Question 3

Broader Patrol Pty Ltd is a trading company which conducts a security agency business using drones to monitor the streets.Which it commenced on 1 July 2019, prior to that it run a restaurant business?

The business incurred tax losses of $45,000 and $11,000 in the years ended 30 June 2018 and 30 June 2019 respectively.

Current year trading information:

Income$

Gross revenue from security agency1,200,000

Sale of shares325,000

The shares had been acquired in a public float on 15 July 2015 for $9,860.

Franked dividend received 3 November 20191,100

Franking credits attached $429

Partly franked dividend received 8 March 20208,000

Franking credits attached $2,743

Interest on investments12,000

Expenses

Purchases - all allowable under sec 8-1700,000

Salaries and wages (including Directors' salaries of $60,000)450,000

Lease rental for business premises80,000

Other allowable expenses and depreciation13,000

Provision for Annual Leave12,590

Superannuation 40,500

Rent prepaid on new premises, 11 months of rent were paid in advance on 28^th June 2020 56,000

Additional information

1.The shareholders of Broader Control Pty Ltd and their shareholdings were:

Shareholders at30 June 201830 June 201930 June 2020

Jason Bourne60120100

Austin Powers4080100

James Bond 300300

Maxwell Smart100400

200500900

2.Voting and dividend rights are held in direct proportion to shareholdings.

3.The Commissioner of Taxation considers that $20,000 of the Directors' salaries is unreasonable.

4.Broader Control Pty Ltd paid a franked dividend of $160,000 on 5 November 2019 the dividend was franked to 65%, and a dividend of $113,400 which was franked to 100% was paid on 10 March 2020.

5.The directors wish to use SBE elections

6.Annual leave actually paid during year was $9,800.

7PAYG Instalments for the year were paid as follows:

28 July 2019$6,100

28 October 2019$7,000

28 February 2020$9,000

28 April 2020$7,000

28 July 2020$4,000

Required:

1Calculate the taxable income and net tax payable for the year ended 30 June 2020.Provide brief reasons for the omission of any items from your calculations.The company is a BRE for tax purposes(32 marks)

2Assuming an opening balance of $123,567 at 1 July 2019 prepare the franking account for the current year, and calculate any tax and/or penalty payable.

(10 marks)