Queensland University of Technology QUT Business School School of Accountancy ASSESSMENT ITEM 2: HANDITAX GROUP PROJECT (Weighting Total: 20%) Due Date: Friday 28 October 2016 (no later than 7:00 pm) Submission: This assignment needs to be submitted electronically via Grade Centre. There are three (3) separate submissions required for this assignment: (a) the cover sheets (ie. the Group Contribution Sheet and Group Integrity Declaration (combined into one scanned pdf file). These documents can be found on pages 30 and 31 of this assignment. (b) Part A (Scott's 2016 tax return) should be printed to pdf from HandiTax and then uploaded to Grade Centre; and (c) Part B (the technical reflection) should be saved as a Microsoft Word document and then uploaded to Grade Centre. Group or Individual: Group This assessment item assesses the following learning outcomes: Knowledge and Technological Skills (KS) 1.2 Apply technical and technological skills appropriate and effective for real world business purposes and contexts. Teamwork and Self (TS) 4.2 Apply teamwork knowledge and skills for effective collaboration across diverse purposes and contexts. ASSESSMENT OVERVIEW Part Description Pages A Prepare Scott Tracy's 2016 income tax return using Sage Handisoft's HandiTax software package in a group of 3 or 4 students from the same tutorial (15 marks) 4-5 B Group Technical Reflection (5 marks) 6-7 C Professional Approach 8 D Academic Conduct 8 E Submission Requirements 9-10 Notes:  It is each student's responsibility to research the issues contained in this assignment. QUT staff members will not be answering any questions or issues relating to this assignment.  However, if clarification of a particular point is required, please send the e-mail directly to the Unit Co-ordinator, Stephen Marsden, and not to your tutor.  Students are reminded to regularly check the "Announcements" section of the AYB 219 Blackboard site for updates and any clarifications required for the HandiTax Project. Assessment Submission and Extensions In both your QUT study and your professional life you will be expected to meet deadlines. In keeping with this expectation, assessment submitted after the due date will not be marked and will receive a grade of 1 (ie. 0%). Students cannot apply for extensions for this assessment under the QUT Assignment Extension process as it is a group assignment and students have had a number of weeks to complete the task. If a member of the group falls sick or is incapacitated that student can apply for special consideration but this should not impact on the ability of the rest of the group to complete the project by the due date. This rule will apply even if one member of the group provides a medical certificate. Furthermore, extensions will not be granted because the group has had communication problems with one (or more) members or has not been able to contact certain group members. Students are expected to be able to sort out group issues or problems themselves and not seek an extension from the unit co-ordinator. For this reason, it is strongly recommended that students start working on the HandiTax project when it is released via the AYB 219 Blackboard site. Once the assignment has been submitted via Grade Centre, students are not able to resubmit any other versions or attach any supplementary documents. In other words, once submitted, this group submission is final. Furthermore, the group is not able to resubmit another version as we do not allow multiple submissions of the assignment. It is the sole responsibility of each group to ensure that the complete (and final version) of the assignment is submitted by the due date. Students are not permitted to resubmit or send us supplementary pages or replacements pages once the assignment is submitted. No submissions will be accepted by any academic staff member by any means (hard copies or e-mails) at any time. In other words, each group only gets one (and only one) opportunity of submitting their assignment (comprising Parts A and B) via Grade Centre. Markers will only be marking the first (and only) submission that was submitted by the group via Grade Centre. For this reason, students should make sure that the version being submitted via Grade Centre is the final version that the group has agreed that should be submitted. ASSESSMENT REQUIREMENTS FOR EACH PART PART A: Prepare Scott Tracy's 2016 income tax return using Sage Handisoft's HandiTax software package in a group of 3 or 4 students from the same tutorial (15 marks) The group is required to complete (but not lodge) Scott's 2016 income tax return using Sage Handisoft's HandiTax. HandiTax has been loaded on all computers in computer labs in both B Block and Z Block. Students are not permitted to use any other electronic tax lodgment software packages (eg. MyTax, Solution 6, MYOB Accountants Office, Tax Assistant etc). Failure to use HandiTax to complete Scott's return will automatically result in the group receiving an overall mark of zero out of 15 for Part A. Printing off the Final Tax Return in HandiTax In printing the completed tax return to pdf, please click "edit" from the pull down menu at the top of the screen and click the last option entitled "view return with worksheets". This will not only provide you with a print preview of the tax return itself, but also the accompanying worksheets, schedules and tax estimate. Please ensure that you print this document to pdf, ready to upload via Grade Centre by the due date. Only one tax return is required to be lodged by the group. Points to Note on How Part A is Marked:  Part A (being the tax return itself) is worth a total of 15 marks. A total of 15 numbers will be marked in Scott's income tax return. Either the answer is correct (1 mark) or incorrect (0 marks). There are no half-marks awarded if the figure is wrong.  Furthermore, please note that in respect of Part A, students will be marked not just on the correct amounts entered into HandiTax, but whether the amounts have been entered at the correct locations (ie. item numbers and item labels) in Scott's income tax return. For example, all work related deductions should be entered at Label D5 (Work Related Deductions) and for the group to get the single mark, then the correct final amount must also be entered at this label.  If the amount entered is wrong, no marks will be awarded. Furthermore, if the correct amount is entered at the wrong label in the tax return, no marks will be awarded.  Whilst we mark the overall net capital gain numbers contained in Label 18 of the tax return, if these numbers are wrong, then we will look at the CGT worksheet to award you part marks. If you do not attach the CGT worksheet, then we will not be able to give you part marks. Students will not be able to submit the CGT worksheet after the due date. PART B: Group Technical Reflection (5 marks) (750 Words Maximum) Only one technical reflection is required to be lodged by the group. Part B requires each group to provide a written group reflection on how the group researched the following two specific tax issues contained in Part A of this project, namely: (i) Item 6 – page 16, being the $9,680 costs incurred by Scott on 18 March 2016 in relation to replacing the retaining wall at the rental property caused by the two falling trees as a result of recent heavy rains and flooding. (2.5 marks) (ii) Item 10 – page 21, being the following three costs incurred by Scott in relation to attending the annual International engineering conference held by the International Engineers Association (IAE) in Chicago in October 2015: $  renewing his 64-page Australian passport (which was about to expire) 380  costs of obtaining 4 passport photographs 14  travel insurance 243 (2.5 marks) For each item above, students are required to outline:  what section references, cases, rulings, determinations etc. used as authority by the group to research the two abovementioned tax issues; and  the conclusion (ie. claim the deduction or not claim the deduction for these two items). Please do not quote the 2016 CCH Australian Master Tax Guide at all in your answer as this is not a source of taxation law. No marks will be awarded if the Master Tax Guide is referenced in your answer. Furthermore, please do not simply quote websites or provide hyperlinks to websites (including the ATO website) in your answer. This includes ATO fact sheets and publications as this is not considered a source of taxation law (as outlined in Lecture 1) No marks will be awarded if students merely include hyperlinks to websites in their answer. Students are expected to research the abovementioned two issues by quoting relevant sections, cases, taxation rulings, taxation determinations, ATO interpretative decisions etc. Note: The group is only required to provide one written technical reflection. We do not want reflections from each individual student. As such, it is a requirement that at the end of completing Part A that the group gets together to reflect upon their experience and write the written reflection. This task is not to be allocated to one group member to complete. The maximum number of words is 750. You must use 11 point Arial font with 1.5 line spacing. Make sure your reflection is clearly labelled. Please use Microsoft Word to write this summary and please limit your submission to no more than two pages. Please use each of the two issues as two headings in your reflection. contained above. Students are encouraged to use bullet points and be concise and succinct in their answers to each of the abovementioned issues. There is no need to include a list of references at the end of your Part B reflection. Instead, include references to sections, tax cases, tax rulings, tax determinations, etc. throughout your Part B reflection, similar to how referencing is used in the lecture notes. There is no need to apply the ILAC model. Any format will do, as long as you answer the two questions outlined above. Please ensure that you upload Part B to Grade Centre by the due date. PART C: Professional Approach This assessment expects a professional approach to presentation similar to that expected when preparing and delivering a tax return to a client. A professional approach also means that it is the responsibility of each student (to ensure that the complete assignment is submitted by the due date and complies with the requirements in submitting the assignment in the correct order. --------------------------------------------------------------------------------------------------------------------- PART D: Academic Conduct in Completing this Asessment Academic conduct is expected to be ethical and above reproach in producing this assessment in the same way you would be expected to produce a client's tax return as their registered tax agent or tax advisor. Students who are found to have committed academic misconduct as detailed below will be immediately referred to the QUT Business School academic misconduct committee. Please note that penalties will be applied not only to the student(s) who have used this information but also to the student(s) who have shared this information. This integrity must be applied to all sections of the assignment including the task and reflection. To this end, each student is required to sign a group integrity declaration confirming that they have not used or plagiarised the work of others (see pages 9 and 31). More information on plagiarism and QUT's range of penalties that can be imposed can be found at: http://pilot.library.qut.edu.au/module6/6_5/index.jsp. PART E: Submission Instructions The HandiTax group project (consisting of Parts A and B) should be submitted (uploaded) via Grade Centre no later than 7:00 pm on Friday 28 October 2016. There are three (3) separate submissions required for this assignment: (a) the cover sheets (ie. the Group Contribution Sheet and Group Integrity Declaration (combined into one scanned pdf file). These documents can be found on pages 30 and 31 of this assignment. (b) Part A (Scott's 2016 tax return) should be printed to pdf from HandiTax and then uploaded to Grade Centre; and (c) Part B (the technical reflection) should be saved as a Microsoft Word document and then uploaded to Grade Centre. Only ONE document from each group is allowed. Failure to submit any of the above documents will result in an automatic mark of zero out of twenty for the whole assignment. For the two cover sheets listed in (a) above, students are required to print off these two pages, then complete and sign (as detailed below) and then scan into one pdf file and then upload into Grade Centre. (i) Group Contribution Sheet (on page 30) Please complete this form, including:  The name of your tutor and tutorial time;  The student numbers and names of each student in your group;  A contribution percentage for each group member (this contribution must be agreed to and signed off by each member of the group and must add up to 100%);  Each student in the group must personally sign their contribution percentage. It would be hoped, and expected, that an equal contribution would be the norm. For example, if there are 4 members in the group and everybody has made an equal contribution, 25% will be entered beside each person's name. In this case, if the group gets a mark of 15 out of 20 for the project, then each person in the group will receive this mark of 15. However, if each person has not made an equal contribution, then differing percentages that reflect each person's contribution should be entered. For example, if there were four people in the group, and it was agreed that two students contributed 30% each whilst the remaining two students contributed 20% each and the group was given a mark of 15 out of 20, the 30% students would receive a mark of 15 out of 20 and the 20% students would get a mark of 10 out of 20 (being two-thirds of the marks awarded to the two students who contributed the 30% as they have done less work compared to others). If you do not submit this signed group contribution sheet – each member of the group will incur a (10) mark penalty. (ii) Group Integrity Declaration (on page 31) This declaration needs to be read and signed by each member of the group. This is a declaration stating that work submitted by each member of the group (including the group as a whole) is their own original work and that each member of the group has not copied or plagiarised any of the content in their HandiTax project from other people (including current or past students) nor have they provided their work to other groups. Please make sure you carefully read this declaration as this declaration applies to all parts of this assessment task. If you sign this declaration and are subsequently caught using or reproducing the work of other students, then serious penalties will be applied. If each member of the group does not sign and/or submit the group integrity declaration, your assignment will not be marked and will be automatically awarded a mark of zero out of 20. HANDITAX GROUP PROJECT (20%) SCOTT TRACY'S DETAILS FACTS: Scott Tracy is an Australian resident. He works full-time as a senior solicitor for Sedgman Consulting, a firm of engineering consultants based in Brisbane that deliver engineering, procurement and construction management services for large-scale construction projects. Scott lives in a four-bedroom house in Norman Park with his wife of sixteen years, Emma, and their two children, Daniel, aged thirteen and Lauren, aged ten. Scott and Emma purchased this property in joint names in March 2007 and regard it as their main residence. Scott has various investments, including shares in listed Australian companies and a rental property which was bought during the current income year. Last year, Scott utilised the services of a local tax agent in Morningside. However, he was dissatisfied with their service and has approached your group to assist him in preparing his 2016 income tax return using Sage Handisoft's HandiTax software program. Scott has supplied your group with the following information relating to his personal income tax affairs for the year ended 30 June 2016. However, not being a tax expert, he is not certain whether everything he has supplied your group with is necessarily assessable or deductible. Accordingly, he asks your group to carefully go through each item in order to determine its assessability and deductibility. Needless to say, Scott wishes to minimise his 2016 taxable income wherever legally possible. PERSONAL INFORMATION Full Name: Mr Scott James Tracy Date of Birth: 17 April 1977 Occupation: Civil Engineering Manager Tax File Number: 212 237 802 Daytime Telephone Number: (07) 3399 1219 Mobile Telephone Number: (0468) 104 957 E-mail address: [email protected] Home Address: 15 Marshall Parade Norman Park, QLD, 4170. Postal Address: as above Child Support: Scott did not pay any child support payments during the 2016 income year as he is still with his wife, Emma and both dependant children (Daniel and Lauren) are sill residing with both parents in the family home in Norman Park. ----------------------------------------------------------------------------------------------------------------------------- Information relating to Scott's wife, Emma, is shown below: Full Name: Mrs Emma Louise Tracy Date of Birth: 19 August 1979 Period: Emma was Scott's dependent spouse for the entire 2016 income year. Spouse's TFN: Not required DETAILS RELATING TO INCOME 1. Gross Salary and Wages During the entire 2016 income year, Scott worked for Sedgman Consulting Ltd. Scott was provided with his annual PAYG Payment Summary from his employer in relation to the period 1 July 2015 to 30 June 2016. His 2016 PAYG Payment Summary revealed the following: Name of Payer: Sedgman Consulting Ltd ABN of Withholder: 80 675 091 925 Gross Salary: $135,194 PAYG Tax Withheld: $42,316 Reportable Fringe Benefits Amount: $9,168 Reportable Employer Superannuation Contributions: $7,800 The reportable fringe benefit amount of $9,168 shown on Scott's 2016 PAYG Payment Summary related to a salary-sacrifice arrangement that the firm has in place with all of their senior engineers. Scott arranged for Sedgman Consulting to pay several personal expenses on his behalf. These expenses were all subject to fringe benefits tax. 2. Entertainment Allowance As part of his job, Scott is frequently required to entertain clients of the firm. This involves taking clients out for lunch at expensive restaurants around the Brisbane metropolitan CBD to discuss engineering matters arising from large-scale construction projects. In addition to his gross salary shown at Item 1 above, during the 2016 income year Scott received an entertainment allowance of $6,500 from his employer. PAYG withholding tax of $2,276 was deducted from this amount. These amounts were shown separately on Scott's 2016 PAYG Payment Summary. 3. Interest Income Scott maintains accounts at two different Australian banks. He provides your group with the following information in relation to the interest he has earned during the 2016 income year: $  Westpac online savings account (gross interest) 456.00  Bank of Queensland (BOQ) access account (net interest) 91.80 (TFN withholding tax of $88.20 deducted by bank - refer note below)  BOQ term deposit (interest accrued - refer note below) 500.00 Scott opened his Bank of Queensland (BOQ) access account on 15 October 2015. When opening the bank account, Scott did not have his tax file number (TFN) with him. He subsequently forgot to provide the bank with his tax file number. Accordingly, the bank has deducted 49% (or $88.20) in TFN withholding tax in respect of interest earned on this account during the 2016 income year. However, the net remaining amount of $91.80 (representing 51%) was credited to his BOQ access account. Furthermore, on 1 January 2016, Scott invested $25,000 into a 12-month term deposit earning 4.00% interest with the Bank of Queensland with interest to be credited on maturity. This term deposit will mature on 1 January 2017. Scott is expecting interest of $1,000 will be credited to his bank account upon maturity on 1 January 2017 and has therefore calculated that interest of $500 has accrued to him as at 30 June 2016. When entering the above information into HandiTax, please leave the "Branch" and "Account Number" boxes blank. The above interest has been derived from personal investments, and not in relation to any business activity undertaken. 4. Dividends Received Scott owns shares in several Australian listed public companies. During the 2016 income year, he received the following dividends: Name of Company Unfranked Dividend Franked Dividend Franking Percentage attached to Franked Dividends 1. AMP 2. Billabong (refer below) 3. Cabcharge 4. CSR 5. Horizon Oil (refer below) 6. Telstra 7. Westfield Holdings 8. Woolworths $65 $480 - - $102 (net) - $34 - $120 - $720 $488 - $820 $120 $1,047 100% - 75% 100% - 100% 60% 100% In the case of all franked dividends received, the company tax rate was 30%. (a) Billabong Limited Dividend Scott owns 6,000 shares in Billabong Ltd, Scott was entitled to a dividend of $480 (unfranked). However, instead of receiving the cash dividend, Scott elected to apply this amount under the company's dividend reinvestment scheme so that he received an additional 400 shares in the company. On the date of the dividend was declared, the share price of the company was $1.20 per share. Hence, instead of taking the $480 cash dividend (which would have been unfranked), Scott elected to receive an additional 400 shares in the company. (b) Horizon Oil Limited Dividend In the case of the Horizon Oil Ltd dividends, Scott once again forgot to provide his tax file number (TFN) to the share registry. Accordingly, the share registry deducted 49% (or $98) TFN withholding tax in respect of the Horizon Oil dividend. The net amount of the unfranked dividend (ie. $102) was paid to him by cheque on 27 April 2016. All of the above dividends have been derived from personal bank account, and not in relation to any business undertaken. 5. US Dividend Received Scott owns 1,000 shares in the US company, Google. On 4 May 2016, he received a net dividend cheque of US$765 from the company's US share registry. According to the dividend statement that accompanied the cheque, foreign withholding tax equivalent to 15% of the gross dividend (being US$135) had been deducted from the gross dividend received US$900. The foreign exchange rate on the date the dividend was received was $A1.00 = $US0.71. There were no franking credits in respect of these foreign dividends. Furthermore, some years ago, Scott borrowed A$10,000 from Macquarie Bank to fund the purchase of these shares. He incurred interest of A$615 during the 2016 income year in respect of this loan. Scott advises you that he does not have more than $A50,000 invested in foreign assets. 6. Rental Property – 28 Grey Street, Paddington, QLD, 4064 On 21 July 2015, Scott purchased a three-bedroom house in Paddington in his own name at a cost of $680,000. Stamp duty and legal fees relating to this acquisition totaled $22,500 and were also paid on the same date. The house has been permanently rented out since 21 July 2015 (ie. 49 weeks). For the 2016 income year, Scott derived gross rental income of $34,300. Expenses relating to the rental property were as follows: $  Building & pest inspection report (incurred prior to purchasing the house) 960  Cleaning 382  Council rates 4,312  Interest on Westpac loan (from 21 July 2015 to 30 June 2016) 25,808  Landlord insurance 921  Property agents commission 2,915  Repairs and maintenance (all tax-deductible) 217  Travel to and from the rental property to inspect prior to purchase 92  Travel to and from the rental property to inspect after purchase 134 To finance the purchase of the rental property, on 21 July 2015, Scott borrowed $520,000 from Westpac. Loan establishment fees, totalling $1,800, were incurred on this date. The term of the loan is 25 years. Scott put the remaining $160,000 cash in himself to fund the acquisition of the property. When he purchased the house, Scott was provided with a detailed schedule from Blake's Quantity Surveyors advising that the house was originally constructed on 19 March 1993. Blake paid $140 for this schedule. The schedule confirms that the original construction cost of the house was $216,000. The property was rented out partially furnished. On 15 August 2015, Scott purchased several items for the benefit of his tenants. These items are detailed as follows: $  Microwave oven 280  Refrigerator 890  Dishwasher 676  Carpets 3,240 In early-February 2016, two trees fell down and broke a retaining wall on the property in various places. It is believed that these two trees fell due to ground softened as a result of the recent heavy rains and flooding during January 2016. Upon advice from a local builder, the retaining wall was fully rebuilt in at the end of February 2016. The same materials that had been used in the original wall were used to build the new retaining wall. The wall's location, height and length also remained unchanged. The cost of the new retaining wall (including tradesman's labour costs) came to $9,680. This bill was paid on 18 March 2016. Scott chooses not to allocate assets costing between $300 and $1,000 into a low-value pool. Instead, he prefers that you depreciate each depreciable asset in accordance with their effective lives as set out by the Commissioner in Table A of Taxation Ruling TR 2015/2 (refer to Residential Property Operators 67110). Assume that Scott wishes to maximise any depreciation deduction claimed. Students are advised to refer to the additional information at the back of this document for further guidance as to what depreciation rates to use for both Division 40 and Division 43 claims. Note: There are 346 days from 21 July 2015 to 30 June 2016 There are 321 days from 15 August 2015 to 30 June 2016 There are 105 days from 18 March 2016 to 30 June 2016 Hint: When entering expenses into the rental property schedule in HandiTax, if you press the function key "F5" it will reveal the full list of items/deductions that relate to a rental property. 7. Capital Gains/(Losses) Scott advises you that he sold the following assets during the 2016 income year: (a) On 25 March 2016, Scott sells a block of land at Caloundra which he had inherited from his grandfather on 7 September 2005 for $260,000. His grandfather had initially purchased this land in June 1985. The land has been kept vacant the whole time, but Scott was hoping to build an industrial storage shed complex on the land, however, this never eventuated. His grandfather initially purchased the land for $50,000 in June 1985 and at the time of his death on 7 September 2005 the land was valued at $150,000. Since acquiring ownership in September 2005, Scott has only spent minimal money on maintenance (eg. grass cutting and occasional land clearing totalling $8,500 and council rates totaling $13,500). The sales agent charged him $6,000 in fees in relation to selling the land. (b) On 21 April 2016, Scott sells a sculpture for $3,000. Scott had purchased this sculpture for $2,000 on 21 January 2010. (c) On 17 May 2016, Scott sold a caravan for $15,000. Scott used this caravan to go camping with his family during the summer holidays. He initially bought this caravan on 5 October 2011 for $23,000. (d) On 13 June 2016, Scott sold a baby grand piano for $25,000 which was also inherited from his grandfather on 7 September 2005. His grandfather had bought this piano on 17 June 1990 for $15,000. As at the date of his death, the piano was reliably valued to be worth $20,000. Scott informs you that he has carried-forward (unapplied) net collectable capital losses of $1,500 relating to the sale of a painting during the 2013 income year. He also has carried-forward (unapplied) net capital losses of $4,955 relating to the sale of some Qantas shares in 2014. Scott wishes to minimise his capital gains tax payable wherever legally possible. Assume that Scott is not eligible to rollover any of part of the capital gain relating to any of the assets. Important Tips Relating to the Capital Gain Calculations in HandiTax 1. Please ensure that you enter data and complete the "Capital Gains Worksheet" in HandiTax. You will need to enter each CGT transaction (where relevant) into this worksheet. Please note that HandiTax does not use the term "personal use asset". Instead, it refers to these assets as "other CGT assets" – using the code "O". Land is referred to as "real estate" – using the code "R". 2. Furthermore, in the case of the indexation method, when you enter purchase and sale dates, HandiTax automatically calculates the indexation factor. However, for some inexplicable reason, HandiTax does not correctly round the CGT index factor to three (3) decimal places. Instead of rounding, it appears that the package automatically rounds the third digit in the CPI indexation factor upwards. Students will need to accept this calculation as it is not possible to override it. However, if you are planning to manually calculate or replicate the capital gains tax calculations, please be aware that there will be a slight discrepancy between your calculations and HandiTax's calculations. I have brought this to the attention of the technical staff at Sage HandiSoft, and they have advised me that they are looking into the problem. However, it is unlikely to be resolved before the assignment is due for submission. Hence, once again, to reiterate, please accept the indexation factor calculation that HandiTax makes. 3. After you have completed the Capital Gains Worksheets, you will also need to complete the "CGT Schedule" in HandiTax. If you want the figures in the CGT Worksheet to automatically populate and prefill this schedule, then you will need to enter "Y" to the question "Transfer from Capital Gains Worksheet"? This is illustrated in the screen dump below. 8. Sportsbet Winnings Scott is a keen football follower. Each weekend he loves nothing better than watching the National Rugby League (NRL) and Australian Football League (AFL) games. Every Friday afternoon before the Friday evening games, Scott places a bet of $25 on the NRL games and $25 on the AFL games for the weekend. During the 2016 income year, Scott won 6 times. However, the winnings were reasonably small that they barely covered the amount he bet. However, in the last week of June, Scott took a multibet that ended up proving to be a winner for him. He ended up winning $6,780 for that particular bet. DETAILS RELATING TO DEDUCTIONS 9. Car Expenses Scott frequently uses his own motor vehicle to visit clients at their business premises for meetings. He also uses his car to visit worksites where projects are being completed. Scott owns a 2015 BMW Sports Convertible 3 Series, which he purchased outright on 12 February 2015 for $74,000. The registration number is 187BDT. Scott informs you that he has maintained a logbook for a consecutive twelve-week period during the 2015 income year. At the end of the twelve weeks, the logbook revealed that Scott travelled a total of 4,700 kilometres, of which 1,316 were work-related. Scott tells you that this pattern of use is still relevant for the current year. At 30 June 2015, the odometer reading on the car was 7,780 kilometres. At 30 June 2016, Scott advises you that the closing odometer reading of the car was 28,265 and that there was no significant or material change in business usage during the 2016 financial year from the prior year. Scott provides you with the following expenses in relation to his car for the 2016 income year: $  Registration 1,034  Insurance 978  RACQ membership fees 96  Petrol and oil 3,153  Car washing 174  Repairs and general maintenance 750  Bridge tolls and parking fees (all work-related) – refer note below 220 Scott advises you that he has kept receipts for all of the above expenses. Scott was fully reimbursed by his employer for the bridge tolls and parking fees totalling $220. On 16 May 2016, Scott's Queensland drivers licence expired. He pays Queensland Transport $150 to renew his driver's licence for a further 5-year period. Having a driver's licence is a condition of Scott's employment with Sedgman Consulting. Note: There are 139 days from 12 February 2015 to 30 June 2015 (being the date that he acquired the car during the previous income year to 30 June 2015). A reminder that there are 366 days in the 2016 income year (as 2016 is a leap year). Hint: Please complete the "Other Vehicles & Travel" worksheet in HandiTax. Unfortunately, HandiTax does not automatically transfer the eventual claim to Label D1 in the tax return. Hence, students will need to remember to retype the claim and amount claimed at Label D1 in Scott's tax return. 10. Travel Expenses On 17 October 2015, Scott travels to Chicago to attend the annual International engineering conference held by the International Engineers Association (IAE). The purpose of this conference is to update practising engineers on the latest engineering trends and developments in the industry. Scott believes that the conference will prove to be very useful for keeping him up-to-date on aspects of engineering that relate to his job. Scott personally paid all of the following costs relating to the conference. The costs of the overseas trip are detailed below (all amounts are expressed in Australian dollars): $  renewing his 64-page Australian passport (which was about to expire) 380  costs of obtaining 4 passport photographs 14  travel insurance 243  economy class airfare from Brisbane to Chicago and back 1,920  3 nights accommodation at the Westin Hotel in Chicago 878  phone calls home to Emma and the kids to see how they are going 38  IAE conference registration fee 1,650  meals for three days while attending the conference 198  dinner (consisting of a steak a glass of red wine purchased at Los Angeles International Airport (which was a two-hour stopover en route to Chicago) 56  taxi fares to and from airports 192  ticket to the Chicago White Sox baseball game (who were playing the New York Yankees) 140 Scott advises you that he has kept receipts for all of the above expenses and has kept the appropriate travel diary for taxation purposes. Note: For the purposes of the tax return, it is debatable as to whether travel expenses are deductible to an individual taxpayer at Labels D2, D4 or D5 of the tax return. For the purposes of this particular project (and to ensure consistency between groups), if students consider that any of the abovementioned expenses are tax-deductible, please include the deductible expenses at Label D2 in the tax return (ie. work-related travel expenses), not at Labels D4 or D5. Hint: Please complete the "Other Vehicles & Travel" worksheet in HandiTax. Once again, HandiTax does not automatically transfer the eventual claim to Label D2 in the tax return. Hence, students will need to remember to retype the claim and amount claimed at Label D2 in Scott's tax return. Important Tip Relating to Entering Information for Label 11 into HandiTax HandiTax has a "Work Related Expenses" worksheet. This worksheet asks the preparer to enter more details for any deductions claimed between Labels D1 to D5. However, students are advised NOT to use this worksheet. Instead, please claim any deduction (where appropriate) for information shown at Items 11(a) to 11 (e) below directly into the relevant label in HandiTax. 11. Other Expenses (a) Mobile Telephone Expenses Scott owns his own mobile telephone. His mobile telephone call costs for the 2016 income year totalled $1,630. According to Scott's mobile telephone statements (which he maintained over a three-month period), Scott reliably estimates that 40% of these calls were work-related. (b) Business Lunches with Engineering Clients As previously mentioned at Item 2, Scott frequently takes clients out for business lunches. Scott usually takes clients to his favourite restaurants in the City, including Kingsleys Steakhouse, Aria, Il Centro and Jellyfish, all of which are located at the Eagle Street Pier. Scott uses this opportunity to discuss how projects are going and any engineering or project-management issues that need to be addressed. During the 2016 income year, Scott spent a total of $5,815 on food and beverages for himself and his clients. The breakdown consisted of: $  Food (consisting of entrees, main meals and desserts) 4,205  Drinks (consisting of soft drinks and juices) 216  Drinks (consisting of alcoholic beverages) 1,394 To assist with these costs, as mentioned at Item 2, Scott received an entertainment allowance from his employer of $6,500. (c) Subscriptions and Memberships to Professional Associations Scott paid the following subscriptions and professional memberships during the 2016 income year: $  Australian Journal of Structural Engineering 150  12 month subscription to Time magazine (for personal interest) 270  12-month membership to Engineers Australia 1,250  Qantas Airport Lounge 12-month annual membership renewal fee 480 Scott has been a member of The Qantas Club since 2004. On 1 January 2016, Scott renewed his annual Qantas airport lounge membership because he travels extensively for work purposes and finds it convenient to use the Qantas airport lounge (particularly the business facilities) each time before boarding his flight. Note: For the purposes of the tax return, if students consider that any of the items listed in the four bullet points above are tax-deductible, please include the relevant amounts at Label D5 of the tax return (ie. other work-related expenses). In other words, do not include these items at any other label of his tax return. (d) Home Internet Access Fees Scott pays $60 per month to an internet service provider (ISP) to connect to the internet at his home in Norman Park. This provides him with a total allowance of 200GB worth of data uploads and downloads per month. Based on a three-month diary that Scott has maintained, Scott uses an average of 25% of this data allowance accessing the firm's intranet, downloading client files, and checking his work e-mails. The other 75% of internet usage is attributed to his two children who use the internet to play video games, watch video clips, research for school homework and assignments and send e-mails and messages to their friends. During the 2016 income year, Scott paid $720 to the ISP representing 12 monthly payments of $60 each. (e) Home Office Expenses Although he spends most of his day working from the offices at Sedgman Consulting, Scott finds it convenient to occasionally work from home. He has set aside a small room in his house at Norman Park, which he uses for the purposes of catching up on work, reading client files and writing reports. When you ask Scott to provide your group with his electricity statements so that a proportionate claim can be made for home office expenses, he advises that he has not kept them. However, Scott provides you with a diary which he has kept for four weeks during the 2016 income year, detailing the total number of hours he has worked at home. Scott's records indicate that he worked a total of 680 hours from his home during the 2016 income year. Important Tip Relating to Entering Information for Items 12 to 14 into HandiTax Please enter the details for any claims relating to the below possible deductions (ie. the below items numbered 12 to 14) directly into the relevant label in HandiTax. 12. Insurances (a) Income Protection Insurance On 1 January 2016, Scott took out a 12-month sickness and accident insurance policy with Apex Insurance to insure himself against the loss of income in the event of serious illness or an accident. He paid $1,600 for this policy. The policy was in respect of the period 1 January 2016 (12:00 am) to 31 December 2016 (11:59 pm). (b) Life Insurance Policy On 1 September 2015, Scott took out a life insurance policy with AMP Life. The policy provides that in the event of his death, his spouse and children will receive a lump sum payment of $1 million. On 1 September 2015, Scott paid a premium to AMP Life of $860. The policy was in respect of the period 1 September 2015 (12:00 am) to 31 August 2016 (11:59 pm). 13. Concessional and Non-Concessional Personal Superannuation Contributions Scott advises you that apart from the compulsory 9.5% superannuation contributions made by his employer, Sedgman Consulting into his AMP superannuation fund, during the 2016 income year he also made pre-tax salary sacrifice (ie. concessional) superannuation contributions of $7,800 into his complying superannuation fund. This amount has correctly been reported by his employer on his 2016 PAYG Payment Summary as a "reportable employer superannuation contribution" (see Item 1). In addition to these pre-tax superannuation contributions, Scott also advises you that he made after-tax (ie. non-concessional) superannuation contributions of $5,200 into his AMP superannuation fund during the 2016 income year. All of the relevant paperwork has been processed by the fund and Scott has been advised of these contributions. All of Scott's pre-tax and post-tax cash superannuation contributions were received by his superannuation fund prior to 30 June 2016. Details relating to the superannuation fund are outlined below: Name of Superannuation Fund: AMP Superannuation Fund Fund's Australian Business Number: 39 780 311 675 Fund's Tax File Number: 814 560 022 Scott's Account Number: 11681474 14. Tax Agent's Fees and GIC Charge On 16 May 2016, Scott paid the invoice which he received from his previous registered tax agent in Morningside for the preparation and lodgment of his 2015 income tax return. The tax agent's fee was $480. Scott also informs you that as his tax agent lodged his 2015 income tax return more than four weeks late, the Australian Taxation Office charged him a general interest charge (GIC) of $81. Scott paid this amount on 22 June 2016. Important Tip Relating to Entering Information for Item 15 into HandiTax Please enter the details for any claims relating to the below possible deductions (ie. from the listing provided in Item 15 below) directly into Label D9 in HandiTax. 15. Gifts and Donations During the 2016 income year, Scott made the following payments: $  Brisbane Housing Company Limited 70  Jigsaw Queensland Inc. 120  Prostate Cancer Australia 400  Queensland State Emergency Service Volunteer Association Inc. 250  World Wide Fund for Nature Australia 50  Queensland Symphony Orchestra Pty Ltd (gift fund) 130  Purchase of a ticket to a gala charity ball at the Brisbane Sofitel on 2 October 2015 on behalf of Starlight Children's Foundation of Australia to raise monies for seriously ill and hospitalized children 150  Donation made on the night to Starlight Children's Foundation of Australia 100  Pat Rafter signed tennis ball bought at a Starlight Children's Foundation of Australia charity auction held on 2 October 2015 (market value = $30) 360 Scott also volunteers his time one day a month to Autism Queensland Inc. (an endorsed DGR) where he assists in organising social day outs for autistic children. Scott estimates that he has devoted approximately 100 hours of his time to this cause during the 2016 income year. He conservatively estimates this to have cost him approximately $6,000 in lost earnings. DETAILS RELATING TO REBATES AND TAX OFFSETS 17. Spouse Details - Emma Tracy Scott's wife, Emma, quit her full-time job with Westpac one year ago and enrolled full-time in a Bachelor of Arts degree at Griffith University. Emma works six hours per week part-time at a local Balmoral coffee shop. Emma's assessable income for the 2016 income year consisted of gross cash wages totalling $10,400 (this amount includes PAYG withholding tax of $1,260 deducted) and interest income of $40. Emma also received a fully franked dividend of $147 from Rio Tinto Ltd during the 2016 income year. Emma has no other assessable or exempt income, no reportable fringe benefits. and no reportable employer superannuation contributions. Emma incurred allowable deductions of $150 in relation to her salary and wage income. 18. Private Health Insurance Policy On 29 September 2015, Scott takes out private health insurance for the entire family with Bupa (BUP). This covers him and his family for the 276 days from 29 September 2015 to 30 June 2016 inclusive. His combined policy ("C") covers all family members and is the most comprehensive health policy available providing both private patient hospital cover and ancillary cover for all members of his immediate family. On 29th day of each month, Scott pays his monthly premium for this family policy. Scott's Bupa policy number is 895103. Scott provides you with the private health insurance statement that he receives from Bupa in respect of the 2016 financial year. The key details from Scott's private health insurance statement are summarised below. Bupa Membership Number Your Premiums eligible for Australian Government rebate Your Australian Government rebate received Benefit Code Other Adult Beneficiaries for the Policy 895103 $679 $182 31 Emma Tracy 895103 $1,739 $484 30 Emma Tracy Scott advises you that he wishes to claim his share of the rebate entitlement in relation to his policy in his income tax return and that his wife, Emma, will claim her rebate entitlement in her own tax return. ADDITIONAL INFORMATION For the purposes of this project, students should note the following:  Scott is not registered for GST. Hence do not adjust any of the figures contained in this assignment for the effects of GST. The figures shown in this assignment are the figures you should use if you determine they should be entered into HandiTax.  Scott has been lodging tax returns since he was 18 years of aged and expects to continue to lodge future Australian income tax returns.  Scott does not intend to use the electronic funds transfer (EFT) in HandiTax to receive his tax refund (if applicable). Therefore, ignore the section at the bottom of the front cover screen in HandiTax prompting you to enter Scott's financial institution details, including his BSB, account numbers and name of his bank account.  Scott and Emma are not eligible for any Family Tax Benefit (Part B) payment and neither person received any paid parental leave payments during the 2016 income year.  Scott does not have any outstanding HECS/HELP debt, nor does he have a financial supplement debt or any post-graduate FEE-HELP debt whatsoever.  Scott has kept all receipts substantiating all of his expenses.  Scott did not receive any tax-free government pensions or benefits and did not receive or derive any foreign employment income (also known as target foreign income).  The franking percentage shown in the final column of the table at Item 4 Dividends only relates to franked dividends. An unfranked dividend carries no franking credits. Where there is both a franked and an unfranked dividend, this means that the company has paid two (2) separate dividends to shareholders during the 2016 income year – a franked dividend (franked to the relevant franking percentage) and an unfranked dividend. Hence, if a dividend is franked to 80%, that does not mean that the remaining 20% of that franked dividend constitutes an unfranked dividend. It is only considered an unfranked divided if an amount appears in the "unfranked" column. In the case of all franked dividends received, the company tax rate was 30%.  As mentioned at Item 6, in the case of all depreciating assets that Scott acquired (including those assets relating to his rental property), Scott prefers that your group depreciates each depreciable asset in accordance with their effective lives as set out by the Commissioner in Table A of Taxation Ruling TR 2015/2 (refer to Residential Property Operators 67110). Do not refer to Table B under any circumstances.  If depreciating the car, students should use the effective life of a car of eight (8) years contained in Taxation Ruling TR 2015/2. This translates to a rate of 25% diminishing value. The depreciation car cost limit for the 2015 and 2016 income years was $57,466.  Scott wants you to use the diminishing value depreciation method for all depreciating assets under Division 40.  In terms of any Division 43 capital allowances claim relating to the rental property, students should use the prime cost method.  Any Division 43 claim is entered directly into the rental property schedule. Pressing the function key, "F5" will reveal all of the various deduction codes that can be used to enter data into the rental property schedule. The code to enter a claim under Division 43 is "R" Capital Works – Special Building Write-off.  Any Division 40 claim for depreciation relating to the rental property is to be entered into the depreciation worksheet in HandiTax. The total depreciation claim can be transferred to the rental property schedule (by coding it to Item 3 at the top of the screen). You will need to enter the address of the rental property at the top of the screen.  Scott wishes to minimise his 2016 taxable income wherever legally possible. Hence, your group should calculate all alternatives allowed under the income tax provisions offering a choice (eg. car expenses, capital gains etc). Your group should therefore choose that option which provides Scott with the greatest tax benefit (ie. one which results in the lowest amount of assessable income and/or one that results in the highest allowable deduction being claimed).  Enter all amounts into HandiTax based on whether the program allows for inclusion of cents or whole dollars. In some instances (eg. dividends, franking credits, TFN withholding tax, foreign tax credits, etc.), the program requires that cents be included. However, other amounts (eg. assessable income and allowable deductions) require whole dollar amounts be entered. In this case, round all amounts to the nearest whole dollar.  All calculations relating to the decline in the value of depreciating assets and borrowing costs should be made on a daily basis and rounded to the nearest whole dollar.  If you need to calculate the number of days, the ATO has a useful online calculator which performs such calculations, being: http://calculators.ato.gov.au/scripts/axos/axos.asp?CONTEXT=&KBS=Calculate_Days.xr4&go=ok AYB 219 TAXATION LAW GROUP CONTRIBUTION SHEET We, the undersigned, have formed one group from the following tutorial class and agree that each member of the group has made the below outlined contributions to this HandiTax project: TUTOR NAME: ________________________________________________ TUTORIAL TIME: ________________________________________________ Student Number Student Name Signature % Contribution TOTAL CONTRIBUTION: 100% Never sign your name before the percentage contribution has been agreed upon by the group members. In other words, do not sign a blank contribution sheet. Notes: It would be hoped, and expected, that an equal contribution would be the norm. For example, if there are 4 members in the group and everybody has made an equal contribution, 25% will be entered beside each person's name. In this case, if the group gets a mark of 15 out of 20 for the project, then each person in the group will receive this mark of 15. However, if each person has not made an equal contribution, then differing percentages that reflect each person's contribution should be entered. For example, if there were four people in the group, and it was agreed that two students contributed 30% each whilst the remaining two students contributed 20% each and the group was given a mark of 15 out of 20, the 30% students would receive a mark of 15 out of 20 and the 20% students would get a mark of 10 out of 20 (being two-thirds of the marks awarded to the two students who contributed the 30% as they have done less work compared to others). If you do not submit this signed group contribution sheet – each member of the group will incur a (10) mark penalty. AYB 219 TAXATION LAW GROUP INTEGRITY DECLARATION We, the undersigned, hereby declare that we have read, accepted and agree to all of the statements in the Declaration below: 1. We have complied with all the unit coordinator's instructions for this assessment. 2. We understand that plagiarism involves using another person (or persons) ideas or work as one's own, as explained in the QUT Manual of Policies and Procedures at C5.3 which is available at: http://www.mopp.qut.edu.au/C/C_05_03.jsp. 3. We understand that it is a breach of academic integrity to assist, or allow another person (or persons) to use and/or copy our work. 4. We declare that this work is entirely our own, and no part of it has been copied from any other person's (or persons') words or ideas. 5. We declare that no part of this assessment has been written for us or supplied to us by any other person or persons outside of the below listed group members. 6. We give permission for our assessment to be reproduced (copied), communicated, compared with other sources and stored (including electronically) in order to detect plagiarism and agree that plagiarism detection software can be used. 7. We declare that all group members have contributed to the assignment and the following group contribution percentages are accepted by all members of the group. Student Number Student Name Original Student Signature If each member of the group does not sign and/or submit the group integrity declaration, your assignment will not be marked and will be automatically awarded a mark of zero out of 20 for the project. AYB 219 TAXATION LAW HANDITAX GROUP PROJECT CRITERIA SHEET – PARTS A and B (20%) STUDENT NAMES & STUDENT NUMBERS: ________________________________________________ TUTOR'S NAME AND CLASS TIME: ________________________________________________ CRITERIA 7 12.75 – 15 6 11.25 – 12.75 5 9.75 – 11.25 4 7.50 – 9.75 <4 0 – 7.5 Total % Knowledge and Technological Skills (KS1.2)  Ability to accurately complete a tax return using HandiTax. A total of 15 numbers will be marked in Scott's income tax return. Either the answer is correct (1 mark) or incorrect (0 marks). There are no half-marks awarded if the figure is wrong. Part A is worth 15%.  Furthermore, to get the 1 mark, each amount must be entered at the correct label in the tax return. Complete accuracy in calculation of the tax return and entry of items into HandiTax A few mistakes in calculation of the tax return and/or entry of items into HandiTax Some mistakes in calculation of the tax return and/or entry of items into HandiTax Several mistakes in calculation of the tax return and/or entry of items into HandiTax A large number of mistakes in calculation of the tax return and entry of items into HandiTax / 15 CRITERIA 7 4.25 - 5 6 3.75– 4.0 5 3.25 – 3.5 4 2.5– 3.0 <4 0 – 2.25 Teamwork and Self (TS4.2)  Ability to effectively explain how the group researched the two tax issues identified in the assignment by reference to appropriate sections, cases, taxation rulings, tax determinations and ATO Interpretative Decisions etc. Complete accuracy in quoting appropriate legislative references, cases, tax rulings, tax determinations and ATO Interpretative Decisions for the two issues. Mostly accurate in quoting appropriate legislative references, cases, tax rulings, tax determinations and ATO Interpretative Decisions for the two issues. Some accuracy in quoting appropriate legislative references, cases, tax rulings, tax determinations and ATO Interpretative Decisions for the two issues. Little accuracy in quoting appropriate legislative references, cases, tax rulings, tax determinations and ATO Interpretative Decisions for the two issues. Virtually no accuracy in quoting appropriate legislative references, cases, tax rulings, tax determinations and ATO Interpretative Decisions for the two issues. /5 TOTAL: / 20 AYB 219 TAXATION LAW - NO NEED FOR STUDENTS TO SUBMIT PAGE (THIS IS FOR MARKERS ONLY) PART C: PROFESSIONAL APPROACH (SATISFACTORY/UNSATISFACTORY) CRITERIA MAXIMUM PENALTIES TO BE APPLIED (The maximum amount of penalties that can apply is to reduce the student's overall mark to zero out of 20) DEDUCT FROM MARK OUT OF 20 IF UNSATISFACTORY (Maximum deduction is the amount of marks awarded for each part) Meets all of the submission requirements of the assignment as per the instructions Unsatisfactory Satisfactory Not forming a group of 3 or 4 students from the same tutorial   Not using HandiTax to complete Scott's tax return   Not submitting or signing the group contribution sheet   Not signing and/or not submitting the Group Integrity Declaration   - 20 marks - 15 marks - 10 marks Not marked TOTAL PENALTIES APPLIED: FINAL MARK OUT OF 20: /20