Assessment task 2: Assignment

29 Oct

Sapphire Stables Pty Ltd 30.06.2017


Sapphire Stables Pty Ltd operates a chain of horse riding training centres. The directors are

Mr &Mrs Equine and they have been the same directors since the company was incorporated in the A.C.T. on 1.7.2008.  The cashbooks are prepared by the bookkeeper Miss Joy Ryder and she provides you with the following information for the year ended 30.06.17


Receipts :                                                                  $

Fees                                                                            660000

Subscriptions                                                                        32000

($8000 paid in advance for July/Aug 2017)

Sale of riding gear                                                      77000

Seminars                                                                    16500

Show jumping events                                              55000

Vetcare subsidy                                                          15000

Tax refund (amendment 30.06.16)                                        8000

Exempt income                                                             7360

Advertising                                                                   5500

Net dividend; Sapphire Pty (Perth) Subsidiary        1400

Net dividend from U.K. Horse Centre Plc              6000

Total income                                                                        883760


Payments:                                                                 $

Net wages                                                                  220000

PAYGW withheld                                                     80000

Superannuation                                                          28900

Rent                                                                              88000

Purchases of stock                                                     66000

Veterinary fees                                                           22000

Donations      (Registered charities)                          4440

Asset purchases                                                            5500

Advertising                                                                   9900

Legal – re 3 year lease (No GST)                                 990

Entertaining staff from Perth at A.C.T.

restaurants in December 2016 (no alcohol).           9900

Airfares – bring Perth staff to A.C.T.                         8800

Accommodation – Perth staff in A.C.T.                   11000

Fully franked dividend paid 20th May 2017          80000

PAYG instalments                                                       50000

Fringe benefits tax paid for 31.3.17                        14700

Refund of fees                                                              6600

Tax advice provided to staff                                      1650

HELP paid for employee                                             4500

Hire of car for employee when his private

car was being repaired                                                  880

Supply uniforms to staff                                         3960

Total                                                                           707720



Sapphire Stables Pty Ltd 30.06.2017

Additional information ;

  1. The company is registered for the GST.
  2. The company has an aggregate turnover of less than $10 million
  3. Sapphire Stables Pty Ltd (Perth) is a wholly-owned subsidiary. The dividend of $1400 was received on 1.4.17 and was 50% franked.
  4. The dividend from U.K. Horse Centre Plc is a portfolio investment and withholding tax of $4000 has been deducted at source.
  5. The company bookkeeper Miss Joy Ryder advises that at 30.6.17:
    • liability for wages is $9000
    • liability for annual leave is $1500
    • $2000 of the advertising expense was prepaid for August 2017
    • GST input tax credit on purchases of stock $4900
    • Open stock 1.7.16 $8000 / Closing stock 30.6.17 $10000
    • The depreciation schedule had a 1.7.16 balance of $5000 in the general pool. New assets this year: (1.) Weighing machine $3300 dated 1.6.17. (2.) Facsimile $ 1100 dated 1.6.17 (3) Four saddles costing $275 each dated 1.6.17
    • The lease agreement for rental of the premises was dated 1.7.16
  6. The Vetcare campaign subsidy is repayable if any company personnel harms any animals in their care. You are advised that, at an inspection on 2.6.17, the inspector sighted severe scarring on one of the horses. By 15.7.17 he had filed a report stating his professional view that the company was in breach of the subsidy provisions.
  7. The franking account has a zero balance at 1.7.16.
  8. Payments of company PAYG tax during 30.6.17 were as follows;

* 1.09.16        $ 9000                        * 1.12.16        $ 9000

* 1.03.17        $ 16000          * 1.06.17        $ 16000

  1. The bookkeeper also advised that the quarterly business activity statements were never lodged and no GST has been paid.
  2. Tax loss carried over from last year amounted to $32000.


From the above information you are required to;

  • Prepare a statement of taxable income; also record in HandiTax
  • Determine the tax payable/refundable, using 27.5% tax rate
  • Complete a company tax return
  • Prepare the franking account
  • Complete the annual business activity statement
  • List the payments that would be liable for fringe benefits tax
  • Determine any penalties applicable to the franking account and late lodgment of the BAS
  • Minimise the clients tax burden
  • A professional presentation is required. Show all workings.





Sapphire Stables Pty Ltd 30.06.2017


  • Additional Requirement:

The Deputy Commissioner of taxation has issued the companyan amended assessment on 1.10.17 for the 30.6.17company tax assessment. The Commissioner has reduced the deduction for the rent of $88,000 down to $44,000. The Commissioner is arguing that the rent paid is a non-arm’s length transaction. This has resulted in an adjustment as follows:

  1. Extra company tax of $11000.
  2. Extra GST of $4000
  3. Interest charge of $1000.


The Deputy Commissioner of Taxation is in fact incorrect. The landlord charging the company $88,000 has no personal connection with the company directors and transacts business at arm’s length on a commercial basis.


You are therefore required to prepare a Notice of Objection Against Assessment within the appropriate time frame. You should refer to the professional format for notices of objection as presented in the Master Tax Guide. (Ref 28-050).


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Posted by on October 29, 2017 in Academic Writing


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