ACC5TAX: Engagement of Critical Thinking and Interpretation Skills - Jenny Jones Case Study - Accounting Assignment Help

Assignment Task:

This group assessment broadly covers the contents of weeks 1-9, and specifically focuses on the overall calculation of tax liability (including derivation of income, income tax equation, application of income, deductions and offsets). 

It is designed to simulate a client-advisor real life scenario, where students are required to apply teamwork, interpretation of tax law, taxation rulings, and case law, critical analysis and numeracy skills to defend your advice to a tax partner in calculating the tax liability of a client.  It is not a letter to the client, but the preliminary research report which will support the basis of such a letter.

Case study: 

Jenny Jones is a 43 year-old marketing manager employed by Jockwood Pty Ltd in Melbourne. Jenny engages your services for the preparation of her 2018/19 tax return. 

On 20 April 2020 Jenny sends you the email below:

Dear Tax Accounting Team,

I provide some details that should be of assistance in the preparation of my tax return. 

1. Salary and allowance - As discussed, please note that I received $69,000 net salary for 2018/19 after my employer had deducted PAYG of $30,000,000.  This can be found on my 2018/19 payments summary.  I will send this to you later.  In addition, I received an Executive Allowance to cover my wardrobe needs that I fully spent to improve my professional wardrobe (and I have all the receipts) and claim as a deduction to cover my professional attire.  (Image is everything as a marketing director).  In addition, I also claim hairdressing costs of $4,000 and make-up of $1,000 that I was required to also spend to promote and maintain my professional image.  I received a $1,000 Myer gift voucher from Rockfords for my 20 years service and I was so happy when my staff all chipped in together to give me a China vase valued at $200. 

2. Investment earnings – I received $1,000 from the bank for my high interest term deposit and my partially franked dividends (40%) of $7,250 from Tiny Co P/L being a very small company

3. Casino Winnings and TAB Account– I loved going to the Casino on the weekend and was getting to be well known by staff as a bit of a regular playing Roulette - they joked and said I was addicted to gambling and was like a ‘professional gambler’.  Fortune favoured the brave and I made $20,000 over the year with my regular attendances, which I was delighted with.   But what has been really great is that I have won $50,000 in 2018/19 – I just love watching the ponies, it is so exciting. I limit myself to a betting only once each week and I did really well – although some weeks were not so good - I really bombed out. But I received a good tip one week and won $25,000 on a trifecta! 

4. Sale of my residence - Settlement has finally come through on the sale of my home. Hooray. You will recall that I purchased my 2 story apartment in Melbourne city on 1 July 2001 at a bargain cost of $200,000 and $25,000 for various expenses such as stamp duty and other fees and on 30 June 2019 I entered into a contract, and I sold it for $700,000, and settlement was 3 months later.  There was another $15,000 expenses for commission on sale and other expenses. You might remember I rented out the top floor to university students for a period of 9 years but that doesn’t matter as at all time it was still my main residence, so it is still exempt– is that right?

5. Company Car - Since I was promoted to my current Marketing Director position, Jockwood provided me with a Toyota Corolla at no cost (although I know the car cost them $25,000) except for fuel, which costs me $80 per month. I’ve been driving this car since 1 October 2018, to and from work and on the weekends, but not to visit clients (I prefer to take an Uber to visit clients so I can work during the trips).  I did use the car for income producing purposes.  I travelled a number of times to visit the property to inspect it and discuss matters with the tenants such as when they were late paying me the rent, and the leaking roof (see rental property)  I estimate my car expenses were in the order of 1000 kms so using the Commissioner’s rate of 68c/km for income producing purposes, I claim $680. 

6. Rental property - I signed the contract to purchase the Inverloch house on 10 August 2018 and it has been rented at $1,500 per month since 1 September 2018. On 1 October 2018 the tenants advised of a leak from the roof, so I had it fixed at a cost of $22,000. It was that expensive because 1/3 of the roof had to be replaced, and I paid this amount in full on 04 October 2018 when the service was completed.  

7. Company Loan - On 1 January 2019 I took a loan with Jockwood of $600,000 at an interest of 4% per annum. I used $400,000 to buy an investment property in Inverloch/VIC, and the rest I used to pay off my home mortgage. 

8. Rental property - I signed the contract to purchase the Inverloch house on 10 August 2018 and it has been rented at $1,500 per month since 1 September 2018. On 1 October 2018 the tenants advised of a leak from the roof, so I had it fixed at a cost of $22,000. It was that expensive because 1/3 of the roof had to be replaced, and I paid this amount in full on 04 October 2018 when the service was completed.  

9. Various expenses – I made a donation to La Trobe University of $1,000.   I had a tax return fee I paid in August 2018 of $300, that I paid to a retired tax officer – much cheaper than going to the registered tax agent. I made a superannuation contribution of $10,000 to my superfund (not salary sacrificed but through my after tax money).  I had telephone expenses of $1,000, and 10% are business related.  I purchased a new leather brief case at the January sales on New Year’s Day for $290 which I use as a tool of my trade -  no private use.

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