Business Tax Requirements

FNSACC401 Process Business Tax Requirements 

 Task A

Multiple choice questions

  1. d. 46.5%
  2. d. Not reported in the BAS at all.
  3. a. Foreign travel expenses reimbursed by employer.
  4. a. $75,000
  5. b. $2 million
  6. d. Provide support benefit for employees.
  7. d. None of the above; all are actual requirements of the PAYG withholding system.
  8. a. 1050.00
  9. a. A non-resident earning rental income in Australia
  10. b. $18,200

Task B

Fringe benefits refer to benefits that offered by an employer to an employee. It is some extra from the salary. Typically, it is paid according to economic performance of the company. For example, mostly reputed public and private companies provide accident and health benefits that come under fringe benefits (Murray and Pateman, 2012).

In order to ensure that sufficient and current records are maintained to comply with lodgement requirements, there is a need to maintain the accounting recode for the taxation process. For this, a strong taxation system can be established and maintained for managing business tax return.

3.

 PAYG is a kid of tax where individual pays incremental amounts which accumulate towards at the end of financial year. Before submission of the income tax file, it is important to calculate PAYG instalments. It contains the some limitation such as for this it is necessary applicant should be employee (Burkhauser, et al. 2012). Another limitation of PAYG is that people make payments to businesses that do not quote their ABN.

In the Australian business environment, the non profit organisations use the activity statement to pay and report a number of tax liabilities. It includes good and service tax, pay the PAYG instalment, PAYG withholding. It also includes the fringe benefits tax FBT instalment. Activity statement includes the below item in the list.

  • Lodging and paying your BAS
  • Goods and services tax (GST)
  • Pay as you go (PAYG) income tax instalment
  • Pay as you go (PAYG) tax withheld
  • Fringe benefits tax (FBT) instalment
  • Luxury car tax (LCT)
  • Wine equalisation tax (WET)
  • Fuel tax credits
  • Instalment notices for GST and PAYG instalments (Australian taxation office, 2017)

5.

In the situation when a taxpayer fails to correctly report or pay by the due dates, ATO charge penalty units amount on the taxpayer. In regard of this, there are different penalty unit amount that is calculated using either a statutory formula (Australian taxation office, 2017).

When infringement occurred Penalty unit amount
Up to 27 December 2012 $110
28 December 2012 – 30 July 2015 $170
31 July 2015 – 30 June 2017 $180
On or after 1 July 2017 $210

6.

Information should be included in a tax invoice for supplies

  1. a) Less than $1,000

The word tax invoice should contain a prominent place, name of firm and GST number of the supplier. It should also include the total amount payable for supply with date the tax invoice was issued.

  1. b) More than $1,000’

For supplier more than $1000, the tax invoice should clearly include the prominent place, organisation name and GST number and recipient of the supply. It should also include information on the date the invoice was issued (Greiner and Gregg, 2011).

  1. c) Property Register

To property register for tax invoice for supplier the below information is required

  • Name and address of the recipient,
  • Address of delivery,
  • State name and state code

The term accounting system refers to a system that enables the organisation to manage the income, expenses and other financial activities of a business. It allows organisation to maintain and record all kind of the financial transaction. A good accounting system is reliable, relevance and comparability (Greenville, et al. 2013). An effective accounting system is user-friendly that allows the user to customise the data.

BAS – The business activity statement is a kind of taxation form that is submitted to the Australian taxation office. It provides the information on the taxation liabilities.

IAS – An instalment activity statement is a kind of taxation form that is submitted by a taxpayer who is not register by GST.

Payment Advice – Payment advice is a not vendor or buyer. It depicts the methods of payment that will be accepted.

Annual PAYG Withholding Notice – This notice defines the class of payees the payer has he payer has included in the report.

  1. 9.

(i) There are five last date for lodgement of returns that are 31 October, 15 January, 28 February, 31 March and 15 may.

(ii) A failure to lodge on time penalty is administrative penalty that happens when people are needed to lodge a return, notice, statement or other document .

(iii) The current value per unit penalty amount is $155.46

(iv) What documents does an FTL penalty apply to

10.

It is sign and authenticate by a person who is a registered tax or BAS agent of the partnership or company.

Task C

TPB (tax practitioner’s boards) can provide various options in response to against the tax agents that are as follows:-

  • Civil Penalty Provision: TPB can provide the civil penalty provision in which civil penalty is imposed by the court to the people who exercising the criminal actions. As per this provision,. Tax agents are liable to get the punishment for providing the wrong guidance.
  • Termination of Registration: As per this, the boards are able to terminate the registration of the tax agent or BAS agent in case board is not satisfied with the tax agent’s performances. Due to tax agent has no longer to meet the targets of the individual or any organisation (Fletcher and Guttmann, 2013).
  • Application of TASA: Under this application, tax agent are covered into the civil penalty if beach the following code of conduct:-
  • Signing the false declarations
  • Misguide or making the sales statements

Thus, according to such Australia regulation, tax agent will be liable to get punish by terminate its registration by the boards for giving the instruction about the tax and he is the liable to pay all the penalties.

b)

Under the professional code of conduct, the advice that I will be give to the client is that it is expected that tax agents will need to display an appropriate, professional standards of behaviour while filing the tax and it is consider as an ethical practices. besides that there is set of ethical standards are given in which breaching of any contact or providing any false data or documents will be consider against the professional code of conducts (Traub, 2012). Thus, such practices are required to follow the tax agents as well as the organisation while filing the tax and as per the code of conduct, client will be exempt from paying any type of penalties.

Task D

  1. A) Calculate the final price

Wine supplies = $1500

Wet (29%) = $435

Wet inclusive price = $1935

GST 10% = $193.5

Final price = $2128.5

  1. B) (i) the care is subject of LTC (Luxury care tax) because the value of care is more than $65000.

(ii) LTC rate = 33%

$99000 * 33%

LTC amount = $32670

(iii) New sale price = $99000 + $32670

= $31670

  1. C) Caculatation of FBT payable

FBT refers to fringe benefits taxation. To pay this, an organisation should aware about the taxation obligation.

  1. C) Type 1 = Fringe benefit amount *    [(FBT rate + GST rate ) / (1- FBT rate ) * (1 + GST rate ) *FBT rate]  (Fletcher and Guttmann, 2013)

Fringe benefit amount = Audi care ($15000)

FBT rate = 49%

GST Rate = 10%

= $15000 * [(0. 49 + 0.10) / (1- 0.49) * (1+0.1)

= $15000 * [(0.59) / (0.51) *(1.1)

= $15000 * [(0.59) /   (0.561)

= $15000 * 1.05

= $15775

Gross up Fringe type 1 = $15775 * 2.1463

= $33858

Type 2 = Fringe benefit amount * (1/(1-FBT rate)) (Jordan, 2012)

Fringe benefit amount = medical costs + overseas travel + Loan Benefit

= $4800 + $5000 + $5100

= $14900

= $14900 * [1/ (1-0.49)]

= $14900 * [1/ (0.51)]

= $14900 * 1.96

= $29215

Gross up Fringe type 2 = $29215 * 1.9608

= $57284

 

References

Australian taxation office (2017) [Online] available at: https://www.ato.gov.au/

Burkhauser, R.V., Feng, S., Jenkins, S.P. and Larrimore, J. (2012) Recent trends in top income shares in the United States: reconciling estimates from March CPS and IRS tax return data. Review of Economics and Statistics, 94(2), pp.371-388.

Cebula, R.J. and Feige, E.L. (2012) America’s unreported economy: measuring the size, growth and determinants of income tax evasion in the US. Crime, Law and Social Change, 57(3), pp.265-285.

Fletcher, M. and Guttmann, B. (2013) Income inequality in Australia. Economic Round-up, (2), p.35.

Greenville, J., Pobke, C. and Rogers, N. (2013) Trends in the Distribution of Income in Australia. Canberra: Productivity Commission.

Greiner, R. and Gregg, D. (2011) Farmers’ intrinsic motivations, barriers to the adoption of conservation practices and effectiveness of policy instruments: Empirical evidence from northern Australia. Land Use Policy, 28(1), pp.257-265.

Jordan, B. (2012) The low road to basic income? Tax-Benefit Integration in the UK. Journal of Social Policy, 41(01), pp.1-17.

Murray, M.C. and Pateman, C. (2012) Basic income worldwide: Horizons of reform. UK: Palgrave Macmillan.

Traub, S. (2012) Framing effects in taxation: An empirical study using the German income tax schedule. Germany:  Springer Science & Business Media.

 

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