You work at a professional services consulting firm. One of the major business lines of that business
Question:
You work at a professional services consulting firm. One of the major business lines of that business
is to provide advice to lobby groups. One of the firm's clients is concerned about something it calls
'middle class welfare', where the government allows a variety of laws to operate which advantage
the middle class and the rich. The client is particularly interested in the impact of the dividend
imputation scheme on government revenues.
The client suggests that dividend imputation cease, and all dividends are treated as ordinary income
in the hands of the recipient.
The client asked your firm to estimate the impact on the Commonwealth Government revenues if
his suggestion is implemented. He thinks there will be huge savings, and these can be used to reduce
tax rates on individuals.
The client also wants to get a sense of who is benefitting from this scheme. For example, if this was
removed, what impact if any, would there be on females v males? What are the characteristics of
the major classes of beneficiaries of this scheme? What are the major characteristics of people who
do not benefit from this scheme? For some strange reason, the client really dislikes Canberra and is
convinced that this scheme unfairly benefits residents of that lovely place. You better address this
issue, as your manager does not want the client to be embarrassed if he makes an erroneous
statement in public. Your manager wants to know which areas are most advantaged by the current
scheme.
Your manager is delighted, as this job will generate considerable income for the firm. She wants you
to build a model based on relevant data from some or all of the following tables (Tables 3, 4, 5, 6, 7,
8) found at the Taxation Statistics website
https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Taxation-statistics/Taxation-
statistics-2016-17/?anchor=Individualsdetailedtables#Individualsdetailedtables.
You trust your manager, but you are welcome to look for and incorporate data from other tables, if
you think this will assist your response.
Your manager advised that that you may find something called 'Share of franking credit from
franked dividends' in some of the tables. She advised you to treat this as a normal franking credit.
Briefly, the share of franking credit arises from certain payments to and from trusts. She suggested
you don't worry about the detailed tax law, just treat these the same way as other franking credits.
(At this point, you did not know whether to thank her profusely or take your mum's advice and apply
for that job as an undertaker, as they seem such happy people.)
Your manager has hinted strongly that she wants you to identify any major assumptions and
limitations in your analysis. She also asked you to identify potential 'political' risks if the proposal is
implemented and briefly discuss ways these could be managed. (She does not want the client to look
like a fool if another lobby group raises concern about a section of society being disadvantaged
'unfairly'.)
You will need to follow the basic rules of spreadsheet design, such as separating the data from the model etc. Ensure there is no 'hard-coding' in the model.