Peter Rafter is 45 years old and is a registered tax agent practising in Mittagong for over twenty years.
In 2014, Mr Rafter met Mr William Emery who was 80 years old and retired who soon became not only a major client of Peter Rafter as a registered tax agent, but also a close friend.
Mr Emery had ceased the need to lodge annual tax returns and his ATO account had been marked as such.
However, Mr Emery owned a substantial private residence of six bedrooms and had significant cash reserves in various deposits.
On 20 February 2015, Mr Emery gave Mr Rafter access to a Bank of Queensland account from which Mr Emery conducted his day-to-day banking.
On 25 February 2016, Mr Rafter transferred $440,000 from Mr Emery’s account to an account under his and his wife’s name.
Mr Rafter verbally promised to pay Mr Emery cash interest of 3% per annum payable yearly in arrears, which he did at the end of each year.
On 24 January 2017 Mr Rafter transferred $160,000 from Mr Emery’s bank account to one operated by Mr Rafter only.
On 24 February 2017, Mr Rafter transferred $40,000 to Mr Rafter’s son Caleb’s bank account. Mr Rafter’s evidence was that this was for painting and decorative work on Mr Emery’s home. No quotes or tenders were sought nor to this date has any work been carried out.
All transfers represented loans to Mr Rafter made, apparently, with the approval of Mr Emery.
At no stage was an executed agreement made in writing between Mr Rafter and Mr Emery setting out the terms of the loans, and the loans were not secured against any asset. Nor did Mr Rafter ever advise Mr Emery to seek independent advice on the loans.
Mr Rafter said that he had contacted his solicitor who he advised him that there was no legal ban to the verbal arrangements with Mr Emery.
In October 2015, Mr Rafter entered into an agreement whereby he began using an area of Mr Emery’s home in Mittagong as an office for his business. He rented two rooms and shared use of a
storeroom for this purpose. There was no written agreement reflecting this arrangement. Mr Rafter did pay a cash rental each week to Mr Emery.
In March 2017, Mr Rafter and Mr Emery had a disagreement.
Mr Emery appointed new accountants, and on 31 March 2017, those accountants contacted Mr Rafter by letter seeking the provision of any documents he held on Mr Emery’s behalf. Mr Rafter failed to provide any documents, saying that there were no relevant documents to be sent.
This task requires you to identify and follow legislative and regulatory requirements by critically evaluating and researching the relevant concepts.
This task requires you to identify and follow legislative and regulatory requirements for the relevant concepts.
Note: Refer to the online learning resources on the OLS website.
For each of the following items state what amounts (if any) are to be included as assessable income of William, an employee of Sports Stars Ltd.
|$ Assessable Income
|Sports Starts Ltd. pays tuition fees of $3,000 for William’s children
|$1,070 net interest from bank ($930 tax deducted due to no TFN notified)
|Received an award of $600 cash as employee of the month
|Carer payment of $1,000 received from Centrelink in respect of his 70 year old ill father
|Given a farewell gift worth $120 from work colleagues of his previous employment
|Tax refund of $3,400 received from the ATO
|Reimbursement of hospital expenses from Medicare $700
|Gross Salary of $71,000 ( PAYG $11,400)
|Car allowance of $2,500 received from employer
|Unfranked dividend of $4,000
|Proceeds of term deposit of $5,200 (includes principal of $5,000)
|Lottery win of $45,000
|Army reserve payment of $850 to William who serves on part time basis
|Received lump sum of $50,000 due to loss of leg as a result of work accident
|Prize of $200 won in a magazine competition
|Birthday gift of $200 from uncle
|Gross interest on saving account held jointly with spouse $1,000
|Christmas bonus of $800 received from Sports Stars Ltd
|Fully franked dividend of $7,000 received from Westpac Bank
|Received $2,400 from sickness and accident policy
|Sports Starts Ltd. paid $1,000 in superannuation guarantee payments to William’s nominated superannuation fund
|GST of $1,400 on sales received from customers on goods sold in his business
|Workers compensation received by William for lost wages
Note: Refer to paragraphs 10-005, 10-195 and other relevant paragraphs in your MTG.
Peta Perfect conducts a small business but chooses not to take advantage of the small business concessions. Her bank statement showed the following transactions for the year ended 30 June 2018:-
|Extract of the Bank Statement for the year ended 30 June 2018
|Sales receipts (reconciled to Sales Receipts Journal)
|Insurance recovery for loss of income following fire at premises
|Commissions from suppliers
|Proceeds of business loan
|Loan from brother
|Fully franked dividends
|Proceeds of term deposit (includes capital of $50,000)
|Cash drawings during the 2018 year
|Accounts receivable as at 30 June 2017
|Accounts receivable as at 30 June 2018
|Trading stock held at 30 June 2017
|Trading stock held at 30 June 2018
|Stock taken during the 2018 year
Note: Peta purchased $300,000 worth of trading stock during the year.
Calculate the Taxable Income of Peta Perfect under the accruals basis for the year ended 30 June 2018.
|$ Deductible Amount
|Luke is a salesperson and was fined for speeding while rushing to meet a customer.
|Luke is a salesman and purchased a suit (which he wears when he goes to see customers)
|Luke is a salesman and incurs costs for laundering his suit
|Luke is a salesman who has incurred expenses in attending interviews for a new job (he wishes to leave his present job for one that pays more)
|Tax agents fees to lodge objection against prior year tax assessment
|Ian is a police officer who makes subscriptions to the police union
|Ian is a police officer and makes personal superannuation contributions (concessionalcontributions) to a complying superannuation fund
|Ian pays donations to public hospital
|Sam is an ambulance officer who purchased Ambulance officer uniforms
|Sam is an ambulance officer who incurred expenses for the laundry of Ambulance officer uniforms
|GST remitted to the ATO
|Michelle works as an accounts payable clerk and incurred expenses travelling from her home to workin her own car.
|Michelle works as an accounts payable clerk and incurred parking fees for her own car when she parks in a parking station on the days she works back.
|Michelle makes donations to Salvation Army(Registered Charity)
Calculate the tax-free threshold for the following individuals for the year ended 30 June 2018. Use months rather than days in your calculations and show all your workings.
Calculate the Medicare levy surcharge for the following individuals for the year ended 30 June 2018.
$3,000, had reportable fringe benefits of $18,000 and a net investment loss of $4,000 for the year ended 30 June 2018.
Daniel purchased and used a 3000cc motor vehicle on 1 July 2017 with an effective life of 8 years and maintained a logbook for 12 weeks during the year.
During the 12-week period, Daniel travelled 1,200kms which were all business related. Costs incurred during 2017/18 year include:
|Petrol, oil and servicing
|Registration and insurance
Note: The car had a market value of $60,000 when purchased.
Show all methods of calculating the motor vehicle expenses and choose the most advantageous method for Daniel for the year ended 30 June 2018.
After five years' service, Sam, who is 35 years old, is made redundant from his place of work in 2017–18 and receives the following payments:
Under Sam’s workplace agreement, payment in lieu of notice and the gratuity are payable on termination of employment. Sam has five years of completed service and his redundancy meets the conditions of a genuine redundancy.
Sam also received $140,000 in salary and wages income during the year.
Note: You must show all your workings and may refer to the tables on paragraph 42-270 in your Master Tax Guide.
Christine is a married resident taxpayer with no dependants. The following has been taken from her taxation records.
Liz operates a small restaurant. She does not wish to take advantage of the small business concessions and her business is registered for GST.
Assets that Liz had acquired post 10 May 2006 and held at 1 July 2018 were shown in the Fixed Assets Register below:
|Adjustable Value 1/7/18
|Effective Life (years)
|Hot water service
Liz had also commenced the use of a low value pool on 1 July 2008. The pool balance as at 1 July 2018 was $4,100.
Liz places all eligible assets into the Low Value Pool.
During the year, Liz purchased the following new depreciable assets. The purchase price of the assets included GST.
|Purchase Price ($) Including GST
|Date of Purchase
|Effective Life (years)