Assessment $3$ Case Study Data

Background

Amity Holdings Pty Limited $($Amity$)$ is an Australian resident company that was incorporated during $2022.$ After purchasing several investments including real estate and shares, in $2023$ Amity commenced business as a golf equipment wholesaler with both Australian and overseas clients.

Katy Mahon, the Managing Director of Amity, has terminated Kurt Aild, the company$$s accountant, as she is concerned that there are several errors in the returns prepared. Katy has provided the following information produced by Kurt:

a$)2023$ Income Tax Return

b$)$ Additional notes accompanying the income tax return including franking account

c$)$ June $2023$ Business Activity Statement $($BAS$)$

d$)$ Additional notes accompanying the BAS

e$)2023$ Fringe Benefits Tax Return

f$)$ Notes and workings accompanying the FBT return

Requirements

Katy has requested that you prepare a statement of advice including:

i$)$ Any necessary corrections to Amity$$s Income Tax Return that impacts taxable income, income tax liability or the franking account. Each correction should be supported by a brief explanation and correct referencing from legislation, along with any workings and calculations.

ii$)$ Any necessary corrections to Amity$$s Fringe Benefits Tax Return that impacts the taxable value of benefits and fringe benefits tax liability. Each correction should be supported by a brief explanation and correct referencing from legislation, along with any workings and calculations.

iii$)$ Any necessary corrections to Amity$$s Business Activity Statement that impacts GST on sales, GST on purchases and net GST payable. Each correction should be supported by a brief explanation and correct referencing from legislation, along with any workings and calculations.

Notes and workings accompanying the tax return

ITEM $6$

INCOME $ $

C $-$ OTHER SALES OF GOODS AND SERVICES

Sales of goods and services to Australian customers $525000$

Exported sales of goods and services $65000590000$

H $-$ TOTAL DIVIDENDS

Fully franked dividends received from listed companies $21000$

Unfranked dividend from listed companies $200023000$

R $-$ OTHER GROSS INCOME

Rent from residential investment properties $($includes $$5,000$ accrued for rent outstanding$)195000195000$

EXPENSES

A $-$ COST OF SALES

Purchases $175000$

add: Closing stock $($at cost$)37000212000$

D $-$ SUPERANNUATION EXPENSES

Contributions to complying fund $21500$

Superannuation Guarantee Charge $150023000$

E $-$ BAD DEBTS

Provision for doubtful debts $($none written off during year$)2000020000$

H $-$ RENT EXPENSES

Management Fees $16000$

Strata Levies $44000$

Insurance $1450074500$

Notes and workings accompanying the tax return $($cont$.)$

Y $-$ MOTOR VEHICLE EXPENSES

Running costs $14500$

Speeding Fines $50015000$

S $-$ ALL OTHER EXPENSES

Fringe benefits tax paid $22300$

Wages $205000$

Other employee benefits $16000$

Commercial rent $-$ fully serviced business premises $63000306300$

ITEM $7$

A $-$ NET CAPITAL GAIN

Amity entered into a contract for the sale of a residential property that was acquired in $2022$:

Capital proceeds

$820000$

less: Purchase price $685000$

$135000$

less: $50\%$ discount $6750067500$

J $-$ FRANKING CREDITS

$30\%$ x $$21,0006300$

CALCULATION STATEMENT

T$1$ TAX ON TAXABLE INCOME $69,300$

$$231,000$ x $30\%$

$($Kurt noted that Amity is not a Base Rate Entity as more than $20\%$ of assessable income is Passive$)$

D $$ NON$-$REFUNDABLE CARRY FORWARD TAX OFFSETS

As per Item $7$ J $$ Franking credits from listed companies $6,30030\%$ x $21,000$

Notes and workings accompanying the tax return

NOTE $1$ Amity prepared the following franking account for the year:

DATE DESCRIPTION DR CR BAL

$1-$Jul Opening Balance $3000$

$30-$Sep Fully franked dividends totalling $$21,000$ received $63009300$

$21-$Nov PAYGI Paid $850017800$

$21-$Jan Dividend of $$70,000$ paid $-$ fully franked $21000-3200$

$31-$Jan PAYGI Paid $85005300$

$21-$Apr PAYGI Paid $850013800$

$28-$Jun Dividend of $$24,500$ paid $-$ unfranked $013800$

NOTE $2$ Rental properties held by Amity had unexpired constructions costs totalling

$$600,000.$ All properties were constructed between $2000$ and $2010.$

NOTE $3$

Amity was provided with artwork valued at $$11,000$ by a client in return for products provided at no charge. This has not been included in any returns as it is non$-$cash.

NOTE $4$ In $2022,$ Amity incurred company set$-$up and initial costs of $$15,000.$

NOTE $5$ PAYGI instalments paid amounts to $$33,000($i$.$e$.4$ instalments of $$8,500$ each$)$

Notes and workings accompanying the business activity statement

$ $

G$1-$ TOTAL SALES

Sales of goods and services to Australian

customers

$192000$

Exported sales of goods and services $23000$

Rent from residential investment properties $44000259000$

G$11-$ NON CAPITAL PURCHASES

Trading stock purchases $51000$

Superannuation $5300$

Management Fees $-$ rental properties $4500$