LAW301 Summer Semester Assignment1Case study: Mandy Johnsenis a 45-year-oldManager/Chauffeurwho is employed by Hummer FunPty Ltd in Sydney. Mandy requestsyour services for the preparation of hercompanys2019/20 tax return.Mandy has already lodgedher ownpersonal tax return on my.gov. au.You are required to prepare thecompanystax return.On 11September 2020Mandypresents you with the relevantinformationfor the preparation of hercompanys tax return for the 2020 income year. Company Tax Return1.HummerinheritanceMandyreceived a Hummerfrom her unclewho passed awayon 15November2019. Rather than sellingthe hummer privately,Mandy decided to make some money by startingup her own small businessusing the Hummer. She decided that she would be the managerand chauffeur. Mandys residence is her working base.The market value of the limo was $80,000on 20 January2020when the business started.2.New HummerFun business costs Mandyconsulted LawrenceLawyers and they suggested, that sheshould set up a Small Business Entity in the form of a company, and register the Hummerin the name of the company.Theconsultation expense was$2,000. Accordingly, on 18January 2020 Mandy purchased a companyonline using UltimateCompany Services and registered thecompanyas Hummer FunPty Ltd, for a cost of $700. Registration was confirmed on the day, and Mandyapplied and receivedan ABN and TFN with the ATOusing my.gov.auat no cost.LAW301 Summer Semester Assignment23.Hummer hireServicesincomeThe businessinvolved hiring the Hummer for special events, parties and other daily hire bookings. On 20 January2020Mandy registeredthe limousinein the companys name andreceivedthe keys from heruncles estate lawyer and launchedthe business. The company makes its income from the hiring services. However, Hummer Fun is apremium service business that suits a fairlylimited clientele,where the price is set up frontwith the clientswho areprepared to paythe high premium, given it is more expensive thanother hiring services. Thebusiness was fairly slow at firstrelying on Mandysonline advertising, word of mouth, and partypick-ups and drop-offs. The business picked up when theservices started to besought out also by Politicians, hotelsand businesspeople, thatrequired a highly confidential service, and word of mouth can be powerful businessdriver. During prom season and graduation there are manyspecial pickup requests.From January to June Hummer Fun receivedon average $6,000per weekfrom the long hours ofservice. Mandy believesthat her companyis a personal services business and that this is not income fromherpersonal services, butdoes it matteranyway?For example, all upuntil 30 June2020 the company received $130,000 inreceipts that were mainly on credit.But as at 30 June2020the Hummer Funhadoutstanding fees of $5,000 from some of the regular customersandthey know they owethe company,Mandyhasno given them a bill as she takesa fairly casualapproach butthinks sheshould includethose outstanding fees. Some of my customers even paid some tips for the serviceservices, $2,000, commenting that they were delighted with herpersonal services, but I dont think that needs to be included in the companys income given it was for herpersonal services-is that right?Finally, there were a few who gave hersome exceptional gifts in regard to their appreciations of theservices and these included, 3 Perfumesvalued at $250 each, a $100 EBayvoucher, and even a couple of boxes of Belgiumchocolatesvalued at $200.4.Investment EarningsMandys unclealso left hersome shareshe owned in England.Naturally, the shares were changed into Mandysnamein England, but shemixed up herbank account details and gave the Britishsolicitorthe bank account details of Hummer Fun. As such, shemust of course now declare that as the companys income, because the net dividends of $950were credited into the companys bank account($250 tax had been withheld by the company in England).In addition, the company received interest of $200 in its bank accountfrom the local MNMBank.Additionally, unclehad left Mandy cashand the Johnston

LAW301 Summer Semester Assignment3lawyer suggestedthat Mandy shouldpurchase some investments and put them into the companys name which shedid. Consequently, she put them into a blue chip public company. Mandy also had a friend who had a newbusiness,so shealso invested on behalf of the company into her friendssmall business Marvel Co P/L. MarvelCo P/L paid Hummer Fun fullyfranked dividends of $3900while Large Co Ltd paid a dividendof $4,500, being 60% partially franked.5.Businessexpenses Hummer Fun whichhas its own bank accountpaid for the followingbusinesscosts.Motor vehicleDutyon Uncles Hummer$3,000Registration $2,000Insurance $3,000Services$2,000Car washes $1,000Petrol$6,000Professional Cleaning of Limousine$1,000Council parking fines $1000Dry Cleaning Uniform$800Chauffeur Suit, including $1,5006.Chauffeursalaryand SuperHummer Fungave Mandy asalary at a market rate and paid her$32,000, of which shereceived $24,000 in herbank account and the Commissionerof Taxation received $8,000 PAYGW. The company also paid superannuationinto her nominated Superannuation account which was one she had withherprevious employer. The company was careful only to pay$25,000 (so they didnt go over the cap). The only fringe benefits shereceived from the company were herwages and supershe didnt realise there was so much more advantage to be taken from using salary sacrificing, so wewill need to deal with that next financial year.7.Hummerrepairsand subsequent insurance payoutHummer Funneeded to be repaired becauseunfortunately it was involved in a minor accident. Theappraisersdecided it was Mandysfault and the insurance company didnt cover the cost. It was only one panelthat needed fixing the dent, and the bumper bar that was replaced to return it to its original condition, but the cost was enormous, as Hummer Funhad to pay $7.000.However, on May 15the Hummerwas written off in an accident caused by a Buswhen Mandy and her client hadstopped at a coffee house.Mandyreceived

LAW301 Summer Semester Assignment4$80,000 compensation from the insurance company, as she hadinsured it at market value.8.Purchase of new HummerMandyused the $80,000 from the insurance company as a deposit to purchase a brand new Hummerfor $120,000(including stamp duty). She borrowed $40,000 from APP bankon 17April 2020 overa 5-yearloan and associated bank fees were $150. The interestonly for 3months (17 April17 June 2020) was $1,300. The registration was $1200 and insurance $2200.9.Taxable incomeand tax liabilityof my company Based on the above information, what would be the taxable income and the tax liability of the business?Required1)Prepare a report (1,200 words) to put into Mandysfile which you can use as background in discussion with the Partner, and subsequently when you need to provide further advice to Mandy. Format of your report. You must:address the 9mainissuesraised using the same numberingsystem/ headings listed above.adopt a report style approach using 3 headings, and apportion the column width similarly.The3columnsshould notbeequal width -the issue is only a small number words, the amountonly has numbers, but the Law is the substantive column which is why it is the widest column.You can also use the how to solve a taxation question that Iuploaded on Moodleor simply add more columnsto this oneand customise as appropriate. IssueLaw that applies, including Reasons(& Common Law/Tax Ruling)Amount ($)Effect on taxable income/ tax liabilityBe concisegiven the word limit, but in your discussion make sure you state, the relevant legislative authority and/or case law authority and the final effect on taxable income / tax liability under the Amount heading.If it increases taxable income use a +in front of the amount, and if it reduces taxable income use a in front of the amount. Similarlyapply a + or as appropriate in relations to the calculationof tax liability.

LAW301 Summer Semester Assignment5Marking allocationAs a guide to assist the weighting of your deliberations and to help identify the number of different sub issues within each main issue, the marking allocation, not including bonus marks, is:Issue 1 -5marksIssue 2 -2 marksIssue 3-4marks Issue 4-4marksIssue 5-4marksIssue 6-3marksIssue 7-3marks Issue 8-3marksIssue 9-3marks Total 30marksGOOD LUCK!