By completing this assessment the learner will gather evidence of their ability, knowledge and skills to:
? complete lodgements and returns for legal entities
? assess taxation liabilities, optimise tax positions, establish processes and plans, evaluate tax policies and review tax compliance for legal entities.
Written report consists of the following assessment methods:
– Setting and reviewing business taxation simulations
– Evaluating an integrated activity which combines the elements of the competencies
Part A ? Written Report
The Ethical Trading Group has continued to grow and become a more complex organisation. You (the learner) are the CFO of the Ethical Trading Group Pty Ltd. The Managing Director CEO has requested your assistance in relation to a few important matters. As the group has continued to grow, the Managing Director has asked you to present to the Board a written report about the tax plan (a plan to optimise the tax position of Ethical Trading Group) and an upcoming ATO audit. The Ethical Trading Group has received a notification from the ATO in regards to a scheduled audit. You (the CFO of the Ethical Trading Group) are to prepare a report to the Board to discuss the tax plan and the ATO audit.
In your report on the tax plan and ATO audit for Ethical Trading Group Pty Ltd, address the matters raised in the Questions 1 to 4 below.
a) Provide information on the different types of taxes that may be payable by the company.
b) Include a tax calendar highlighting key taxation lodgement due dates (for taxes identified in question 1a above) and any penalties to be levied for late lodgement. Please use a table format to display this information.
c) Discuss the appropriateness of the use of the accruals basis of accounting for the company.
Conduct research to identify updates or any potential changes to tax compliance requirements relevant to maximising Ethical Trading Group?s taxation benefits. (Hint: consider any changes Ethical Trading Group could make based on any ATO or recent Federal Budget Announcements.)
Your report should include the following;
a) Three separate updates which impact the taxation obligations of Ethical Trading Group (ie report on three  different taxes Ethical Trading Group pays).
b) Note in your report, three (3) separate sources used to research for the updates and changes (such as names of websites and publications).
c) For these three updates, document the potential record keeping and reporting requirements that Ethical Trading Group will need to implement to reflect these changes.
Explain how your tax plan could optimise the organisation?s tax position by:
a) Note which financial records or statements Ethical Trading Group can use to ensure it is able to meet their taxation obligations. Consider two (2) key financial records Ethical Trading Group would already produce or any other external tools which could assist.
b) Note how Ethical Trading Group can use the taxation schedule and calendar developed in Question 1b above, to assist in preparation of a budgeted cash flow.
c) Using the Income and Expenditure statement from the Ethical Trading Group, estimate the following;
i) Budgeted GST payable for the year ended 30/6/15. (Assume GST is collected at 10% of sales revenue and GST is paid at 10% of applicable expenses).
ii) Budgeted Income tax payable by the company, using the standard rate of company tax. (Assume all income is assessable and all expenses are deductible).
d) Analyse differences between budgeted GST payable and budgeted Income tax payable (as you calculated in your answer in question 3c) and the actual GST payable and Income tax (obtain actual balances from the 2015 Actual income and expenditure statement for 2015,
In your analysis discuss possible issues with financial management strategies (ie budgeting) or other processes and controls, taking into consideration the facts discovered from a recent internal audit review of the company.
Internal audit findings include;
? Issues have arisen with invoicing of sales where GST has not been correctly coded and processed.
? A review of income and expenditure identified $300k of legal expenses which had been incorrectly coded as deductible for tax purposes.
e) As a result of the variances between actual tax balances payable and the tax plan estimates noted in 3 d. above, what changes (2 changes) would you suggest have to be made to the budgeting and tax plan process and other management processes.
The ATO has written to the Ethical Trading Group informing them about an audit they will be performing of GST, FBT and CGT. For the audit, the ATO has requested the information noted in questions a ? e below.
Taking into consideration the activities of the Ethical Trading Group, identify:
a) the source documents used to verify GST collected or paid, including;
i) what information should be shown on tax invoices (at least 7 pieces of information).
ii) what is the threshold amount for which you are required to issue a tax invoice.
b) Information and/or reports required to assist in preparing the FBT return for the company.
c) Records and/or resources which could be used to assist in calculating and recording capital gains tax. (Hint: Do not provide details on how to calculate CGT.)
d) Details of processes and controls to prepare and lodge GST/ FBT returns, including;
i) Review and sign off of returns
ii) Where and how tax records are stored and filed
iii) Audit trail requirements
iv) How long tax records are kept
e) Note three (3) relevant sections from the Ethical Trading Group Policies and Procedures, which would assist them being compliant with their taxation obligations.