Assignment 2 Instructions
Assignment marks: 95 | Referencing and presentation: 5 Total marks: 100
Total word limit: 3,000 words Weighting: 40%
Download and use the Assignment 2 Answer Template provided in KapLearn to complete your assignment.Your assignment should be loaded into KapLearn by 11.30 pm AEST/AEDT on the wdue date.Refer to ‘Time remaining’ on the ‘Assignment 2’ page in KapLearn to ensure you submit your assignment by the specified due date and time.
Learning outcomes (LO) mappingMarksLO1Explain the role of key stakeholders in the Australian taxation system.5LO2Classify and apply concepts of income, expenses, rebates and offsets in calculating tax outcomes.15LO3Interpret and communicate taxation issues and strategies in the provision of financial planning advice.19LO4Calculate and evaluate employee remuneration arrangements.10LO5Compare and contrast the tax treatment of different entities.16LO6Analyse situations which may lead to the application of integrity measures and penalty provisions.18LO7Explain and reflect on the role of ethical, professional and legal standards in providing tax (financial) advice.12Referencing and presentation5Total marks100
Assignment 2 detailsThis assignment covers Topics 1 to 10 and accounts for 40% of your final grade.There are four (4) questions in this assignmentMarks will be awarded for referencing and presentation.Your overall mark for this assignment will be rounded to the nearest whole number.Refer to the Criteria-Based Marking Guide for guidelines on what is expected for each question.Full workings must be shown for all calculations. Show all calculations in the text of your assignment and not attached as an appendix. Appendices to the assignment will not be read.Indicative weightings are noted beside each question. Use these weightings to assist you with your allocation of time and resources. The weightings indicate the relative importance of each question.State all assumptions used in providing your answer.
PoliciesMarks will only be awarded for answers up to the word limit (plus 10%) for each question. Any material written after this will not be counted towards your mark for that question. Headings, quotes and references within the body of the answer are included in the word count. Numerical tables, calculations, and reference lists are not included. For more information on word counts and their rationale, go to Assessment à Assignment à Assessment Preparation Guide. The Assessment Preparation Guide contains information about format and presentation, word limits, citations and referencing, collusion, plagiarism and other policies, useful resources, submitting your assignment and accessing your results.Answers are to be in your own words. Reference and cite all your sources (within the text of your answer) when quoting or using material from external sources. Include a reference list at the end of your assignment.Use of the Harvard referencing style is recommended (as per Kaplan Australia: Harvard Referencing Guide, available from the ‘Referencing and Research’ section of the ‘Build Your Skills’ hub in KapLearn), but the consistent application of any other referencing style will also be accepted.Requests for special consideration or information pertaining to special consideration written in the body of the assignment will not be considered by the assessor. Refer to the ‘special consideration’ section of the Assessment Policy on Kaplan’s website for more information.
Independent research
For some or all questions in this assignment, you will be required to complete independent research beyond the provided materials. You will also be expected to analyse this research and use it to support your own reasoned conclusions.
This includes:
consideration of multiple sources beyond topic notes or other provided resources
sources included are academically sound and credible
analysing and understanding the argument or information the source presents
using the material appropriately to directly support your conclusions.
Where significant independent research is required for a given question, it will be clearly indicated in the question instructions and the Criteria-Based Marking Guide.
Assignment 2 referencing and presentation (5 marks)
Your assignment should be presented in a clear and appropriate format, with all sources correctly referenced and cited.
You are required to:
structure a clear response to each question, using headings if required
number questions (including sub-questions) and pages
use correct font style and size
ensure tables or graphs are clearly labelled and readable
clearly set out calculations or workings, where they are required
adhere to the assignment word limit
cite sources and provide a reference list at the end of your assignment. It is recommended to use Kaplan Professional’s preferred referencing style, Harvard (see Kaplan Australia: Harvard Referencing Guide, available from the ‘Build Your Skills’ hub in KapLearn), but the consistent application of any other referencing style will also be accepted.
Criteria-Based Marking Guide for referencing and presentation
The Criteria-Based Marking Guide (CBMG) provided at the end of each question is designed to assist you to understand what is expected of you in each question and to let you know how your performance will be judged. It provides advice about the criteria used in the marking of the question and what discriminates between an excellent, satisfactory and unsatisfactory answer.
The below CBMG outlines the expectations for referencing and presentation in this assignment.
Excellent (Mark range: 4–5 marks)Satisfactory (Mark range: 2.5–3.5 marks)Unsatisfactory (Mark range: 0–2 marks)clear response structured for each question, including use of headings where appropriate all page and question numbers included correct font style and size used consistently throughout all tables and graphs clearly labelled and readable clearly set out all calculations or workings, where required adheres to assignment and question word limits external sources cited accurately throughout the assignment and included in reference list, using any consistent referencing styleadequate response layout and structure for each question, with some use of headings where appropriate most page and/or question numbers included correct font style and size generally used, with some inconsistencies most tables and graphs clearly labelled and readable unclear layout of some calculations or workings adheres to assignment and most question word limits external sources mostly cited accurately throughout the assignment and in reference list using any referencing style; some errorspoor response layout and/or structure for each question with little to no use of headings few or no page and/or question numbers included application of font style and size has significant inconsistencies tables and graphs have little to no labelling or are difficult to read unclear layout of most calculations or workings assignment is significantly under or over the word limit no or inaccurate use of referencing throughout the assignment and reference list, and/or no reference list provided
Case study
Claude (age 48) and Lilou (age 43) Maroilles are a married couple, living in Pilbara region, Western Australia. They have two dependent children, Gabrielle (age 15) and Milena (age 13).
Claude and Lilou are pearl divers and work for themselves, selling their pearls to luxury jewellery brands. In the previous financial year, the value of their combined pearl harvest was $580,000 and the harvest is expected to be the same this financial year. They have one full-time employee, James (age 25).
Glenda, their tax accountant, gave them your name as they are seeking personal financial advice regarding business and retirement planning. Glenda is a distant acquaintance to you.
Glenda’s services include the preparation and lodgement of Research and Development (R&D) Tax Incentive applications and R&D Tax Incentive Schedules and to date has successfully managed nine R&D schemes involving taxpayers.
Claude and Lilou recently purchased a commercial property, affectionately termed the ‘boat shed’ where they sometimes bring the lugger in for repairs, but more importantly, securely store and prepare the pearls for buyers.
Additional details of the clients’ situation are listed below.
Personal details
ClaudeLilouHealthGoodGoodSmokerNoNoExpected retirement age6560
Lifestyle assets and liabilities
ClaudeLilouJointLiabilityFamily home––$950,000($150,000)Car$120,000–––Ute–$43,500––Home contents (insured value)––$150,000–
Other assets and liabilities
ClaudeLilouJointLiabilityInvestment assetsCBA transaction account––$13,500–CBA credit card ($30,000 limit, cleared each month)––$0–ING online savings account––$530,000–Retirement assetsHostplus Super$210,000 AustralianSuper $150,000
Business assetsPearl Lugger (Boat) $120,000 Diving Gear$10,000$10,000$20,000 Pearling licence$150,000$150,000$300,000 ‘Boat Shed’$350,000$350,000$700,000$290,000
Estimated annual gross income details
ClaudeLilouSelf-employed income (after business related expenses)$250,000$250,000Interest income^$2,915$2,915Total$252,915$252,915
^ Interest income from online savings account at 1.1%. Transaction account interest 0%.
Annual expenses
ClaudeLilouJointGeneral living expenses––$100,000Mortgage repayment––$18,000Personal insurance premiums$3,500$3,500$7,000Children’s boarding school fees––$74,000Marine Conservation (donation)$500$500$1,000Total $200,000
Insurances
Amount insuredPremium p.a.Policy ownerLife & TPD cover$200,000$1,100Super – ClaudeLife & TPD cover$300,000$1,300Super – LilouIncome Protection$10,000pm$3,500ClaudeIncome Protection$8,000pm$3,500LilouHCF – Hospital & Extras (family) $4,500Joint
Claude and Lilou went to Glenda to obtain her advice on what might be the best tax entity structure to operate their pearling business through and would like your opinion also.
All required facts are in the case study above.
Explain the four tax entity structures by discussing three (3) specific features of each, relevant for Claude and Lilou to consider. Indicate in each structure its appropriateness to the clients’ situation. (16 marks)
Calculate Claude’s net tax payable using the following table for 2024/25. Compare his current position (individual of a partnership) compared to a company structure by taking a $190,000 and a
$43,500 fully franked dividend. Assume a company tax rate 27.5%. (10 marks)
Income tax positionPartnershipCompanySelf-employed income$$Interest income$$Dividends/Distributions from portfolio$$Franking/Imputation credits$$Total assessable income$$Less allowable deductions($)($)Taxable income$$Tax on taxable income$$Medicare levy$$Total tax payable$$Franking credit tax offset($)($)Net tax payable$$
Criteria-Based Marking Guide for Question 1(a)–(b)
(a)Excellent (Mark range: 21–26 marks)Satisfactory (Mark range: 13–20.5 marks)Unsatisfactory (Mark range: 0–12.5 marks)comprehensive explanation of all four tax entities covering three (3) relevant features reasonable justification of appropriateness of each structure for clientcomprehensive explanation of all three tax entities covering two (2) relevant features inadequate justification of appropriateness of each structure for clientInadequate explanation of all four tax entities covering one (1) relevant feature inadequate justification of appropriateness of each structure for client(b)correct figures calculated, including correct application of the franked dividends minimal errors in figures presentedmostly correct figures calculated, including correct application of the franked dividends moderate errors in figures presentedgenerally incorrect figures calculated, including correct application of the franked dividends significant errors in figures presented
Assume that Claude and Lilou went ahead with Glenda’s recommendation to establish a company, MariSole Pty Ltd (MariSole) and returned to Glenda for her assistance with the Research and Development (R&D) tax incentive.
Glenda promotes herself to prospective clients as an R&D specialist and sends a letter of engagement stipulating her fee is 20% of any R&D tax offset that the client might obtain. Clients provide her their business’ financial and operational information which she uses to prepare and submit a R&D Tax Incentive application. Once the registration is confirmed, she prepares a R&D schedule instructing her clients to incorporate this in their tax return and invoices the client.
Claude and Lilou have costs in relation to their researching sustainable pearl farming practices. They asked Glenda how she managed to get R&D tax offsets so easily as they had previously tried themselves and not succeeded. Glenda reassured them that they can trust her and that her process is her intellectual property and not willing to disclose it.
Glenda has just been found guilty of being a promoter of a tax scheme she created to secure benefits from R&D tax offsets.
All required facts are in the case study above.
Explain the key differences between tax planning, tax avoidance and tax evasion and why these differences matter in terms of integrity provisions. (6 marks)
Are you likely to be considered a promoter of the tax exploitation scheme if you advise Claude and Lilou to invest funds that were sourced from the R&D tax offset? Justify your answer with supporting references to the ATO’s definition of a ‘promoter’. (6 marks)
Glenda is obliged to act according to the TPB Code of Professional Conduct. Identify and explain three (3) principles in the code that she has breached. (6 marks)
You are subject to the Financial Planners and Advisers Code of Ethics 2019. If you were aware that the scheme being promoted by Glenda was a tax exploitation scheme, identify and explain three (3) standards you would apply in dealing with this situation. (6 marks)
Criteria-Based Marking Guide for Question 2(a)–(d)
Excellent (Mark range: 19–24marks)Satisfactory (Mark range: 12–18.5 marks)Unsatisfactory (Mark range: 0–11.5 marks)(a)comprehensive explanation of the integrity measures in place relevant to the case studyadequately explanation of the integrity measures in place relevant to the case studyinadequate explanation of the integrity measures in place relevant to the case study(b)comprehensive analysis of ‘promoter’ definition and relevant justification from case study facts to determine adviser’s positionadequate analysis of ‘promoter’ definition and relevant justification from case study facts to determine adviser’s positioninadequately analysis of ‘promoter’ definition and relevant justification from case study facts to determine adviser’s position(c)comprehensive explanation of three (3) principles from the TPB Code Glenda breachedcomprehensive explanation of two (2) principles from the TPB Code Glenda breachedcomprehensive explanation of one (1) principle from the TPB Code Glenda breached(d)comprehensive explanation of three (3) standards from the Code an adviser should apply if they were aware of the schemecomprehensive explanation of two (2) standards from the Code an adviser should apply if they were aware of the schemecomprehensive explanation of one (1) standard from the Code an adviser should apply if they were aware of the scheme
For each of the following transactions, determine whether they are taxable supplies for goods and services tax (GST) and explain the relevant classification:
MariSole’s provision of boat charter services, ie sometimes recreational scuba-divers want a ride out to the ocean and pay $400 for that service. (5 marks)
Claude wants to take out a loan to purchase a jet ski. (5 marks)
From the information below, calculate and explain the GST and corporate tax each company would pay to the ATO. The supplies are all taxable, the GST rate is 10% and the corporate tax is assumed to be 27.5% for all the companies. (10 marks)Claude and Lilou’s company (MariSole) supplies pearls to Pearlane Pty Ltd (Pearlane) for $165,000 including GST.Pearlane uses the pearls to make jewellery and sells to Jewalie Pty Ltd (Jewalie) for $350,000 including GST.
Finally, Jewalie sells pearl jewellery to consumers for $900,000.
Assume, MariSole, Pearlane and Jewalie made a profit of $65,000, $90,000 and $300,000 respectively.
Criteria-Based Marking Guide for Question 3(a)–(c)
Excellent (Mark range: 16-20marks)Satisfactory (Mark range: 10-15.5 marks)Unsatisfactory (Mark range: 0–9.5 marks)(a)correct GST determination of the transaction comprehensive explanation of the relevant classifications.correct GST determination of the transaction adequate explanation of the relevant classifications.incorrect GST determination of the transaction inadequate/no explanation of the relevant classifications.(b)correct GST determination of the transaction comprehensive explanation of the relevant classifications.correct GST determination of the transaction adequate explanation of the relevant classifications.incorrect GST determination of the transaction inadequate/no explanation of the relevant classifications.(c)correct figures calculated and explained, including correct application of the input credits minimal errors in figures presentedmostly correct figures calculated and adequately detailed, including correct application of the input credits moderate errors in figures presentedgenerally incorrect figures calculated with no explanation, including correct application of the input credits significant errors in figures presented
Claude and Lilou (Marisol Pty Ltd) provided a $35,000 interest-free loan to James on 1 April 2024, which will not been repaid at the end of the financial or FBT year. James used the money to buy a new jet ski for
$25,000 and $10,000 on diving gear.
Explain how this loan is captured under the fringe benefits regime and calculate the amount of fringe benefits tax payable. (10 marks)
Compare and contrast the tax outcome for James as a result of the loan fringe benefit on the assumption his annual base salary is $120,000. (8 marks)
James is not happy with how his fringe benefit is assessed by the ATO. Explain if he is able to challenge this assessment and what the requirements are. (7 marks)
Criteria-Based Marking Guide for Question 4(a)–(c)
Excellent (Mark range: 20-25marks)Satisfactory (Mark range: 12.5–19.5 marks)Unsatisfactory (Mark range: 0–12 marks)(a)correct fringe benefit determination of the transactions reported comprehensive explanation of the relevant classifications. minimal errors in figures presentedmostly correct fringe benefit determination of the transactions reported adequate explanation of the relevant classifications. moderate errors in figures presentedincorrect fringe benefit determination of the transactions reported inadequate/no explanation of the relevant classifications. significant errors in figures presented(b)correct figures calculated, including correct application of the fringe benefitmostly correct figures calculated, including correct application of the fringe benefitgenerally incorrect figures calculated, including correct application of the fringe benefit(c)comprehensive explanation of the possibility and process of challenging the ATO assessmentadequate explanation of possibility and process of challenging the ATO assessmentinadequate/ no explanation of possibility and process of challenging the ATO assessment
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END OF ASSIGNMENT 2 INSTRUCTIONS
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