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Brian Pert owns Bronny Park, a horse-racing stable that is registered for GST. The customers purchase horses and send them to Bronny Park for training. The horse owners (customers) pay separate fees for training and agistment plus 50% of any prize money earned by the horses trained at the stable. Bronny Park also owns horses. During the June 2018 quarter they reported the following transactions:

Training fees

$82,698

Share of prize money from customers’ horses

$55,000

Prize money from Bronny Park horses

$16,500

Trophy from Brisbane Cup won by a Bronny Park owned horse

$1,200

Trade-in of tractor previously used on the property

$19,000

Hay and saddle blankets donated to local pony club (market value $100)

$0

Horse feed

$8,800

Veterinary fees

$7,700

Farrier (not registered for GST)

$5,500

Accommodation for staff at race meetings (Hotel)

$2,475

Lunch at local restaurant*

$650

Airfares for staff to attend race meetings**

$6,446

Bookkeeping services

$2,640

First Aid courses for staff members

$990

New tractor

$43,990

Business loan repayment (interest $750, principle $275)

$1,025

Lunch at the local restaurant was for Brian, the owner of Bronny Park, and three customers whose horses are being trained at the stable. For income tax purposes this amount would be classified as entertainment and a deduction would be denied under s32-5 ITAA97.

During the period Bronny Park paid for air fares for staff to attend a race meeting in Sydney where one of their prize horses was running. The horse incurred an injury a week before the race and did not run. Consequently, the staff did not attend that race meeting and $1,100 of the airfares mentioned above were not used. The airline did not refund this amount.

Bronny Park also imported saddles and other leather goods from Europe. The cost of the goods was $4,500 and the freight was $250 (Australian Dollars). The supplier in Europe did not charge GST on these goods.

Bronny Park employs 6 strappers. They are paid weekly. All employees are entitled to the tax-free threshold.

Sarah, Lauren, Marty, & Paul are all permanent employees. Their weekly pay is based on an annual salary: and paid salaries.  Annual salaries are:

  • Sarah: $52,000
  • Lauren: $18,720
  • Marty: $72,800
  • Paul: $28,600

Kris and Sam are casual employees and their weekly wage is based on the hours they work. Their work hours are set out in the table below.

Employee/Week

Kris $15/hour

Sam $22/hour

Week 1 – April

8

10

Week 2 – April

7

10

Week 3 – April

10

15

Week 4 - April

12

15

Week 5 – May

0

10

Week 6 – May

0

10

Week 7 – May

5

15

Week 8 – May

12

15

Week 9 – May

10

10

Week 10 – June

12

10

Week 11 – June

8

15

Week 12 – June

8

10

Week 13 - June

8

0

The ATO has advised that Brian Pert, as the business owner, has a quarterly income tax instalment of $16,790. This amount is payable along with other liabilities on his June Quarter BAS.

In the last FBT year Fringe Benefits were provided to the head strapper.  There is a FBT instalment showing on the BAS of $2,500. No Fringe Benefits have been provided in the current FBT year.

There are no liabilities for WET or LCT, and no fuel credits.

a) Prepare the schedule of payroll information for wages paid, including PAYG withholding deductions, and net wages for each employee by week.

b) Calculate the employer’s statutory Superannuation Guarantee obligations for each employee for the quarter. 

c) Explain and classify each transaction item listed, including wages and superannuation, by the type of GST supply, and calculate any GST included in the price.

d) Discuss what conditions need to be met before Bronny Parkcan claim input tax credits in relation to the expenses listed? Explain whether each of the acquisitions is a creditable acquisition. 

e) Prepare a fully labelled Business Activity Statement for the quarter ended 30 June 2018. 

Questions

Schedule of Payroll Information               

Employee Name Weekly Wages / Salary Weekly PayG Quarterly Wages/Salary

Quarterly PayG

Sam 220 49 2860 637
Sarah 4000 1528 52000 19864
Lauren 1440 458 18720 5954
Marty 5600 2280 72800 29640
Paul 2200 755 28600 9815

Payroll Information

Employee Name  Kris Sam
Week 1 120 220
Week 2 105 220
Week 3 150 330
Week 4 180 330
Week 5 0 220
Week 6 0 220
Week 7 75 330
Week 8 180 330
Week 9 150 220
Week 10 180 220
Week 11 120 330
Week 12 120 220
Week 13 120 0
Total Wages 1500 3190

Superannuation Guarantee Obligations 


Employee Name Super Fund Name Ordinary time earnings SG rate SG Contributions
Kris State Super Retirement Fund 1500 9.50% 142.5
Sam State Super Retirement Fund 3190 9.50% 303.05
Sarah State Super Retirement Fund 4000 9.50% 380
Lauren State Super Retirement Fund 1440 9.50% 136.8
Marty State Super Retirement Fund 5600 9.50% 532
Paul State Super Retirement Fund 2200 9.50% 209
    Toal Employers Contributions   1703.35
Item Value Supply Type Reference/Authority

GST Input tax Credit ($)

Assesssable Receipts 11000     1000
Training Fees 82698 Taxable Sales (Supply made in ordinary business course) Section 9-5 & Section 9-10 7518
Share of prize money from customers horses 55000 Taxable Sales (Supply made in ordinary business course) Section 9-5 & Section 9-10 5000
Prize money from Bronny horses 16500 Taxable Sales (Supply made in ordinary business course) Section 9-5 & Section 9-10 1500
Trophy from Brisbane Cup 1200 Taxable Sales (Supply made in ordinary business course) Section 9-5 & Section 9-10 109.09
Trade in tractor 1900 Taxable Sales (Supply made in ordinary business course) Section 9-5 & Section 9-10 172.73
Total Receipts 157298     14299.82

Expenses Eligible as Deductions

       
Horse Feed 8800 Input Tax Sales Section 9-5 800
Veterinary Fees 7700 Input Tax Sales Section 9-5 700
Ferrier 5500 Input Tax Sales

(No GST Included)

 
Accomodation for Staff 2475 Input Tax Sales Section 9-5 225
Airfares for staff 5346 Input Tax Sales Section 9-5 486
Bookkeeping services 2640 Input Tax Sales Section 9-5 240
First Aid courses for staff members 990 Input Tax Sales Section 9-5 90
Cost of Goods Sold 4500 Imported Goods Section 9-5 409
Freight 250 Imported Goods Section 9-5 23
Business loan 750

Input Tax Sales

   
Total Allowable Deductions 38951     2972.818182
Net Income from business 118347      

Total GST Payable

      11327

According to the definition of business that is made under the “section 995-1 of the ITAA 1997”, the term business can be referred anything that includes the trade, profession, vocation, employment or calling but does not takes into the consideration the occupation as the employee (Barkoczy 2014). It is vital to determine the ordinary meaning of the word business because of the broader legislation definition. According to “section 6-5 (4)” and “section 6-10 (3), ITAA 1997” a person is assumed to have obtained the sum as and when it is dealt with in anyway on the taxpayer’s behalf or as they direct.

Similarly, the concept of ordinary income is defined under the “section 6-5 of the ITAA 1997”. Usually greater portion of the income that is obtained by the taxpayer is said as the ordinary income (Grange, Jover-Ledesma and Maydew 2014). The judicial concept or the case law approach defines income based on the ordinary concepts. As evident in the case of Brian owns a Bronny Park of horse-racing stable which is registered for GST and reports certain receipts and expenses during the year. As held in “Scott v CT (1935)” the concept of income should not be observed as the term of art and entails the implementation of necessary values to regulate the revenues as earnings in adherence with the ordinary usage of mankind (Sadiq 2014).

As per the Australian Taxation Office, if a business is registered for GST, any products or services which is sold in Australia is usually held as assessable given that it is registered as GST-free input tax. As understood Bronny Park reports the receipts from the training fees during the year ended 2018. The receipts of training fees represent ordinary business receipts and hence will be held as ordinary income under the ordinary meaning of “section 6-5 of the ITAA 1997”.

Bronny Park also reports the receipts from prize money of customer horses. Referring to the ordinary meaning of “section 6-5 of the ITAA 1997” the share of prize money from the client’s horses is an assessable business income that originated from the ordinary business course.

As held in “Moore v Griffiths (1972)” mere prize is not said as income but it should be noted that it may be treated as earnings if there is enough relation with the taxpayer income producing activities (Woellner et al. 2016). Brian reports the receipts of prize money from the Bronny Park horses. The prize money would be included into for assessment purpose because it constitutes an income and has satisfactory relation with the Brian income producing activities.  

In the later part of the report it is noticed that Brian reported receipts from the Brisbane cup trophy winnings and receipts from the trade in tractor. The receipts are held as ordinary income within the ordinary meaning of “section 6-5 of the ITAA 1997”, because the earnings are made during the Brian’s ordinary business course.

Answers

As defined under the “section 8-1 of the ITAA 1997” an individual tax payer is permitted to an entitlement of deduction from their assessable earnings for any amount of the loss or outgoings that is incurred up to the extent of earning the taxable income or incurred necessarily while carrying on the business with the intention of producing assessable income (Miller and Oats 2016). Brian from its Bronny Park report expenses on horse feed and veterinary fees. According to the decision made in “Ronpibon Tin NL v FCT (1949)” expenditure should be incidental and relevant or should be occurred in the course of gaining or generating the assessable income (Blakelock and King 2017). Evidently in the case of Brian the expenses on horse feed and veterinary fees is incurred in the course of gaining or producing the assessable income.

In the later instances Brian occurred expenditure on farrier and accommodation for its racing staff while conducting race meetings. Referring to the explanation made under the “section 8-1 of the ITAA 1997” these expenditures would be held as allowable tax deduction because the expenses arose at the time of generating the assessable business receipts.

In another instances Brian incurs outgoings on staff airfares for attending the race meetings but unfortunately one of the Brian staff did not turned up for the race meetings and as a result a sum of $1100 of air fares remained unused. The unused amount of staff airfares is subtracted from the airfare expenses while the left over sum is claimed as allowable deduction based on the overall provision of “section 8-1 of the ITAA 1997” (Roe 2017). Brian for its Bronny Park imported leather goods and saddles from Europe that were exclusive of GST. A sum of 10% GST has been charged for importation of saddles and leather goods.

d) As stated by the ATO an individual taxpayer should be registered for GST to claim the GST credits. An individual taxpayer is permitted to claim an entitlement for GST credit for any sum that is contained within the purchase price for the things that is used in the business. This is generally known as the input tax credit or GST credit.

On satisfying the below stated conditions an individual taxpayer is allowed to claim GST credits;

  1. The taxpayer proposes to make acquisition totally or partially for their commercial purpose and the purchase has no link with the making of input taxed supplies.
  2. GST is included into the purchase price.
  3. The taxpayer is liable to provide payment for the items that they purchase.
  4. The taxpayer has the tax invoice from the supplier.

As defined under the “section 11-5 of the ITAA 1997” creditable supplies include the supplies that is acquired completely or partially for the creditable purpose with the supplies forming a part of taxable creditable supply (Burton 2017). In case of Brian items including horse feed, veterinary fees, new tractor, bookkeeping fees, saddles and leather goods imported from Europe would be held as creditable acquisition. The above stated items were acquired totally for the creditable purpose.

OPTION 1: Calculate GST & report quarterly

SUMMARY

1A

GST on Sales

 $14,299-   

G1

Total Sales

 $1,57,298-   

1C

WET

 $-   

Does G1 include GST

Yes

1E

LCT

 $-   

G2

Export Sales

 $-   

4

PAYG Withheld

 $66,235-   

G3

Other GST-Free Sales

 $-   

5A

PAYG income tax instalment

 $16,790-   

G10

Capital Purchases

 $-   

6A

FBT instalment

 $-   

G11

Non-capital Purchases

 $-   

7C

FTC over claim

 $-   

8A

 $-   

PAYG tax withheld

1B

GST on purchases

 $2973-   

W1

Total Salary & Wages

 $1,76,540-   

1D

WET refundable

 $-   

W2

Amount Withheld

 $-   

1F

LCT refundable

 $-   

W4

No ABN

 $-   

5B

PAYG instalment credit

 $-   

W3

Other amount

 $-   

6B

FBT credit

 $-   

W5

total amounts withheld

 $-   

7D

FTC credit

 $-   

8B

 $-   

OPTION 1: Pay a PAYG instalment amount quarterly

PAYMENT OR REFUND

T7

 $66,235-   

Is 8A more than 8B?   

YES

FBT INSTALMENT

Your payment amount

 $11,327-   

F1

 $-   

F2

Est FBT for year

 $2,500-   

F3

Varied amount payable

 $-   

F4

Variation Code

References:

Barkoczy, S. 2014. Foundations of taxation law 2014.

Blakelock, S. and King, P., 2017. Taxation law: The advance of ATO data matching. Proctor, The, 37(6), p.18.

Burton, M., 2017. A Review of Judicial References to the Dictum of Jordan CJ, Expressed in Scott v. Commissioner of Taxation, in Elaborating the Meaning of Income for the Purposes of the Australian Income Tax. J. Austl. Tax'n, 19, p.50.

Grange, J., Jover-Ledesma, G. and Maydew, G. 2014. Principles of business taxation.

Miller, A. and Oats, L., 2016. Principles of international taxation. Bloomsbury Publishing.

Roe, A., 2017. The doctrine of sham in Australian taxation law. AUSTRALIAN TAX REVIEW, 46(2), pp.99-119.

Sadiq, K. 2014. Principles of taxation law 2014.

Woellner, R.H., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D., 2016. Australian taxation law. CCH Australia.

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My Assignment Help (2021) GST Transactions And Payroll Computation Essay For Bronny Park Horse-racing Stable. [Online]. Available from: https://myassignmenthelp.com/free-samples/acct6005-taxation-law-and-practice/wages-and-superannuation.html
[Accessed 24 July 2024].

My Assignment Help. 'GST Transactions And Payroll Computation Essay For Bronny Park Horse-racing Stable.' (My Assignment Help, 2021) <https://myassignmenthelp.com/free-samples/acct6005-taxation-law-and-practice/wages-and-superannuation.html> accessed 24 July 2024.

My Assignment Help. GST Transactions And Payroll Computation Essay For Bronny Park Horse-racing Stable. [Internet]. My Assignment Help. 2021 [cited 24 July 2024]. Available from: https://myassignmenthelp.com/free-samples/acct6005-taxation-law-and-practice/wages-and-superannuation.html.

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