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ACC30005 Group Case Study / Assignment

INSTRUCTIONS

The Assignment must be prepared in groups of three students maximum. Keep a copy.

Candidates must complete a Declaration and Statement of Authorship with their assignment agreed to by all group
Questions are to be written in the candidates own words. The use of unacknowledged directly copied material may result in zero marks. See Page 8 of the Unit Outline re Plagiarism.
Marks will be awarded to the candidate based on the detail provided, correctness of their responses and the accuracy of tax return completion.
Candidates must apply the IRAC principle when addressing the relevant issues (i.e. I= Identify the key issues, R= Cite the relevant legislative provisions and case law (rules) where appropriate, A = apply the relevant rules to the facts presenting arguments for and against and C = form a conclusion based on your stronger argument).
If candidates need to make assumptions when responding to any issue, the assumption and the reason for the assumption must be clearly specified in their

GOOD LUCK

Business Overview

Peter and Leanne Webb, aged 54 and 52 respectively, own an electrical appliances retail business in partnership called “Webb Electrics,” which operates in Hawthorn, Victoria. The business has operated from these premises for 5 years. The Webb’s decided to expand their business and have recently opened a new store on the 1 April 2021, in Croydon.

Each year the Webb’s go overseas to a “Electrical Retailers conference,” to become aware of the latest developments in electrical appliances. During the 2020-21 financial year the conference was held in Auckland, New Zealand, where the Webb’s were fortunate to sign a franchise agreement to distribute “Bosch” a new range of electrical equipment. The cost of the franchise included a “sign on” payment of $30,000 plus a payment of 5 ½ % of sales revenue on this merchandise.

While Peter and Leanne own the shop in Hawthorn they decided to lease the premises in Croydon. One of the reasons for doing this was because of the offer of a lease incentive by way of a twelve-month rent-free period and a free fit out, valued at $40,000.

In November 2020, the Webb’s became aware that a developer had sought approval to redevelop the Croydon site as it was suitable for their business expansion. Consequently, the Webb’s spent $10,000 in legal costs in successfully opposing the development.

The Webb’s also jointly own a rental property in Wantirna, which yielded a rental of $54,000 during 2020-21 and the expenses claimed including, repairs and maintenance came to

$12,000 for the year.

Peter independently also provides private on-line consultancy advice to clients with regards to common electrical appliances and derived $8,000 from this activity incurring expenses of

$1500 and further, Peter derived $4,000 of bank interest and received dividends of $12,000 (including $5,142 franking credits) during the 2020-21 tax year. Peter had no other deductions for the year and the Webb’s do not have any children.

Results of the Business Operations of Webb Electrics for the year ended 30/6/21:

Cash receipts	$
Sales to Customers	1,600,000
Sales Bonus	15,000
Cash expenditure	$
Purchase of Stock	500,400
Salaries	300,000
Set up costs	15,500
Rental payments	140,000
Telephone	3 700
Electricity	2,850
Overseas travel expenses	17,750
Franchise: Cost Royalty	30,000 20,000
Car expenses (Running costs)	26,600
Legal costs	9,380
Advertising	12,500
GST	30,000
Furniture	28,500
Entertainment	9,800
Gas	3,300
Miscellaneous	1,750

Note: All amounts include Australian GST where applicable.

Notes:

(i)

Outstanding creditors 30/06/21

15,500

Outstanding debtors 30/06/21

90,000

At the year ending 30/6/21 a provision for doubtful debts has been raised equal to 1.8% of sales. Also, during the year $16,550 of outstanding debts were written off as bad.

(ii) Opening stock:

Cost 490,500

+Purchases 500,400

-closing stock at cost 420,000

Closing stock values: 30/6/21

Cost 420,000

Replacement Cost 540,000

Market Selling Value 580,000

At the end of the year a stocktake reveals that some of the stock is obsolete. Consequently, a write down of stock (at cost of $15,000) has been made to $7,000.

(iii) Office Furniture: Opening adjusted value Acquisition of furniture during 2020/21:	Cost	25,000 Acquis date
Desks and Chairs	2,000	01/07/20
Computers	18,000	15/07/20
Partitions	8,500	9/07/20
(iv) Car Expenses related to the following vehicles:	Cost	Acquis date
Hyundai Tucson	24,500	21/09/17
Toyota Delivery van	36,000	10/7/16
Ford Falcon*	55,000	02/11/16
BMW *	75,000	04/12/16

* The two cars are used by Peter and Leanne Webb and it is estimated that they are used 55% for Business.

During the year on 1/3/21, the engine in the Delivery van broke down. As a result, a new engine was put in the van at a cost of $5,800. The engine was a more powerful engine modified to run on gas.

(v) Set- Up Costs - New Premises in Croydon:
Stock removal and relocation	4,500
Staff Training	6,000
Special cabinets and office set up	5,000
(vi) Salaries:
General Staff	160,000
Wages – Peter	70,000
– Leanne	70,000

Overseas Travel

Airfare 9,000

Accommodation 6,000

Fare Registration 500

Meals and incidentals 2,250

Entertainment

Christmas Parties-staff 1,800

Clients 8,000

Sales Bonus

The sales bonus of $15,000 was received from the Electrical Retailers Association for “Web Electrics” achieving the highest sales for their products in the June Quarter.

Legal Costs

Redevelopment Action 7,500

General 880

Lease Agreement 1,000

REQUIRED:

You have been approached by Peter and Leanne Webb in your capacity as their tax agent. They have asked you to prepare the necessary documentation (including the Partnership tax return and Peter’s individual tax return) to meet the tax compliance obligations for “Webb Electrics,” for the income year ending 30 June 2021.

Prepare a letter of advice/report which identifies all relevant tax issues, critically analyses and applies the taxation treatment to the issues, i.e., you will need to argue and support your view and consider differing views (if applicable), and finally, indicate your recommended action based on your better view, i.e., your conclusion (apply the IRAC principle where appropriate). You must ensure that your analysis used to determine your recommended action is fully supported with relevant authority, for example, tax legislation and case law. Note that the assignment will require you to undertake your own research, since it will cover some areas which will not be dealt with explicitly in class. The referencing convention required for this assignment is Australian Guide to Legal Citation 4 -see canvas under Assessment Information Module.

In addition, you will be required to satisfactorily complete the Partnership tax return for Webb Electrics and Individual Tax return for Peter Webb using XeroTax by transferring the relevant information from your analysis and letter of advice to the tax return. You will also be required to complete and submit a group contract (See Appendix A below).

The letter/report must not exceed 2,500 words, excluding footnotes, the reference list and Partnership and Individual tax returns. Questions exceeding 2,750 words (10%) will not be assessed and you will receive zero marks (fail grade). You must indicate your word count on the cover sheet.