3    18634             500             1    18134
    A

    Motor car
b   Operating       1           1    6572          200             1     6372
    costs B

c Loan C            1           1    6500             1            1     6500
    Expense
d   Payment         3           3    5000             1            1     5000
    E
e Aggregate Fringe benefits amount                                      36006
f   Fringe Benefits taxable amount (aggregate/ (1-48.5%))               69914
g Total amount of tax payable                                           33908
h Amount of rebate                                                            1
i   Sub-total                                                           33908
j   Less Instalments paid                                                     1
k Payment due or Refund Due to you                                            1
l   Total Reportable Fringe Benefits Amounts for all Employees          33908

The labels in this section are for our reference purposes only.

PAYG-Withholding
The PAYG Withholding System is when tax is withheld from other
taxpayers.

Aussi Cossi is a registered employer, and registered for GST. It had a
gross wage bill of $2800 for the month of May 20AB.

The wages were made up of the following payments.

Weekly Payments

                Tax free        TFN         Gross per                  Net
Employee                                                  Tax **
                Threshold       Quoted      week                       wage
Sandra Joans Y                  Y           200             15.52       184.48
Daille Koyle    N               N           200                   97      103
Henry Choo      N               Y           300              94.5        205.5
Total -
                                            700           207.02 492.98
weekly

Monthly totals (4 weeks)
       Total Month of May                 2800 828.08 1971.92

**Using PAYG - Statement of Formulas for Calculating Amounts to be
Withheld. These formula scales are quite extensive, and care should be
taken to ensure the appropriate scales are used. Variations may occur:
due to dependants, HECS, Medicare levy, TFN or for several other
reasons. (The scale is downloadable from ATO website, or can be
collected from the ATO or post offices)

Extract from BAS Statement

Total of salary and                 Amounts withheld from
wages and other         W1     2800 investment distributions       W3 �
payments.                           where no TFN is quoted.
Amounts withheld from           Amounts withheld from
salary, wages and     W2 828.08 payment of invoices where          W4 �
other payments.                 no ABN is quoted.

The relevant ATO guide for this topic is the Guide to Pay As You Go for
Business.

Working with ATO
Administered Taxes
This section will introduce you to the
calculations that need to be made, and the
information that needs to be included in these
returns forms. A fuller view of the return
forms can be obtained by requesting or
downloading the appropriate forms from the
ATO.

The Tax Office has numerous booklets, guides, videos, CD's and advice
from support officers available at no cost. You are advised to supplement
this resource with publications from the ATO. Guidance as to how to
obtain, or access these publications is included in the tax references
linked below.


Goods and Services Tax
In this section you are required to complete the GST section of a BAS
statement.
        Activity

Refer to the Financial records of Jim's Electrical for the month ended 30
June 20AB. These records are included in the Businesses/Partnership tab
under 'financial records

For convenience purposes the GST panel has been divided into

Supplies Made and

Acquisitions Made.

On the BAS these panels are side by side.

Supplies Made

Review the General Journal and the Cash receipts journal and type in the
correct figures from the choices column ' into the Amount column. Not
all choices will need to be used. Some cells will remain blank. (Complete
and enter the shaded cells by calculation).


                     Supplies Made   Amount       Choices

G1 Total sales/supplies                              12000

G2 Exports (GST free)                                12930
G3 Other GST free Supplies                            3000
G4 Input taxed supplies                              10909
   Total GST and Input taxed
G5 supplies (add G2 + G3 +                           15000
     G4)
     Total taxed Supplies (G1 -
G6
     G5)
G7 Adjustments
     Total Taxable supplies after
G8
     adjustments (G6 + G7)
G9 GST PAYABLE (G9/11)


View the text alternative here.
Acquisitions Made -

Review the General Journal and the Cash payments journal of Jim's
Electrical for June 20AB and transfer the correct answer from the
'choices' into the Amount column. Not all choices will need to be used.
Some cells will remain blank. (Complete the shaded cells by calculation).


              Acquisitions Made       Amounts      Choices

G10 Capital Acquisitions                               1000

       Other acquisitions
G11                                                    1100
       (Purchases)
       Total acquisitions (add
G12                                                    6160
       G10 + G11)

       Acquisitions for input
G13                                                    5600
       taxed supplies

       Acquisitions with no GST
G14                                                     698
       in price
    Total estimated Private
    use of acquisitions & non
G15                                                     415
    tax deductible
    acquisitions
    Total non creditable
G16 acquisitions (Add G13                               635
       +G14+G15)
       Total creditable
G17                                                    1113
       acquisitions (G12 - G16)
G18 Adjustments
    Creditable acquisitions
G19 Total after Adjustments
       (G12 - G16)
G20 GST CREDIT (G19/11)

View the text alternative here.

Complete the relevant calculation cells and calculate the net GST
credit/payable.

If necessary, refer to a copy of the Business Activity Statement
Instructions, or other references for guidance.

The tax office has issued a comprehensive guide to the completion of the
BAS, including the GST component. Further information on the GST are
covered in tax sheets, booklets, and guides issued by the ATO. They are
available on ATO web site at www.taxreform.ato.gov.au. or by requesting a
Fax from Tax, or by phone. Details are included in the tax references
linked below.

Goods and Services Tax
Answers

Question 1

Choose the amount for G1 Total sales/supplies under 'Supplies Made'
from the following:

A. 12,000

B. 12,930

C. 3,000

D. 10,909

E. 15,000

Select the correct response then check your answer.

Answer

The correct answer is E (15,000).

Question 2

Choose the amount for G10 Capital Acquisitions under 'Acquisitions Made'
from the following:

A. 1,000

B. 1,100

C. 6,160

D. 5,600
E. 698

F. 415

G. 635

H. 1,113

Select the correct response then check your answer.

Answer

The correct answer is C (6,160).

Question 3

Choose the amount for G11 Other acquisitions (Purchases) under
'Acquisitions Made' from the following:

A. 1,000

B. 1,100

C. 6,160

D. 5,600

E. 698

F. 415

G. 635

H. 1,113

Select the correct response then check your answer.

Answer

The correct answer is H (1,113).

Question 4

Choose the amount for G14 Acquisitions with no GST in price under
'Acquisitions Made' from the following:

A. 1,000
B. 1,100

C. 6,160

D. 5,600

E. 698

F. 415

G. 635

H. 1,113

Select the correct response then check your answer.

Answer

The correct answer is F (415)

Fringe Benefits Tax Returns
In this segment we work through the process of completing a Fringe
Benefits Tax Return. Some calculations shall be shown, and exercises
provided for you to finish.

Finally an FBT form will need to be completed using the information you
have gathered throughout this segment.

We shall be working through the FBT return of VOC Enterprises Ltd. You
will need to refer to the Finalized FBT File in their Office Filing cabinet.

Steps in Preparing an FBT Return.

      DETERMINE WHAT FRINGE BENEFITS HAVE BEEN PROVIDED
      DETERMINE THE TAXABLE VALUE OF BENEFITS
      Calculate totals for each type of benefit.
      CALCULATE TOTAL VALUE OF BENEFITS FOR EACH EMPLOYEE
      Collate the information and transfer onto return form
      COMPLETE FORM AND DETERMINE TAX LIABILITY



The ATO issues several booklets/guides on Fringe Benefits and the
calculation of Fringe Benefits Tax Liability. The publications are available
on the ATO website, and are available from the ATO on request.

Determine what fringe benefits have been
provided
The benefits provided to VOC Enterprises Ltd employees has already been
determined.

Refer to the Finalised FBT file and locate the summary of benefits. You
may wish to print this page off to ensure that all benefits have been
valued and included on the FBT return.

Determine the taxable value of benefits
Refer to the Details of Benefits provided to VOC Enterprises Ltd employees.
There have been 11 separate benefits that will need to be valued.

Analysing the list, there are three types of benefits.

      Motor Vehicles
      Expense Payments
      Interest Free Loan

Values have been allocated in the FBT Expenses Summary to all items except
the vehicles and the Loan. Where possible, the expenses in relation to the
vehicles have been identified.

Value of Expense Payments

(The Holiday accommodation is considered to be an expense benefit).

                                         Number of
        Benefit                                            Value
                                         Benefits
        Mobile Phones                    2                      1380
        Holiday accommodation            1                       800
        Private School Fees              1                    12000
        Total Expense Payment
                                         4                   $14180
        benefits




       Action -

Transfer this item onto the Blank FBT Return extract. (Our reference d,
ATO reference Label E). You should use the file named FBT.xls which you
saved in the Valuing Motor Vehicle page. If you do not have this file follow
the link at the top of the page now.

Value of Interest Free Loan
Loan benefits provided to employees must be allocated a benchmark
interest rate. The difference between the interest at benchmark rate and
the interest at the rate charged is the value of the benefit.

            Benefit               Number of Benefits Value
            Interest Free Loan 1                            ???
            Total Loan benefits 1                             $




      Activity

Access the latest information from the ATO to determine the current
benchmark rate. Apply it to the loan. Note: no interest has been charged
so the loan times the benchmark interest rate will be the value of the
benefit. The loan has operated for the full year.



      Action

Transfer this item onto your FBT.xls file and save. (Our reference �c,
ATO reference Label C.)

Valuing Motor Vehicle Benefits.
The employer has the option of valuing the Motor Vehicle Benefits in
accordance with the Operating Cost Method or the Statutory Formula
Method, providing the necessary documentation and records are kept.
These requirements and methods are discussed in the Gather and Verify
Element.

Value of Motor Vehicle Benefits

Refer to the Details of FBT Expenses file and the Odometer Details file,
both form part of the Finalised FBT file in the VOC Enterprises Ltd Office
Filing Cabinet.

The Value of the Fringe benefit must be calculated for each Motor Vehicle,
after taking into consideration the particular usage of the vehicle.

Toyota Prado

Calculate Value of benefit using Statutory Formula
Determine Annual Kilometres: This vehicle was used for the full year so
the difference between the opening and closing odometer reading equals
annual kilometres.

35780-15980 =19800

Determine statutory rate applicable to that number of kilometres. Refer to
the current scale. We have used the scale shown in the tax references
linked below.

Statutory rate for 19800 kms = 20%

Substitute values from expenses sheet into Statutory formula

[(A x B x C)/D] - E

(60000 x 20% x 365)/365 -1230 = 10770

To determine item E - you will need to refer to the ***employee
declarations*** for amounts contributed towards fuel expenses.

Calculate Value of benefit using Operating costs Method

Determine total operating costs.

              Fuel oil repairs                          2560
              Registration and insurance                2000
              Depreciation                              9225
              Interest component                        2665
              Total                                    16450

Note: an interest component of depreciated value of vehicle x Benchmark
interest rate must be included in operating costs. Depreciation at a rate of
22.5% pa of the depreciated value of the vehicle must also be included.
The petrol, oil repairs in the expense summary includes the amount if any
contributed by the employee.

Substitute values into the Operating Costs formula

(A x B) - C

(16450 x 90%) - 1230 =13575

Note: The private use percentage (Item B) can be determined by
referring to the ***odometer Details*** file which show the Business use
percentage as determined by a log book.
Select Lowest Value

The Statutory Formula Method would be selected with a value of $10770.

Transfer value to Employee Benefits File (available in The
Records/Financial Records).




      Exercise

Complete calculations for the remaining vehicles, determine if the
operating cost or the statutory formula method is the most appropriate.
Note: the Ford laser for Allen Lyle, must be valued using the statutory
formula method as no other information is available.

Complete the tables below

                                        Number of
        Benefit                                              Value
                                        Benefits
        Motor Vehicle - Statutory
        Total Motor Vehicle Statutory                        $


                                        Number of
        Benefit                                              Value
                                        Benefits
        Motor Vehicle - Operating
        Costs
        Total Motor Vehicle Operating
                                                             $
        Costs

***



      Action

Open the XLS file contained in the following link. Transfer these items
onto the Blank FBT Return extract. (Our reference a, ATO reference Label A,
for Statutory Method and into b, ATO reference Label B, for Operating
Costs. You should save a copy of this on your machine named FBT.xls.

FBT Expense Summary
Details of Motor Vehicle Expenses FBT Year 31 March 20ad
             Vehicle                  Age of
                     $60,000                  2 years
             cost                     vehicle
             Petrol oil repairs       $2560
Toyota
Prado        Registration and
                                      $2000
             Insurance
             Opening Written down
                                      $41000
             value
               Vehicle                Age of
                          $35000              3 years
               cost                   vehicle
          Petrol oil repairs          $4800
Holden
Commodore Registration and            $1250
          Insurance
               Opening Written down
                                      $16000
               value
               Vehicle                Age of
                                              1 year
               Leased                 vehicle
Mitsubishi     Petrol oil repairs     $2000
Magna          Registration and
                                      $1800
               Insurance
               Vehicle Lease fees      $6000
               Vehicle                Age of
                          $15000              9 months
               cost                   vehicle
               Petrol oil repairs     $900
Hyundai        Registration and
Excel                                 $1100
               Insurance
                                      New in June
               Opening Written down
                                      (purchased in
               value
                                      October)
               Vehicle                Age of
                          $35000              2 years
               cost                   vehicle
               Petrol oil repairs     $4000
Ford Falcon Registration and
                                      $2300
            Insurance
               Opening Written down
                                      $21500
               value
               Vehicle                Age of
                          $25800              2 months
               cost                   vehicle
Ford Laser     Petrol oil repairs     Unavailable
               Registration and
                                      Unavailable
               Insurance
              Opening Written down      New in February
              value                     20AD

Cost of Other Fringe Benefits

Mobile Phone - Warren McCloud                           $900
Mobile Phone - Grahame Smith                            $480
Private School Fees - Warren McCloud                    $12000
Interest Fee Loan - Grahame Smith (lent $100,000
                                                 $
out of company funds)
Holiday Accommodation by customer- Phillip Holt         $800
(cost nil)                                              value
Calculate total value of benefits for each
employee
In order to determine whether an employee reaches the
Reportable Fringe Benefits Threshold, the benefits provided
to each employee must be determined.




      Activity

Using the information in the Finalised FBT file and the
calculations made in the previous steps, complete the
following table. You will need to refer to ATO literature to
determine the Reportable benefits threshold.




                                                     Report-
 Employee        Loan Phone Car       Other Total
                                                        able
 Warren
                      900     10770 12000 23670        23670
 McCloud
 Grahame
                      480
 Smith
 Heather
 Luing
 Samantha
 Kilne
 Kevin Currin
 Allen Lyle
 Phillip Holt                          800                  nil


 Total
 Reportable
 Benefits




       Action

Transfer the total of this item into your FBT.xls file
extract.(Our reference l , the last line.)

Complete form and determine tax liability
After completing the previous steps in the FBT return preparation process,
all that is required is the totalling and tax calculations.




       Activity

Following the guidelines demonstrated in the looking section, and the
Guide to the FBT return, complete the necessary calculations on the
return.

Forward the completed FBT.xls return to your facilitator.

Working with PAYG Withholding
The PAYG Withholding System is when tax is withheld from other
taxpayers.

In this segment you will be required to complete the section of the BAS
that related to Pay As You Go Withholding. You will need access to the
ATO publication PAYG - Statement of Formulas for Calculating Amounts
to be Withheld.

These formula scales are quite extensive, and care should be taken to
ensure the appropriate scales are used. Variations may occur: due to
dependants, HECS, Medicare levy, TFN or for several other reasons. (The
scale is downloadable from ATO website, or can be collected from the
ATO or post offices).
      Activity

You are required to

     determine the applicable withholding amounts,
     complete the wages schedules,
     complete the BAS extract below
     to reflect the following information:

Aussi Cossi is a registered employer, and registered for GST. It had a
gross wage bill of $3000 for the month of June 20AB.

The wages were made up of the following payments.

Weekly Payments

                                             Gross
                            Tax free TFN                   Net
       Employee                              per   Tax
                            Threshold Quoted               wage
                                             week
       Sandra Joans         Y         Y         142
       Daille Koyle         N         N         160
       Henry Choo           N         Y         240
       Geoff Peder          Y         Y         170
       Total - weekly                           712

Single Payment

Ramir Kashmin           y        y        152

Other Amounts withheld

The business also had electrical repairs undertaken during the month.
The total invoice received was for $600, but did not include an ABN. The
business withheld the appropriate amount of tax. (You will need to
determine how much and include it on the BAS statement).

Extract from BAS Statement

                                 Amounts
       Total of salary
                                 withheld from
       and wages and W1                           W3
                                 investment
       other payments.
                                 distributions
                                  where no TFN is
                                  quoted.
                              Amounts
       Amounts
                              withheld from
       withheld from
                              payment of
       salary, wages     W2 �                       W4
                              invoices where
       and other
                              no ABN is
       payments.
                              quoted.

Submit the details of the completed wages sheets and BAS statement
extract (i.e. Label W3= Nil) as an e-mail to your facilitator.

Working with Land Tax
In this section you are required to calculate land tax payable in your
State. You will need to contact the Office of State Revenue or the State
Revenue Office in your state to obtain details of the appropriate rates and
exemptions.

The information may also be included on the relevant website.




      Activity

Andrea Cossi has the following properties, located in your State. The
Valuer General valuation is shown next to each property. All properties
are held in her own name.

       Property address                                  Valuation
       Nyora Street                                           75000
       Radan Avenue                                         130000
       Clark Street                                           45000
       Driftwood Place (Her Principle residence)            160000

Advise Andrea of her Land tax liability and advise her of the date by which
the tax (if any) will need to be paid.

Email your facilitator with your answer.


Working with Payroll Tax
In this section you are required to calculate Payroll tax payable in your
State. You will need to contact the Office of State Revenue or the State
Revenue Office in your state to obtain details of the appropriate rates,
inclusions and exemptions.

The information may also be included on the relevant website.

As with many taxes and charges, the relevant return form is, in most
States pre-printed and addressed to the recipient. It is therefore not
possible for you to access a blank form.




      Activity

VOC Enterprises Ltd makes the following employee related payments in
your State. All Wages are paid in your State. The payments listed are the
annual amounts.

                                                      Annual
       Type of Payment
                                                      Amount
       Salaries and Wages                                      845000
       Fringe Benefits                                          35000
       Redundancy Payments                                     135000
       Motor Vehicle reimbursements (cents/km
                                                                 5000
       basis)
       Superannuation Contributions                             85000

Advise Voc Enterprises Ltd of its Payroll tax liability and advise it of the
dates by which the tax (if any) will need to be paid.




Working with the Annual Return
One of the critical aspects of a company's obligations under Corporations
Law is to lodge an annual return.

The components of the annual return have been detailed in the Key
Principles area.




      Activity
Visit the ASIC website at www.asic.gov.au, and review the current guide to
completing and lodging an annual return. Determine what the current
charges are for lodgement of an annual return.

Email your facilitator with the answers to the following questions:

   1. The lodgement fee for an annual return of a proprietary company
      lodged in the March of the year after the end of the financial year.
   2. The lodgement fee for a public company lodged on the 5th of
      February in the year after the end of the financial year.
   3. What declarations must a company director or secretary make
      when lodging the return?
   4. What are the consequences of not making this declaration?

Notification of Changes
One of the critical aspects of a company's obligations under Corporations
Law is to notify the Australian Securities and Investments Commission if
any of the outlined changes have occurred.

Details of some of the specified changes have been detailed in the Key
Principles area.




       Activity

Visit the ASIC website at www.asic.gov.au, or contact your local business
centre.

Locate, download and complete the form/s appropriate to make the
following notifications. (Please indicate if notification is not necessary)

Your Company is VOC Enterprises Pty Ltd. Its ACN number is 00 000 099

In each case you are making the notification 6 weeks after the event
occurred.

      You are a director, and you have changed your address to 1
       Cordelia St, South Brisbane Qld 4001.
      You have changed your office hours from 9am to 2 pm. daily, to 1
       pm to 3 pm daily.

You have issued 200 ordinary shares to S. Holder

Clearly mark your forms in large letters "Student use only".
Indicate the fee (if any) that would be payable.

Forward your completed forms and answers to your facilitator.

Overview of Return Lodgements
A Business has an obligation to lodge a number of returns. In an effort to
minimize the number of times a business is required to lodge returns and
statements the tax office introduced the New Tax System.

The System incorporates the Goods and Services Tax (GST), PAYG (both
withholding and instalments) , Fringe Benefits Tax instalments and
deferred company instalments.

The system allows businesses to report and remit their obligations on one
form, the BAS, and make one payment.

Businesses are however still required to lodge Income Tax and Fringe
Benefits Tax returns. These returns provide the basis for determining the
amounts to be paid via the BAS.

Lodgement of Income Tax returns
Due Date for lodgement of Income Tax Returns

Individual, partnership and trust returns must be lodged by the 31st
October in the following tax-year, unless they are lodged by a registered
tax agent.

Tax agents are able to lodge the returns at a later date in accordance
with their 'normal lodgement program. The due date within an agent
program is dependent upon the level of tax payable, and whether the
taxpayer has been a late payer or late lodger in prior years. Details of the
lodgement programs are available in external references or on the ATO
website/professionals section.

Lodgement Dates for Company Income Tax Returns

The due date for income tax returns for companies is dependant upon the
classification of the company. Companies are classified according to likely
tax payable. For full details of penalties refer to external references or
the ATO website.

Format of Lodgement

Returns must be lodged on the form provided or authorised by the
Commissioner.
The return can be lodged electronically using commercial packages or by
using eTax the ATO's downloadable electronic individual tax return
preparation package.

Details of Return

The income tax return must be prepared in accordance with the Income
Tax Assessment Act.

The return must be signed by the taxpayer.

Any tax agent who charges a fee for preparing or assisting in the
preparation of the return is also required to sign it.

Penalties apply for non-compliance

A penalty of up to 200% of the tax payable may be applied if a taxpayer
fails to lodge an income tax return. A similar rate of penalty may be
applied if the return contains false or misleading information. The
Commission has authority to make an assessment of tax payable where
the taxpayer fails to furnish a return. For full details of penalties refer to
external references or the ATO website.

Lodgement of FBT returns
Due Date for lodgement of FBT returns

FBT returns must be lodged by the 21st May in the following tax-year.

Payment of FBT obligations.

Fringe benefits tax is paid in instalments on the BAS unless the notional
obligation is less than $3000, in which case the employer can choose to
pay the FBT annually.

Format of Lodgement

Returns must be lodged on the form provided or authorised by the
Commissioner.

The return can be lodged electronically using commercial packages.

Details of Return

The return must specify the fringe benefits taxable amount and the tax
payable thereon.
The return must be signed by the employer or representative who
furnishes it.

Any tax agent who charges a fee for preparing or assisting in the
preparation of the FBT return is also required to sign the return. They
must set out the sources available for the compilation of the return.

Penalties apply for non-compliance

A penalty of up to 200% of the tax payable may be applied if an
employer fails to lodge an FBT return. A similar rate of penalty may apply
if the return contains false or misleading information. For full details of
penalties refer to external references or the ATO website.

Lodgement of the Business Activity Statement
The Business Activity Statement (BAS) incorporates seven types
of taxes.




      Activity

Refer to a BAS, or the BAS Instructions, the ATO website or another
external reference.

List the seven taxes incorporated into the Business Activity Statement.

Email your facilitator your response




Lodgement requirements depend on size of business and
activities.




      Activity

Review external information sources and complete the following
table.

How often do enterprises need to lodge their activity statements?
Liability                                          How often?
GST                  Annual turnover less than       Quarterly
                     $20 million
                                                     Monthly
                     Annual turnover $20 million     Quarterly
                     or more
                                                     Monthly
                     Entities whose income tax       Quarterly
                     year does not end on 30
                     June                            Monthly

PAYG                 Annual withholding              Quarterly
Withholding          obligations $25,000 or less
                                                     Monthly
                     Annual withholding              Quarterly
                     obligations more than
                     $25000 but do not exceed        Monthly
                     $1 million
PAYG                                                 Quarterly
Instalment
                                                     Monthly
FBT                                                  Quarterly
Instalment
*                                                    Monthly

View the text alternative here.

*If FBT liability for the previous year is less than $3000 an annual
instalment can be made. ***

Activity Statements may report different information in different
periods.

Small businesses have the option of reporting their GST obligations either
monthly or quarterly, and their FBT and PAYG instalments quarterly, but
they may be obligated to report their PAYG withholding obligations
monthly. (Refer to the table above).

This would result in the need to prepare a monthly activity statement
reporting PAYG Withholding (and perhaps GST), and every quarter
preparing a quarterly activity statement incorporating FBT and PAYG
instalments as well as the other two taxes.

A similar variation in reporting obligations would occur for even large
businesses as they would be required to report for GST and PAYG
withholding whereas the PAYG Instalment and FBT instalment are
reported quarterly.

Compliance - Making Payments
Most tax payments are now incorporated into the BAS or IAS statement.
These tax payments include:

     Fringe Benefits tax
     PAYG Instalments.

Pay As You Go Instalments replace the old Provisional tax. PAYG
Instalments are payable on non-salary and wage income, other than
imputation credits, capital gains, exempt income and deemed dividends.

The BAS Statement requires quarterly payments of these taxes.

TAXPAYERS WITH SMALL OBLIGATIONS

For PAYG Instalments

Taxpayers with smaller PAYG instalment obligations (less than $8000)
and not registered for GST have the option of choosing annual payments.

Due dates for PAYG Instalments annual payments are as follows:

       Financial Year        Earliest PAYG due date
       2001                  31st March 2002
       2002                  31st March 2003
       2003                  21st October 2003

For FBT payments

Taxpayers with smaller FBT obligations (less than $3000 pa) have the
option of choosing annual payment.

The due date for FBT annual payment is when the annual return is
lodged. The return should be lodged by 21 May.

Principle of BAS Payments
A critical aspect of complying with the new tax system is to ensure
payments are made when due. The BAS is the mechanism for reporting
and paying several taxes.
When is payment due?

Payment is due by the due date for lodgement on the statement.

Usually the business will make the payment with the Statement.

When payment is due on a Business Activity Statement (if the business is
registered for GST) or an Instalment Activity Statement (if the business
is not registered for GST), will depend upon whether the business has
chosen to lodge the statement monthly or quarterly.

Businesses with annual withholdings of $25 001 to $1 million lodge the
Activity statement and payment by the 21st day after the end of the
month.

The Activity statement would include the PAYG withholding amount. This
statement may also include GST components if the business has chosen
to report GST monthly.

Otherwise the business will lodge a Business Activity Statement (with
payment) in the following way.

       Payment type           Month 1     Month 2     Month 3
       PAYG Withholding       yes         yes         yes
       PAYG Instalments                               yes
       FBT                                            yes
       GST                                            yes

In each case the payment is due 21 days after the end of the
month.

Businesses with annual withholdings of up to $25 000 can choose to
lodge monthly or quarterly. If they choose to lodge quarterly for PAYG
withholding and also choose to lodge quarterly for GST the following
payment schedule will apply.

       Payment type           Month 1     Month 2     Month 3
       PAYG Withholding                               yes
       PAYG Instalments                               yes
       FBT                                            yes
       GST                                            yes

In each case the payment is due 21 days after the end of the
quarter.
Other Compliance Issues
In addition to compliance with the lodgement and payment requirements
for income and fringe benefits taxes, and the Business or Instalment
Activity Statement, businesses have several other compliance obligations
to the Taxation Office.

Compliance with record keeping requirements

A major compliance issue is to ensure income tax returns are prepared in
accordance with the Income Tax Assessment Act and the records are
kept as required by law. The record keeping issues are discussed in the
Gathering and Verifying Element.

Compliance with Employer obligations.

Businesses that employ staff have tax obligations other than the
withholding and remittance of PAYG instalments. They are also required
to:

      send completed Tax File Number declarations to the ATO within 14
       days.
      withhold tax from wages or salaries at the top marginal rate, if
       payees don't complete a TFN declaration form
      report to the ATO by 31 October the details of any existing payees
       who have not given it Employment Declarations under the previous
       system and who do not subsequently provide TFN declarations,
       under the current PAYG system
      for new employees, report to the ATO within 14 days of the payee
       starting if they have not provided TFN declarations

This report takes the form of completing a TFN declaration for the
employee, with the information known about them, but leaving it
unsigned.




Complying with Corporations Law
Company Obligations

Companies have extensive obligations under corporations law. They have
obligations to shareholders, external parties and the Australian Securities
and Investments Commission. Public Companies also have obligations to
the Australian Stock Exchange.

Obligation to lodge Returns with ASIC.
The Annual Return must be lodged by 31 January of the year following
the end of the financial year.

The annual return can be lodged at any time during the year, but it must
be lodged by no later than 31 January of the following year, unless
alternative lodgement requirements have been agreed to between the
company and ASIC.

Public Companies and large proprietary companies have financial
reporting obligations throughout the year. Refer to external references or
the ASIC website for details.

Lodgement of the return must be accompanied by the appropriate
fees.

If a company fails to lodge its annual return with the fee by
the due date, late lodgement fees will also apply.

Looking - Overview
To ensure a return is prepared and lodged in accordance with
statutory requirements the business or individual must:

External issues

      have a thorough understanding of the requirements - an
       introduction to the requirements is in the key principles in this and
       previous elements
      ensure records are kept in accordance with the requirements - for
       further discussion of record keeping requirements refer to the
       Gather and Verify element or refer to any ATO guide. Each guide
       includes details of the specific record keeping requirements in
       relation to that area.

Internal Issues

      review the records on which the returns are based
      ensure returns are prepared in accordance with the records
      ensure returns are arithmetically correct and lodged on time.

These processes are assisted by the extensive support offered by the
Taxation Office. The contact details for the Taxation Office are included in
the Reference/Tax tab. The ATO has launched a comprehensive education
program: including seminars, videos, telephone support, an extensive
website and numerous free publications and guides.

Looking at Tax Return Payment Issues
Look at the income tax return for Andrea Cossi.

When Andrea lodges the return she makes the following declaration:

I declare that all the information I have given in this tax return, including
the supplementary section and schedule- if applicable - is true and
correct, and:

   a. I have shown all my income- including net capital gains - for tax
      purposes for the year of income as required by the ITAA 1936 and
      1997
   b. I have the necessary receipts and/or other records, or expect to
      obtain the necessary written evidence within a reasonable time of
      lodging this return - to support my claims for deductions, rebates
      and family tax assistance (FTA)
   c. I have obtained the consent of my spouse to quote their TFN where
      this is given to support a claim for FTA and
   d. I have completed item M2- Medicare levy surcharge.

Notice that Andrea is required to declare that she has all the necessary
records to support her claims, and that she has declared any capital
gains.

Andrea, the taxpayer is required to make these declarations and is legally
responsible for the accuracy of information provided even if the return
has been prepared by a tax agent or accountant .

The taxpayer is the one liable for any incorrect return penalties.

Looking at Lodging an FBT return
Look at the declaration on an FBT Return.

I declare that the particulars shown in this return, and any accompanying
documents, are true and correct in every detail and disclose a full and
complete statement of the net amount of all taxable fringe benefits
provided to current, future and former employees and associates.

Notice that the Employers are required to declare that they have made a
full and complete disclosure of all the fringe benefits they have provided
to current, future and former employees and associates.

The Employer is required to make these declarations and is responsible
for them regardless of whether the return is prepared by a tax agent.

The employer is the one liable for any incorrect return penalties.
Looking at BAS Lodgement
A Business has completed the calculation sheets on the back of the BAS.
They have included all the GST data and the PAYG withholding and
instalment data. The summary of these items, including the labels at
which they put them is detailed below.

Goods and Services Tax

                                    Goods and
      Supplies G9 11434       services tax paid G20     9450
                                 (Acquisitions)

Pay As You Go withholding

     Amounts withheld from salary, wages and
                                             W2         2971
                             other payments

Pay As You Go instalments


  Instalment Income     T1   295101               T2 1.7 %


Fringe Benefits Tax


   ATO calculated fringe benefits tax instalment F1     1020


These amounts would be transferred to the front of the BAS as
shown in the BAS statement.

(Note: the amount transferred to item 5A PAYG instalment had to be
calculated $ 295101 * 1.7% =$5016 ).

Business Activity Statement
The follow table represents the labels on the front of a Business Activity
Statement.

                        DEBITS                                   CREDITS

        Goods and
                                        Credit for goods and
       services tax 1A 11434                                 1B      9450
                                           services tax paid
           payable
 Wine equalisation                    Wine equalisation tax
                   1C                                       1D
      tax payable                               refundable

        luxury tax
                   1E             Luxury car tax refundable 1F
          payable

                                          Special credit for
                                                             1G
                                        wholesale sales tax

  Add 1A + 1C +
                2A 11434          Add 1B + 1D + 1F + 1G 2B           9450
             1E

                                  If the result is positive this is your net
    2A minus 2B                        amount of GST. � If the result is
                 3       1984
  GST net amount                    negative this is your net amount of
                                                                GST credit

    Pay As You Go
                  4      2971
      Withholding

                                        Credit arising from
    Pay as You Go
                  5A 5016           reduced Pay As You Go 5B
       Instalment
                                               Instalments

                                        Credit arising from
   Fringe Benefits
                   6A 1020          reduced Fringe Benefits 6B
   tax Instalment
                                            Tax Instalment

         Deferred
    company/fund 7
       instalment

   Add 2A + 4 +
                8A 20441                Add 2B + 5B + 6B 8B          9450
    5A + 6A + 7

                               If the result is positive, the amount is
    8A minus 8B                  payable to the ATO. If the result is
   net amount for 9      10991           negative, the amount will be
   this statement              refunded to you or offset against any
                                               other tax debt you have.


Looking at BAS & IAS Payments
After a business has registered for GST it must ensure that the
appropriate BAS or IAS is lodged with payment (if any) by the due date.

Look at the obligations in the following examples:
Example A

A business has the following commitments, for the quarter. It has elected
to report GST quarterly.

TAX                   Month 1 Month 2 Month 3 Total
Net GST                     6530      12345        (365) 18510
PAYG withholding            5000        5000       5000 15000
PAYG Instalment                                   23000 23000
FBT Instalment                                     5000     5000

Obligations: Note: This business will have to lodge and pay monthly
because its PAYG withholding obligations are more than $25000 per
annum. It only has to pay the remaining taxes on a quarterly basis,
consistent with the GST election.

             BAS Month 1 BAS Month 2 BAS Month 3
                                                 Net GST
             PAYG              PAYG              PAYG
             withholding       withholding       withholding
                                                 PAYG
                                                 Instalment
                                                 FBT Instalment
PAYMENT $5000                  $5000             $51510
DATE         21st Month 2 21st Month 3 21st month 4

Example B

Business B has the same obligations as the business in example A,
except that its monthly PAYG Withholding commitment is $2000 month.

Obligation: Payment of $52510 (all outstanding amounts) and lodgement
of BAS 21st Month 4. Monthly statements would not be required as total
PAYG instalments do not exceed $25000 pa.

Resources
A1 Accountancy Temps has given you the following resources for you to work with:

      Businesses (information about three major businesses that you will be
       dealing with)
      Standards (information about accounting and other standards)
      References (web site, text, computing and other references you may need)
      Client documents (files relating to clients other than the three major
       businesses that you will be working for)

Downloading spreadsheets

You will need to open and work with spreadsheets. How your web browser handles
these files depends on which browser you use and how your browser's preferences
are set up. The simplest way to check is to click on the following link to a test
spreadsheet (Excel 8 KB).

If the above link does not automatically open a speadsheet file, follow any
instructions given or seek help by looking through the browser's help pages.

				
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