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Table of Contents

Answer 1.

Answer 2.


Taxation - Answer 1

To Date :

The Director

Hand Sanitiser and Cleaning Products Company


Subject: recommendation about the tax optimized strategy that would best suit the requirements arising at the firm.

Respected Sir,

I would hereby like to bring this to your notice that your firm being the sole trader business of hand sanitizers and cleaning products carrying out its activities for about 20 years both in manufacturing and supplying the same, the taxation strategies involved will be very clear and distinct for understanding purpose. In terms of your retirement which is going to take place by 5 years time, an advice with assurance of the taxation will be provided to you beforehand.

As you know the taxes in Australia gets collected by Australian taxation office (ATO), and here money can be saved by making payment of taxes within the stipulated time and being entitled to receive certain concessions in terms of payment made (Barkoczy, 2016). The types of taxes involved are Income Tax, Capital Gains Tax (CGT) and Goods and Service Tax (GST) which can be paid by the business holders in certain terms operating yearly, monthly and quarterly.

Being an Australian based company, the income tax will be calculated over tax rate as set by the Australian Government although the rate of tax and the income that falls under taxable criteria is variable (Braithwaite & Reinhart, 2019). Capital gains tax arises from the sale of assets in the long run which is owned by the business. GST gets calculated over all the goods sold by the company as well as the businesses receive some concessions in terms of GST paid on acquiring business supplies. Payroll tax will get levied on the payment made to employees if the total amount paid exceeds the level of exemption and this varies between states and territories. There are two more other taxes i.e. Land tax and fringe benefits tax which needs a mention here as in this case it might be needed.

The yearly statement made to manage the business affairs will have an effect over the payment to the employees as well as the managing committee members if they are entitled to get a payment in terms of service rendered. The new purchase to be made of the warehouse which was still now on rent at an industrial complex in blacktown. The new one will be developed at a site located in seven hills which will help to expand the business at its great and is supported by Dolores, the future director of the company by next 5 years of time.

According to the taxation law of Australia, any income earned after the age of 60 gets tax free indifferent to its type like if it is an account-based pension or as a fixed income for the rest of the life or a fixed period. The income and the expenses as provided as information in terms of business affairs, to get an evaluation of how to achieve the goals are being scrutinized thoroughly to provide full proof and authentic statement of taxation prepared at the end of each financial year (Brown, 2018). The statement reflects the current position of the firm in terms of income earned and expenses incurred along with all other transactions made like loans or debts or mortgage or payment to employees and shareholders and so on. All the assets including the equipments and machineries in the black town warehouse will have their specific effect in the taxation statement as those will also suffer certain changes in terms of relocation to the new place. The inventories will also have a mention too in the financial statement to the business status for goal achievement (Morgan, Mortimer & Pinto, 2017).

All this information will be taken into consideration while we will be preparing the statement of taxation for your company and will be provided to you in time with full proof details about the transactions made so that you can assess the situation of the company and make decisions accordingly for achievement of success in future.


Financial Advisor

(as appointed by Manuel and Dolores)

Taxation - Answer 2

Supporting file note developed as per the recommendations made to Manuel and Dolores.

The case given states that Manuel is the owner of a trading business that operates in Sydney with hand sanitizers and other products used for cleaning purposes. The age of Manuel is 63 and still he runs the business successfully by providing supplies to major hospitals and places of medical facilities and this has been operating for twenty years passed by although from a rented warehouse in Blacktown within the industrial area there. 15 number of staff and personnel are employed in the firm but recently Manuel is in tension about his retirement which is nearing by 5 years and for that he has started preparing his daughter to take over his duties after the retirement procedure commences. He already has employed his daughter as a senior manager in the business who is herself an industrial chemist of the age 26 years for learning the business activities in their true form. Now on the basis of personal relationship, Manuel is not in good terms with his wife and Dolores’ mother, Carmen and so they had a divorce which has been 9 months till date. Since then Manuel has been living with his 21-year-old partner, Paolo, who has been working as a mechanic to repair the hydraulic equipment in the warehouse situated in black town. He is deciding to make Dolores inherit the entire responsibilities of the business after his retirement with the retention of some sort of control over the business till his death and after retirement some sort of stable income should be coming in from the business without being a part of the daily operations (Murphy, 2019).

Here according to the taxation system of Australia, the workforce and employment system here is of very much skilled and flexible type where the businesses operating require to abide by some range of legislative needs while getting them employed into the business. Here in Australia employess come in various types depending upon the flexibility and stability of the business and they can be employed on either direct with employer or on contractual basis. The employees are to receive certain entitlements which are been covered under some standards as mentioned below:

  • Hours of working in a week
  • Requesting to arrange for working facilities that will be flexible in nature
  • Entitlements that are related to leave and forms of the same
  • Payments that are tied with redundancy and termination of the employees

Tax that is levied over the income of employees in Australia is termed as payroll tax and that is also levied over the income that exceeds the exemption limit as stated in the taxation criteria (Murphy, 2019). This tax gets deducted from the payment made to the employees directly while payment is made to them and gets an entry in the taxation statement which is being prepared at the end of financial year. Retirement pension is another important part of the income statement that provides security to the employees in terms of the stability of income that is to be maintained even after the retirement takes place. Indifferent to any person associated with the organization be it the employer himself or any senior employee of the firm the retirement benefits remain the same according to the structure of income held by each individual at their subsequent level (Murray et al. 2019).

As per the requirement of Manuel, account-based pension is the perfect option for him to adopt in terms of his retirement as that offers regular, flexible and free of tax income from the retirement benefit option. Although this scheme lasts as long as money remains in the pension account but still this is found the best way because the income goes through an even distribution during the span without the raise of any hassles.

certain transactions are being mentioned in the case as provided which states the income, expenditures and other related taxable entries that are to be mentioned in the financial statement at the end of the year.

  • Value of equipment and machinery is to be included in the taxation statement while deducting their depreciation costs as incurred throughout the year for the span it has working or been used.
  • The income stated in the business account of $79261, should be justified that wether it is the net amount balance or the opening one as on the basis of that calculations to be made to get the actual net income.
  • Same goes for personal savings account but the only difference here will be that no business expenses can have a mention here and deductions if any are to be made according to personal expenses incurred by the accountholder by himself or somebody close.
  • About the residence of manuel and paolo, the actual value of the premises can be realized after the deduction of mortgaged amount in terms of the house as well as deprieciation costing from the time when from it is being used. The net value will then have an entry in the taxation statement made.
  • Manuel also bears a super account for the help after the time of his retirement with IbizaSuper at a value of $367000 which is in its growth form. The income from this will not get an entry in taxation statement as no income from this account is applicable till the holder of the account gets retired from his work and starts receiving the pension amount after the submission of supporting documents to the authorities involved (Niemirowski, 2017).
  • The annual operating income is basically the income which can be seen after the deduction of operating expenses from gross income. So here in the statement of taxation, firstly the gross income should be mentioned while adding up the operating income with the operating expenses and then repeat the entire procedure to find out the operating income for making it applicable to get an entry in the taxation statement of the financial year ending (Phillips, 2016).
  • Inventories are basIcally the objects that are dealt with by the owner of an organization in terms of their carried out daily activities and apart from this unless an inventory is sold by the holder of the same the amount does not fall under taxable limit. This comes as an asset in the statement of taxation or balance sheet and this also can be utilized to reduce the income receipts at gross level. Any inventory which has been stolen or faced a theft or has become obsolete can help in getting a deduction in terms of the taxable income as forms a part of assessable income of the business owner.
  • The salary paid to employees be it the owner or any other family person working as the employee and drawing salary every month falls under taxation only when the drawn amount exceeds the limit of tax exemption. Elsewhere the amount given out as salary stands as income for the employees and get treated under the expenses head as per the balance sheet prepared by the owner at the end of financial year (Woellner et al. 2016).
  • The cost of living as drawn by Manuel the owner of the company will have an entry as expense in terms of payment made to directors which will be deducted from the income part and the taxable amount will also be shown there to provide an ultimate effect.

At the end it can be stated that the decision made by Manuel and Dolore, his daughter and the future director of the company, to buy the site of warehouse and make an establishment is a wise as well as good decision because which will benefit the company by saving the amount of rent paid every month for the warehouse part. Although at the initial stage they need to make some investments in terms of buying and establishing the new warehouse but still at the end it will benefit the business at its best.

References for Tax Compliance

Barkoczy, S. (2016). Foundations of taxation law 2016. OUP catalogue. Retrieved from: https://ideas.repec.org/b/oxp/obooks/9780190304423.html

Braithwaite, V., & Reinhart, M. (2019). The taxpayers' charter: Does the Australian tax office comply and who benefits?. Centre for tax system integrity (CTSI), research school of social sciences, the Australian national university. Retrieved from: https://openresearch-repository.anu.edu.au/bitstream/1885/154906/1/1.pdf

Brown, C. (2018). Submission to the inspector-general of taxation.. Retrieved from: https://eprints.qut.edu.au/128640/8/CPLRC%20Submission%20ATO%20use%20of%20Garnishee%20Notices.pdf

Morgan, A., Mortimer, C., & Pinto, D. (2017). A practical introduction to Australian taxation law 2017. Oxford University Press. Retrieved from: https://espace.curtin.edu.au/handle/20.500.11937/74820

Murphy, K. (2019). Moving towards a more effective model of regulatory enforcement in the Australian Taxation Office. Retrieved from: https://openresearch-repository.anu.edu.au/bitstream/1885/154871/1/45.pdf

Murphy, K. (2019). Procedural justice and the Australian taxation office: A study of scheme investors. Retrieved from: https://openresearch-repository.anu.edu.au/bitstream/1885/154885/1/35.pdf

Murray, I., Cianfrini, M., Clements, J., & Wilson-Rogers, N. (2019). Taxation, innovation and education: Reflections on a flipped lecture room. Retrieved from: https://www.business.unsw.edu.au/About-Site/Schools-Site/Taxation-Business-Law-Site/jattavolumes/JATTA-No-14-2019.pdf#page=127

Niemirowski, A. (2017). Tax Compliance: Beliefs, behaviours, attitudes and values of Australian taxpayers, tax agents and Australian taxation officers 1995 to 2000 (Doctoral dissertation). Retrieved from: https://digital.library.adelaide.edu.au/dspace/bitstream/2440/119358/1/Niemirowski2017_PhD.pdf

Phillips, B. (2016). Distributional modelling of proposed negative gearing and capital gains taxation reform. Retrieved from: http://taxwatch.org.au/wp-content/uploads/2016/03/Distributional-modelling-of-proposed-negative-gearing-and-capital-gains-taxation-reform.pdf

Woellner, R., Barkoczy, S., Murphy, S., Evans, C., & Pinto, D. (2016). Australian taxation law 2016. Retrieved from: https://ideas.repec.org/b/oxp/obooks/9780190304386.html

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