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Hand Sanitiser and Cleaning Products Company
Subject: recommendation about the tax optimized strategy that would best suit the requirements arising at the firm.
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.
(as appointed by Manuel and Dolores)
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:
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.
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.
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
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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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