Part 1: Role Plays

To complete this part of the assessment, you will participate in a role play with the help of a colleague or peer to demonstrate your ability to complete skills-based tasks to industry standards.

If you are completing your course online, you will need to digitally record and submit the role play as video evidence. Follow the Video recording instruction (pdf). These instructions include useful tips, links to resources, and a demonstration video.

There are 3 role plays in this part of the assessment:

• In Role play 1, you need to prepare information for a meeting with your client.
• In Role play 2, you role play a meeting with your supervisor to check that your information is sufficient and correct.
• In Role play 3, you role play a meeting with your client.

To complete this part of the assessment, you will participate in 2 role plays with the aid of a colleague or peer to demonstrate your ability to complete skills-based tasks to industry standards.

Read all instructions carefully and complete all the assessment requirements. In addition, refer to the Observation checklist and Assessment checklist, which the assessor will use to assess your performance and record your results.

Role play 1: Preparation

The scenario

You are a Senior Tax Accountant working at Azure Beach Accountants and Financial Services (ABAFS) and you have been asked to provide advice on the varying tax treatment for a client, Mark Smith, who is considering the purchase of a parcel of light industrial land. You will need to explain the treatment of capital gains tax on the disposal of assets in the following entities:

1. Partnership
2. Company
3. Trust
4. Superannuation

Mark Smith owns a business with an income of $200,000. Mark is married to Zoe, and they have 2 children aged 13 and 15 years old.

You will need to research and provide advice on each of the above entities and the treatment of Capital Gains in order to review with your supervisor.

Prior to the role play, you must undertake research to prepare for the meeting with your supervisor. You can find further information on CGT cost base and capital gain or loss for the sale of investments in your textbook or at the following links:

• calculating your CGT ATO website
• cost base of assets ATO website
• CGT discount ATO website

Time allowed

This activity should take approximately one hour.

Required: Complete your notes in the space below.

NOTES

Treatment of Capital Gains

Partnership

• Each partner's participation in the partnership's capital profits is taken into account when calculating their individual capital gains.
• On their individual tax returns, each partner discloses their portion of the capital gain.
• If partners have owned the asset for more than a year, they may qualify for the 50% CGT discount.

In a partnership,The distribution of capital gains among the various partners in a partnership will determine how the profits are taxed. The gain is normally distributed to each partner in accordance with their ownership stake in the partnership when a partnership sells an asset and realises a capital gain. Each partner reports their portion of the capital gain on their individual tax return and is responsible for paying tax at their respective personal tax rates. Each partner's portion of the capital gain is subject to the regulations and tax rates for personal capital gains.

Company

• The 50% CGT deduction is not eligible for business entities.
• The tax rate on capital gains is determined by the size of the company and is now 30% for big companies and 25% for smaller ones.
• Capital losses from the same financial year or losses carried over from prior years may be used by businesses to offset capital gains.

In a company structure,Capital gains are taxed at the corporation tax rate, which is often higher than individual tax rates, in a company structure. A company's capital gain on the sale of an asset is computed by deducting the asset's cost base from the sale profits. At the applicable corporate tax rate, the company taxes the capital gain. Depending on their unique circumstances, the shareholders may be required to pay additional tax on the dividends they get if the firm chooses to distribute the post-tax earnings from the sale to them as dividends.

Trust

• Beneficiaries receive capital gains based on their ownership share in the trust.
• Beneficiaries record their portion of the capital gain on their personal tax return.
• If the trust has owned the asset for longer than 12 months, beneficiaries may be qualified for the 50% CGT deduction.

Capital gains held in a trust are taxed differently depending on the form of trust (discretionary or fixed) and how the gains are distributed to the beneficiaries. The gain is often assigned to the trust itself and taxed at the appropriate trust tax rate when a trust sells an asset and realizes a capital gain. The beneficiaries may be subject to tax on the distribution at their individual tax rates if the trust chooses to distribute the after-tax revenues to them. Discretionary trusts give beneficiaries the freedom to receive capital gains at beneficiaries' lower tax rates, which may result in tax savings.

Superannuation

• Within a superannuation fund, capital gains are taxed at a 15% concessional rate.
• The fund might be qualified for a one-third CGT discount if the asset is held for longer than 12 months, which would lower the effective tax rate to 10%.
• Depending on the particular conditions of the fund and its members, capital gains may not be taxed during the pension period.

The standard tax rate for capital gains made inside of a superannuation fund is 15%. The superannuation fund may be qualified for a one-third reduction on the capital gain if it retains the asset for longer than a year. With this discount, the taxable capital gain is effectively reduced by one-third. The capital gains made within the superannuation fund are normally tax-free when the fund enters the retirement phase and begins paying a pension to the member.

Role play 2: Meeting with supervisor

Role of the student being assessed

You are meeting with your supervisor, Cris Rhanda, the Senior Tax Partner at ABAFS, to discuss the treatment of capitals gains that you have prepared for the client. During the role play you should do the following:

• conduct the meeting in a professional manner and demonstrate appropriate protocols
• make sure that you present and run through your notes. You should demonstrate your knowledge of CGT, cost base calculations and discount eligibility during the discussion with your supervisor
• seek advice from your supervisor if you are not sure of particular items
• ask appropriate questions to confirm the information in your notes.

Role/s of the person/s in supporting roles

In this role play you will play Cris Rhanda, Senior Tax Agent at Azure Beach Accountants and Financial Services (ABAFS), the supervisor/mentor of the participant. You should do the following by preparing a script:

• ask the student to explain the treatment of capital gains under each different entity
• confirm that the student has fully explained the treatment
• check if the student is unsure of any information in their notes
• check if there are any outstanding issues or uncertainties.

Time allowed

Your role play should take 5-10 minutes to perform and/or record.

Role play 3: Meeting with the client

The scenario

You are a Senior Tax Accountant working at Azure Beach Accountants and Financial Services (ABAFS) and you are ready to meet with the client to provide advice on the varying tax treatment on the disposal of assets in the following entities:

1. Partnership
2. Company
3. Trust
4. Superannuation.

Role of the student being assessed

Use your notes by preparing a script and any additional information you obtained from your supervisor to:

• explain to the client the differing tax treatment under each entity
• advise the client of any relevant tax obligations and that any advice from taxation authorities is to be followed including that tax office enquiries must be responded to and there is an obligation to meet taxation audit requirements, when applicable, in a timely manner
• respond to clients questions.
• Effectively participate in verbal exchange using active listening and questioning techniques to elicit, clarify and confirm information from the client.
• Select and use appropriate conventions and protocols when communicating with the client to explain the CGT treatments.
• Reassure the client that you and ABAFS will assist in following ATO advice or requests for information.

Role/s of the person/s in supporting roles

You play the client role, Mark Smith. You are considering the purchase of a parcel of light industrial land and you want the student to explain to you the treatment of capital gains tax on the disposal of assets in the following entities:

1. Partnership
2. Company
3. Trust
4. Superannuation