Greenhorn Club and Hotel - Excess Contributions Tax - Case Study Example

Tax Return Report (Your name) (Name of institution) Tax Return Report Greenhorn club and hotel is an incorporation that was started in the year 1999 under the Australian Association Incorporation Act (Australian Govenment, 2012). The incorporation is a profit making institution that is situated at Sydney. It is main business activity is to provide hotel services to the general public. The incorporation’s facilities include function rooms, bar, and restaurant. In addition, it owns poker machines, TAB, and keno. The function room facility of the hotel is used be hired out to the public and also used by the hotel to hold its own functions such as annual meetings. The hotel outsources catering services from catering companies to assist internal catering staff when demand is high. Greenhorn club and hotel has 6000 members. The attendance of non-members and members to its premises is recorded in a register that is kept at the hotel’s main entrance. During the financial year ended 04th November, 2012, the number of visitors who entered the hotel’s premises was 48,900, including 38905 guests. During this financial year, the hotel traded for 350 days. The water systems were being renovated in the rest of the ten day of the year (on 2nd June to 11th June). An average number of 230 members entered the hotel’s premises every day of trading. The hotel’s financial statements are provided below. Part A – Relevant period Greenhorn club and hotel’s financial year started on 1st October, 2011and ended on 31st October, 2012. Part B – The description of the business activities Greenhorn club and hotel’s main business activity is provide hotel services to the general public. Part C – Status of the hotel Greenhorn club and hotel is an Australian resident and a profit making institution. It is located at the city of Sydney. Part D – Total profit and loss calculation Profit and loss calculation Income $ Hotel sales 8276950 Income from club tickets 234960 Revenue from porker machine 15982470 Income from club raffle and bingo 234960 Members subscription 982470 Interest received 543220 Hire for function room 60000 Restaurant's leas income 100000 Total amount of other revenues 160000 Income from accommodation rooms 450000 Total income 27025030 Expenses $ Bingo expense 3925780 Bar expenses 135000 Hotel expenses 45330 Expenses in catering 30000 Raffle expenses 248510 Entertainment expenses 664990 Service charges in central monitoring 261830 Superannuation 135920 Depreciation of assets 1214980 Decline in value of bar 2624810 Decline of value of gaming 297640 Club supplies and maintenance 364380 Maintenance and repairs of gaming 865630 General maintenance and repairs 132290 Other expenses 2354670 Total expenses 10939160 The total profit is $16,085,870. This is calculating subtracting the total expenses from the total revenues (27,025,030 – 10,939,160). Note from the above incomes and expenses, the other incomes include keno commissions, TAB commissions, and commission from vending machines it also included gross sales of the trading stock and other earnings from the hotel’s services. Other expenses includes general accounting expenses (tax affairs management, auditing), bank charges, cleaning, computer expenses, and insurance. Others are advertisement, telephone, salaries and wages and membership cards. Part E – Taxable income calculation 1. Revenue Classification Revenue Income – non assessable Income that is assessable Apportionable revenue Total Sales from the bar 8,276,950 8,276,950 Raffle and bingo income 234,960 234,960 Ticket sales – Club luncheons 225,000 225,000 Hire of function room 60,000 60,000 Received interest 543,220 543,220 Commissions – keno 461,520 461,520 Restaurant leas income 100,000 100,000 Subscriptions from members 518,000 518,000 Revenues from machine 15,982,470 15,982,470 TAB commissions 184,210 184,210 Commissions from vending machine 214,670 214,670 Total $ 518,000 $ 1,563,620 $ 24,719,380 $ 26,801,000 2. Expenses Classification Expenses Expenses – non deductable Expenses that are deductable Expenses that are apportionable Total Cost of goods sold 3925760 3925760 cleaning 450000 450000 Catering expenses 135000 135000 Supplies and maintenance 297640 297640 Tax affairs accounting 30000 30000 Depreciation of assets 1214980 1214980 Electricity 824780 824780 Insurance 48192 48492 Subscription expenses 92260 92260 Land taxes and rates 196880 196880 Wages and salaries 7285470 7285470 Service charge for central monitoring 261830 261830 Other expenses 100000 851860 11837602 12789462 Total $ 192,260 $ 1,078,740 $ 22,748,070 $ 24,019,070 3. Calculate the taxable actual taxable income Taxable income is calculated by subtracting total deductable expenses from total assessable incomes. This is illustrated below; Assessable income of the year $ 1,563,620 Less: deductable expenses of the year $ 1,078,740 Taxable income $ 484,880 Excess Contributions Tax A company or any institution can make after tax contributions to boost their supers. They always do this even when they have a little savings. Therefore, they can make their own after-tax contribution more into their accounts. In fact, there exists a limit to the after-tax contributions according to the Australian taxation provisions acts that a company or an institution can make before excess contributions tax is charged. The maximum after tax contribution to super is $15000p.a. to Australian residents, company employees, companies, or any new institution that is below a stipulated limit of time in a given financial year, in which the contribution is made, may bring forward 2 years of contributions. This enables them to make a maximum of a specified amount of contributions. Therefore the company must have to avoid exceeding the limits of super contributions to evade unattractive taxes. Greenhorns club and hotel and company exceeded its contributions according with its financial statements. Allowing companies or institutions to chose funds for themselves permits them to make comparisons and choose those funds with investment options or strategies with project for high returns, as well as, high risks, or those with lower returns, but guarantee greater security of one’s money. They also check whether super accepts both personal contributions and super co-contributions to allow one boost super savings in the future. However Greenhorn club and hotel has a Life insurance which incorporates income protection and total and permanent disability cover (TPD). However Greenhorn club and hotel should also diversify investments in shares and property, this will enable it to avoid financial problems in future due to inflation and political instability that has always been experienced all over the whole world in the previous years. The step will enable Greenhorn club and hotel to maintain or improve its financial position. An institution also make after tax contributions to boost its tax contribution level. Even when it saves little, it can boost its final tax contribution to the tax revenue authority pool. Therefore, it can make its own after-tax contribution of a stipulated amount or more into tax contribution accounts. In fact, there exists a limit to the after-tax contributions that one or an institution can make. When the company have exceeded a cap it must receive correspondence. This implies that the extra contributions tax on the concessional cap can be paid by drawing on the company’s super. A voluntary release authority form or with the company’s own non-super money, or a combination of the two will be used. When there is an excess contributions tax on the non-concessional tax it must be paid by drawing on the company’s super, using a compulsory release authority form. Concessional Contributions Cap This contribution is taxed at 15%. The contributions consist of the institution as an employer‘s contributions, personal deductible contributions and any before-tax contributions like salary sacrifice. Any insurance premiums or a fee paid by an employee to the institution as super is also included. Financial year 2011/12, has a cap of $20,000, not taking age or status into consideration. Contributions above this figure will be taxed an extra 30.5% and count towards one’s non-concessional cap. If you split any contributions with the employees, it counts towards the institution’s cap. According to the taxation rules and regulations in Australia, payable income tax is computed on the basis of assessable income. This is stipulated in the taxation provisions. It is also stipulated in the statutory income Acts of the country. The act also illustrates that companies or institution of same rank should pay an income tax of third percent in every its financial year. Deductions and discrepancies values must be declared in the financial year income tax return and it will be part of any refund that may follow after yearly tax assessment has been made. The extra amount contributed can either be refunded or be left to make up for the following financial year. With regard to the financial year ended on 31st October 2012, Greenhorn club and hotel contributed $ 172732 as its tax contribution of the year. According to the taxation provisions, the hotel was supposed to contribute $ 72732 (Australian dollars) as its annual tax contributions. Therefore, its contribution was extra than it is required by the rules and regulations. Therefore, it should apply for a tax refund of $ 100000. DECLARATION I John David declare that: 1. This return report contains a full and true statement of: a) The income tax liable for Greenhorns club and hotel for the accounting year that ended on third first of October 2012. And b) The relevant particulars that are required by the provisions of tax laws, and that 2. The management and all controls of the company’s activities was exercised in Australia in year that this accounts statements relate, and 3. If the return claims for refund of tax paid, such refund is a full and true statement of Greenhorns club and hotel entitlement to the refund Date: 04th November, 2012 Postal Address.............................. Postal Code................................... Reference AustralianGovenment. (2012). Guide to Company Tax Return for non-profit Organisations 2012. Retrieved November 06, 2012, from http://www.ato.gov.au/nonprofit/content.aspx?menuid=49821&doc=/content/00322422.htm&page=17&H17 Read More