Nicola Convenience Store: Calculation of the Goods and Services Tax and Business Activity Statement - Assignment Example

Question 1 Nicola Convenience Store Calculation of the GST on the sales and expenses Income Amount Value of Supply Output-GST Basic food items (milk, bread, flour, sugar etc) 83,674 76,067 7606.73 Snack foods (Potato chips, salted peanuts, confectionary) 41,857 38,052 3805.18 Takeaway foods (hotchips, hotdogs, hamburgers and various sandwiches) 187,429 170,390 17039.00 Takeaway coffees and assorted hot drinks 29,967 27,243 2724.27 Soft drinks 34,241 31,128 3112.82 Bottled water 12,140 11,036 1103.64 Newspapers & Magazines and other stationery 135,241 122,946 12294.64 Prepaid phone cards 61,345 55,768 5576.82   53263.09 Expenditure   Purchases Amount Value of Supply Input-GST Basic food items (for resale and raw ingredients for preparation of takeaway food) 193,238 175,671 17567.09 Purchase pre-prepared food for takeaway (e.g.sausage rolls, pies, frozen chips 32,681 29,710 2971.00 snack foods 34,881 31,710 3171.00 Bottled water 10,117 9,197 919.73 soft drinks 28,534 25,940 2594.00 Newspapers, magazines and other stationery 112,701 102,455 10245.55 Pre-paid phone cards 55,768 50,698 5069.82   42538.18 Other expenses   Coffee, tea and sugar 23,052 20,956 2,095.64 Electricity for use in the store 9,854 8,958 895.82 Rent for premises 13,200 12,000 1,200.00 Telephone 764 695 69.45 Water consumption 4,126 3,751 375.09   4636     TOTAL GST chargeable 10,724.91         Notes: 1. Bank charges not allowed since they are part of normal business transactions and not for resale 2. Wages and salaries is subject to income tax which is calculated on graduated tax scale and are services provided by employees 3. Superannuation is not allowable as there is employer support and it is a form of pension scheme. 4. Fines and Penalties are not allowable for GST calculation since it is a non-deductible expense on which no input tax can be claimed. 5. For the other expenses the GST has been included in the price paid by the business for the services. The service provider is the one to remit the GST to the ATO. b). Business activity statement In the case of small business units like the one by Nicola, the Business Activity Statement will be lodged or filed as at the quarter ending June 30th. Nicola Convenience Store   Business Activity Statement for the quarter ending 30th June   Amount ($) Income tax from salaries and wages 3,260 PAYG 12,250 Goods and Services Tax (GST) 10,724   $26,234     Question two Taxation on properties and business Property Initial value Rate Amount Business purchased $123,250 $1290+3.5% of $43250 2803.75 Business office $180,000 $1290+3.5% of $100000 4790 purchased car $19,500 $175+1.5% of $5500 257.5 sale of home $528,430 $8990+4.5% of $228430 19269.35 new vehicle purchased $43,680 $415+1.75% of $13680 654.4 duty payable before deductions 27775 deductions Insurance $4,568 additions $500 Total deductions payable $4,068 Total duty payable $31,843 Total duty payable amounts to $31,843 Treatment of different items for tax - The business purchased is taxed on 3.5% on business property tax Business office is subjected to a premium property duty at a rate of 3.5% which includes residential land duty deductions and stamp duty of 3.5% rate. - Purchase of a used motor vehicle at a price of $19500 from the market price of $23500 which is subjected to tax deductions with a 1.5% rate - Sale of residential house will have an exemption for capital gain tax. - Motor vehicle registration has a dutiable value of less than $45000 at a 3% rate - Insurance policy is subjected to stamp duty with an excess of $500 being subject of exemption from taxable duty. QUESTION 3 – FASHION FORWARD CLOTHING Employs 18 members of staff Financial period ended 30th June General Manager Salary - $140,000 Superannuation - $12,600 Entertainment allowance to be used on potential and potential clients - $9,000 FBT on the Taxable value (9,000 * 2.0647 * 46.5) 8,640.80 Note: This is type 1 since the benefit is acquired Subaru purchased on 1 December 2009 and cost $41,000. A delivery charge of $1,450 and duty of$2,112 were paid at the time. Car entertainment system costing $2,750was installed at the time of delivery. Cost of benefit to the employer (41,000 + 1,450 +2,112+2,750) 47,312 FBT on the car (47,312* 2.0647 x 46.5%) 45,423.56 GST (Input tax credit) (4,129.40) Total Cost of benefit 88,606.16 Note: This is type 1 since the car has been imported During the current FBT year, she travelled 34,296 kilometres. She kept a log book when he first received the car which showed 70% was work related travel. The running costs of the vehicle were $6,254. Taxable value 6,254.0 Less otherwise deductible component (70% * 6,254) (4,377.8) Taxable value 1,876.2 Gross Up *2.0647 Grossed up value 3,873.79 FBT Rate *46.5% Fringe Benefits tax payable 1,801.31 The business made the election to use the operating cost method. General Manager Fringe Benefits Tax FBT on the Taxable value (9,000 * 2.0647 * 46.5) 8,640.80 FBT on the car (47,312* 2.0647 x 46.5%) 45,423.56 Fringe Benefits tax payable 1,801.31 Totals 55,865.60 Reconciliation of gross salary required by employee to purchase the benefit Salary 140,000 Less tax & medicare levy @ 46.5% 65,100 After Tax salary 74,900 Sales Representative The car had travelled 32,868 kilometres Acquisition costs (29,500 + 900 + 1009 + 431) 31,840 FBT on the car (31,840* 2.0647 x 46.5%) 30,569.12 GST (Input tax credit) (2,779.01) Total Cost of benefit 59,630.11 Note: Operating costs on the car have been used Taxable value 4,128 Less otherwise deductible component (85% * 4,128) (3508.8) Taxable value 619.2 Gross Up *2.0647 Grossed up value 1,278.46 FBT Rate *46.5% Fringe Benefits tax payable 594.48 Telephone bills Taxable value 675 Less otherwise deductible component (75% * 675) (506.25) Taxable value 168.75 Gross Up *2.0647 Grossed up value 348.42 FBT Rate *46.5% Fringe Benefits tax payable 162.01 Payment of Educational costs to the accountant 3,383 FBT (3,383 * 1.8692 *46.5%) 2,940.42 Reconciliation of gross salary required by employee to purchase the benefit Salary 51,000 Less tax & medicare levy @ 46.5% 2,940.42 After Tax salary 48,060 Clothing line Employee 1 (1400/0.7) 2000 Discount (600) FBT (1.8692*46.5% *600 521 Employee 2 (1200/0.7) 1,714.28 Discount 514.28 FBT (1.8692*46.5% *514.28) 447 Car Park Parking bays (12 *12.30) 147.60 Christmas Gift hamper (130*18) 2,340 Birthday gift (100*18) 1800 Total 4,140 FBT (2,340 *1.8692 *46.5%) 3598.40 Meals entertainment Expenditure 18,916 Employees 10,786 Reimbursements 9,240 Internal functions 1,546 Using the 50/50 method the taxable value (18,916/2) 9,458 FBT (9,458*1.8692*46.5%) 8220.70 Note: The 50/50 method has been used where the taxable value for meal costs irrespective of the beneficiaries are apportioned on a 50% basis a. TOTAL FBT FOR THE PERIOD General Manager 55,865.60 Sales Representative 30,569.12 Car benefit 594.48 Telephone bills 162.01 Accountant 2940.42 All employees (521 +447+3598.40 + 8220.70) 12,787.08 Total 102,918.72 b. PAYROLL TAX LIABILITY General Manager (60,000*0.37) +17,550 39,750 Finance manager (25,000*0.37) + 17,550 26,800 Sales manager (18,000*0.30) + 4,650 10,050 Accountant 8,850 Note: Since the salaries of other employees are not indicated at individual level, it is difficult to calculate the graduated tax rates paid by the company. However, we will calculate the payroll-liability using the threshold. Total wages 621,432 Directors’ wages and allowances (140+105+55+51) 351,000 Add fringe benefits 102,918.72 Total 1,075,350.72 The annual threshold (750,000) Excess of the threshold 325,350.72 5.5% of the excess of the threshold 17,894.30 The payroll tax liability for the company amounted to AU $17,894.30 Read More