solution

Your task is to analyse client information outlined in the three different case studies below and present the findings in three Statement of Advice (approximately 1,500 words).

1) You are required to prepare Lucy’s individual taxation return.

2) You are required to provide recommendations and tax calculations to Susan regarding the taxation implications and tax payable by the trustee for Megan and Isabel, the beneficiaries.

3) You are required to calculate the franking account and tax payable by Otago Pty Ltd.

For each question you are expected to:

1) identify the facts and issues for each case

2) apply the relevant legislation and/or case law.

She has the following documentation and admits that she is not good at keeping her receipts and invoices:

Payment Summary for the period 1 July 2020 to 30 June 2021 from Burwood Council.

Gross Wages $56,000
Allowances – Clothing $400
Tax withholding Deducted $12,000

Other Information

1) Lucy estimated total $490 annual train ticket used to travel to and from work.

2) Lucy advises you she spent $600 on personal grooming which was essential for her job and insists that she claims this amount.

3) Lucy held $2,000 for the whole year in an interest-bearing account but insists that she did not receive any interest during the year. Lucy has not supplied any bank statements.

4) Lucy sold various shares on 20 June 2021 as follows.

• Apricot Shares (Australian company): purchased in January 1998 for $20,000 and sold for $55,000.

• Pear shares (Italian company): purchased in March 2019 for $7,000 and sold for $5,000.
• Cherry shares (Australian company): purchased in May 2021 for $9,000 and sold for $14,000.

Required.

As the Tax Agent, how would you handle the stance your client has taken in points 2 and 3, Point 2: Lucy advises you she spent $600 on personal grooming which was essential for her job

and insists that she claims this amount.
Point 3: Lucy held $2,000 for the whole year in an interest-bearing account but insists that she

did not receive any interest during the year. Lucy has not supplied any bank statements. You should refer to the Code of Conduct from Tax Practitioners Board. What is the principle involved? What do you recommend in each point?