Late submissions of assignments
Sometimes unavoidable circumstances occur that might prevent you from submitting an assignment on time and, in that case, you may be eligible to lodge a Special Consideration request.
Unless a Special Consideration request has been submitted and approved, please note that no extensions to assignment deadlines will be granted. Assignments that are submitted late will attract a late penalty:
- There will be a deduction of 10% of the total available marks made from the total awarded mark for each 24 hour period or part thereof that the submission is late.
- No assignment will be accepted more than 72 hours after the due date and time (incl. weekends) after the original due date.
- Your written response to this assignment must be presented in a business report format – (It must have an executive summary, introduction, a main body, and a conclusion). Bullet points are not acceptable.
- Responses to this assessment task must not exceed 2,000 words.
- You must cite relevant cases, ATO rulings, and legislative references to support your answers.
- Your response must also provide reasons that explain and support your answers.
1) In January 2021, Opal lent $700,000 to a subsidiary company, Opal Plus Pty Ltd, for a period of 5 years at an interest rate of 10% pa. It was an interest only loan with the full principal required to be paid to Opal at the end of the 5-year period. In March 2021, Opal sold the right to receive interest for the 5-year period to CP Bank for a lump sum payment of $280,000.
2) On 1 January 2021, Opal borrowed $250,000 for three years at 8% interest to finance working capital. The borrowing costs amounted to $3,200.
It is the company policy to adopt the same tax rate of depreciation for accounting purposes on all fixed (non-current) assets other than buildings. The accounting depreciation of buildings amounted to $30,000 for 2020/2021. Apart from the extension to the office buildings all buildings were constructed prior to 1960. The company has elected to depreciate all assets (including motor vehicles) on the prime cost method and not diminishing value.
Depreciation in the accounting report includes all assets acquired during the year, and excludes any profit or loss on the sale of a depreciating asset.
4) Fixed assets disposed of during year were:
- Furniture– Cost 16 January 2019 $8,000 Written down value for accounts/adjusted value for tax $5,852 Proceeds on 20 June 2021 $11,052
5) Additions to fixed assets during the year:
- Extension to office building
- Construction commenced on 1 August 2020 and occupation on 1 June 2021 $300,000
- Motor vehicle (100% business usage) - Purchased on 1 July 2020; estimated life 8 years $85,000
6) Entertainment expenses of $74,000 were spent on meals at restaurants. The company records show that 100% of the total expenditure was for entertainment of business clients.
7) Legal fees $96,000 comprised:
- Debt collection $5,000
- Redrafting the company’s constitution $6,000
- Defending directors against criminal charges $85,000
8) Annual leave paid during the year was $80,500
9) The company has incurred the following expenses which are classified as repairs and maintenance in its accounting records.
- Cost incurred in early November 2020 to replace the roof of an administrative office building acquired from WM.
- Cost of converting an old warehouse into a lunch room and change room for company employees. Completed 1 May 2021 with an estimated life of five years:
Installation of showers and toilets $40,000
Partitioning and panelling the walls $20,000
Furniture for the lunch room $10,000
- Repairs to machinery $35,000
- Prepare a report for Opal’s Chief Financial Officer (CFO) that addresses the tax treatment of the items listed above (Assuming Opal is not a small business entity). (18 Marks)
In your report, you are required to provide explanations for your answers AND refer to relevant statutory provisions, cases and /or rulings.
- Calculate Opal’s taxable income and income tax payable for 30 June 2021. You are to use the attached table to complete your tax reconciliation/calculate tax payable.