Martin Jenkins who is 47 years of age carries on a newspaper business. He has two employees to help him publish a monthly magazine, and he operates from premises located in Footscray. He returns his income on a cash basis. He has come to you for advice regarding the following issues and wants you to prepare his tax return for the year ended 30 June 2013.
Issue 1
- Cash received from clients in 2012 13 amounted to $274,000. (This amount excludes the $10,000 advance fees he received).
- Unpaid accounts as at 30 June 2013 were $9,000.
- Unpaid accounts as at 30 June 2012 were $4,000.
- On 21 June 2013 Martin received $10,000 advance fees for services not yet rendered to a particular client.
Issue 2
- On 15 July 2012 Martin paid $1,000 subscription to the Newspaper Industry Golf Club association to entertain his business clients at ‘business lunches’ where various business issues were discussed and negotiated.
Issue 3
- During the financial year Martin incurred $21,000 legal fees in defending a defamation lawsuit as a consequence of an article written by a journalist he employs.
Issue 4
- During the financial year Martin made a $30,000 concessional contribution to his complying superannuation fund.
Issue 5
- On 1 February 2013 Martin expanded his business operations and purchased a shop in Geelong.
- On 2 February 2013 he incurred $29,750 painting all the interior rooms which were in a state of disrepair, and he moved in one week later.
- On 1 March 2013 he incurred $8,000 moving trading stock from his old premises to his new shop in Geelong.
Issue 6
To help finance the purchase of his new shop in Geelong Martin did the following:
1. Shares:
Sold the following shares:
- Date acquired:
2 March 2005 1000 BAN Ltd Purchase price $40,000
- Date sold:
19 September 2012 1000 – BAN Ltd Sale price $170,000
2. Rare Rolls Royce
- On 16 September 2012 Martin reluctantly sold his prized and extremely rare 1910 Rolls Royce to the Petrol Head Vintage Car Museum for $87,000. He purchased the car on 9 August 2006 for $17,000 and spent $21,000 to restore it back to its original condition. He also paid $1,500 in advertising costs to sell it.
3. Art work
- On 17 September 2012 Martin sold a painting that he purchased on 13 February 1984 for $30,000. The sale price was $64,000.
4. Block of land
- On 17 October 2012 Martin gave a gift of a block of land to his daughter for her 21st birthday. He purchased the land on 11 July 2006 for $140,000. The market value of the land at the time of the gift was $200,000.
At the end of the 2011 12 financial year Martin had a prior year net capital loss of $9,000 from his share transactions.
Issue 7
- On 1 August 2012 Martin paid $94,000 for a new Ford that he uses for business use. (The rate of depreciation is 22.5%) Calculate the amount of depreciation he can claim in 2012 13.
Issue 8
- Martin and his wife resided in a property that is owned by Martin’s family company. The company sold the property on 19 June 2013 for $650,000. The family company originally purchased the property on 3 October 2009 at a cost of $450,000. Martin has sought your advice regarding the tax issues relating to the sale of this property.
Issue 9
- On 1 August 2012 Martin purchased a new printing press for his publishing business. The invoice from the supplier showed the following:
- Printing press $140,000
- Delivery fee $1,000
- Installation and testing fee $1,000
- Annual insurance fee $8,000
$150,000
- The new printing press has an effective life of 5 years and Martin wants to claim the maximum amount possible in 2012 13.
Issue 10
- Advice Martin whether he can claim a tax deduction or tax offset for any of the following transactions:
- $100 meal expenses incurred while travelling overnight on business
- During the financial year Martin incurred net medical expenses totalling $3,620
- On 14 April 2013 Martin made a $3,000 superannuation contribution to his spouse’s complying superannuation fund. (his wife earned $9,000 in 2012 13)
Issue 11
- Due to his heavy workload Martin maintains a home office where he finds it convenient to complete some business reports at home. During the financial year he incurred the following expenses:
- $415 ‘running expenses’ such as cleaning costs, depreciation and repairs of your computer and office furniture, heating/cooling, lighting and telephone calls.
- $3,000 occupancy expenses’ such as mortgage interest, council rates, house insurance, rent and repairs.
Issue 12
- On 9 April 2013 Martin was informed that one of his clients who owed him $7,000 was declared bankrupt and will receive no payment. He has approached you for advice as it whether he can claim the bad debt as a tax deduction.
Required
(1) With respect to each numbered issue, advise where appropriate what expenditure Martin can legally claim or income or capital gain he must include as part of his assessable income. All your answers
must be supported with relevant sections of the ITAA (and where appropriate) relevant case law and income tax rulings. Your answer(s) to each numbered issue must be recorded under the heading
Schedule A. Your answers should be based on legislation and tax rates applicable to the
2012 13 financial year.
(2) Your report
must not exceed a length of 1,500 words and must be typed. Reports in excess of 1,500 words will be penalised one mark per 100 words above this limit.
(3) The assignment will constitute
25% of your final mark. The marks will be allocated as follows:
- 90% of the marks for technical analysis and research
- 10% of the marks for presentation (such as effective use of headings, identification of relevant references and bibliography).
(4) The assignment must be submitted no later than
Monday 16 September 2013 (3.00 pm).
Late assignments will be penalised at the rate of 10% per day, that is, an assignment is marked out of 90% for 1 day late, 80% for 2 days late, etc. and
after 5 working days, assignments will attract zero marks.
You must:
- Provide a progress report of your assignment in class in week 4
- Submit a substantially completed draft copy of your assignment for inspection in class in week 7
(5) Your answer to each identified issue
must be clear and concise and in point form. Also all necessary calculations must be provided.
(6) Students may complete their assignment
in groups of two or three
.
(7) For the purposes of this assignment the
Goods and Service Tax is to be ignored.
Administration Issues
Assignment Submission
Your written assignment must be submitted to the level 7 Assessment collection centre on or before
16 September 2013. The centre is open from 9.00 am to 4.00 pm Monday to Friday except public holidays. Students must attach an assignment cover sheet to the front of the assignment. The cover sheet is available when you log on to https://online.mit.edu.au/ams/
Return of Assignments
All assignments will be marked and made available for collection by students within a minimum of three weeks from the submission date. Assignments can be collected from lecturer or the Assessment collection centre on level 7.
Attachments:
Bachelor Assi….doc