PART A

Zany funds management Pty Ltd is an investment company. There is a carry forward tax loss

of $80,000 from the 2018 financial year. The company has prepared the following Profit &

Loss Statement for the 2019 financial year:

NOTE 1 - The income distribution from the unit trust included $300 of franking credits.

NOTE 2 - One PAYG tax instalment was paid on 28 October 2018 of $11,000 (this related to

the 2018/19 tax year).

NOTE 3 - Zany funds management Pty Ltd paid the following dividends to shareholders:

$35,000 fully franked on 15 July 2018

$35,000 fully franked on 15 January 2019

$21,000 unfranked paid on 15 July 2019 (declared on 20 June 2019)

NOTE 4 - Franking account balance at 30 June 2018 was $8,500 credit.

REQUIRED:

( a ) Prepare a statement reconciling net profit with taxable income

( b ) Calculate net tax payable/refundable

( c ) Calculate ALL losses carried forward by the company

( d ) Prepare franking account AND calculate any additional taxes payable

(indicate how much of any additional taxes payable can be used to o f f s e t

future tax liabilities)

( e ) The company ownership is currently comprised of three equal

shareholders Barney, Ted and Marshell.

Ted and Marshell are considering transferring their entire shareholding's to

their wives. The company will then begin a new business of providing Media

Services. Please advise them of the implications on carried forward tax

losses in the following scenario's:

Distribution from Unit Trusts - Note $ 1,000

Bank Interest 3,500

Unfranked Dividends 6,000

Fully Franked Dividends 7,000 17,500

Expenses

Accounting Fees 7,000

Capital Loss on Sale of Shares 10,000

Ongoing Financial Advice 19,000

Other Deductible Expenses 40,000 76,000

NET LOSS (58,500)

i. If shares are transferred and the company starts to ONLY provide Media

Services (ceasing investment operations).

ii. If shares are transferred and the company continues with its current

investment operation and new Media Services business.