GST Transactions And Payroll Computation Essay For Bronny Park Horse-racing Stable.

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. 

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.