Tax Calculation And Business Advice: Strategies For Herbert And Dorothy

Your tasks

Calculate the net tax payable for Herbert and Dorothy for the 2018/19 financial year. Show all workings.Include Medicare, Medicare Surcharge (if applicable) and any offsets or rebates that may apply.

Provide advice to Herbert and Dorothy about merging both of their businesses into a partnership. Showhow you have compared the option of merging versus not merging. Show all workings/calculations. Justify your advice

Advise Herbert and Dorothy as to whether they could possibly arrange their financial affairs more efficiently; and whether there are other strategies they could be considering to enhance their short term and/or long term position. (Areas to consider include – superannuation, Estate Planning, Insurance, debt reduction) No calculations are necessary, however you will need to provide details of the potential strategy/ies you are recommending they consider. Justify your recommendations.

Calculating Net Tax Payable

In the modern day of business the most practical perspective relating to the strategic partnership is that it turns out to be the association among the two companies through which they agree to work collectively in order to attain the strategic goals (Barkoczy 2014). This is regarded as one of the only main reasons for merging operations. Here for Herbert and Dorothy merging the business into the partnership would help in promoting strategic partnership. From sharing of management to savings of cost could turn out to be the strong reasons for merging their business into strategic partnership.

The rationale for is largely alluring for Herbert and Dorothy as they can create more competitive and cost saving company (Brokelind 2015). Merging their business into strategic partnership would help Herbert and Dorothy in gaining greater market share with the objective of attaining greater efficiency. The below stated are some of the reasons why Herbert and Dorothy should merge their business into partnerships;

Penetration into new market:

Business that are successful have recognized the need of marketing and they aspire to meet those needs. An identical business that wants to share its market gains much benefit from merger (Grange, Jover-Ledesma and Maydew 2014). For Herbert and Dorothy merging their business into the partnership would help in gaining new geographical areas or alternatively specific niche in a particular industry. The strategy of merging for Herbert and Dorothy could work both in the large scale as well as for small scale. Merging their respective business into partnership would help in creating a strong chain and would help in building larger brand.

Economies of scale and competitive advantage:

For any business size is a matter of fact. Whether purchasing of the inventory or new corporate systems, when a bigger company places orders they can save more on the costs. Mergers would Herbert and Dorothy in translating improved purchasing power to purchase the equipment or office supplies. For Herbert and Dorothy when placing larger orders, the companies would have better ability of negotiating the prices with their respective suppliers (James 2013). On the other hand mergers would help in promoting completive advantage for Herbert and Dorothy. In the modern business world for companies to stay on the top they must undertake technological developments in their business applications. Herbert and Dorothy can merge their respective business into partnership so that they can share their technological business aspects for maintaining and developing a competitive edge.

Merging Businesses into a Partnership

Enhanced market research and industry visibility:

Companies usually merges with other companies in order to reach new marketplace and attain growth in their revenues as well as earnings. Merging the companies could help Herbert and Dorothy in increased marketing and distribution that would help them in providing newer sales opportunities (Jover-Ledesma 2014). Furthermore mergers can help both Herbert and Dorothy in improving the standing position of the company through greater community investment as bigger firms have an easy time in increasing their capital than the smaller firms.

Financial power:

When the companies grow they are able to attain the benefit of the economies of scale. This implies for Herbert and Dorothy that the cost involved in producing and distributing the items is reduced when the market share increases (Kenny, Blissenden and Villios 2018). Furthermore, when the companies merge the overall revenue also increases that ultimately makes the end company much stronger in terms of financially to obtain greater credit facilities, strategic association and financiers. For Herbert and Dorothy merging their business into strategic partnership would help in meeting any major requirement of business loan to revenues which would ultimately create a positive flow of cash as well as credit scenarios for the companies. This would enable Herbert and Dorothy to grow their merged companies faster with improved capital investment for marketing, talent and development.

The options for merging against the options of not merging is dependent on the new companies short and long term strategies as well as effort (Kenny 2014). This is mainly because of the factors such as market environment, business culture variations and changes in the financial power ultimately surrounds the captured business. For Herbert and Dorothy a comparison against the options of merging against not merging is given below;

Options of merging: 

1. One of the most common reason for Herbert and Dorothy to merge their business into partnership is the options of gaining better power and control over the markets.
2. Another options for merging is synergy that would act as the power and would ultimately allow Herbert and Dorothy to increase the value efficiencies of their business with better enriched returns and cost savings (McCouat 2018).
3. The union of two business would result in overall savings of costs and would provide a competitive advantage for Herbert and Dorothy. This options can be considered feasible because it would help Herbert and Dorothy in increased purchasing power and long run of productions.
4. Perhaps the most important options of merging is gaining tax advantage for both Herbert and Dorothy. The options of tax benefit would help in instigating the financial advantage for Herbert and Dorothy. Merging their business to partnership would help in providing tax shields, better monetary advantage and better utilization of alternative tax advantage.

Options against merging 

1. As the result of the merging the employees of one of the merging companies might require exhaustive reskilling.
2. Herbert and Dorothy may face the difficulties from the internal competition that might take place among the staff of the united firms (Morgan, Mortimer and Pinto 2015). There may be risk of having surplus amount of employees in some of the departments.
3. There may be uncertainty in relation to the approval of the merger from the adequate assurance.
4. There can be an instance of increased costs that may not result in right management of modification.

After taking into the account the above discussion it can be stated Herbert and Dorothy should merger their respective business into the partnership as this would in gaining vital market resources with better superiority in quality (Sadiq 2018). Merging their business would help in gaining tax advantage and would the business with better monetary advantage and better utilization of alternative tax advantage.

Herbert and Dorothy could possibly arrange their financial affairs in more efficient manner and consider the strategies that may well help in enhancing their both short and long term position. Below listed are some of the strategies that Herbert and Dorothy can consider for their financial affairs;

Superannuation: 

Arranging Financial Affairs More Efficiently

Superannuation contribution can be regarded as the simple way for Herbert and Dorothy to reduce their amount of tax that they pay every year. By setting up the salary sacrifice Herbert and Dorothy can arrange their rate of income tax which they originally pay for their earnings with the lower amount of superannuation contribution of 15% per year (Sadiq et al. 2018). The super funds works as the effective tax wrapper for an individual’s investments. Incomes derived from the investment made outside the marginal tax rate in the name of the taxpayer such as shares or property would be taxed at the normal marginal tax rate. However for Herbert and Dorothy making an investment in the superannuation would ultimately result the income from those assets to be usually taxed at the lower rate of 15% and capital gains at the rate of 10% for the assets that are owned for a minimum of 12 months.

Estate planning: 

Herbert and Dorothy can consider estate planning with the start-up wealth management. The estate planning can be tailored particularly with the family situation particularly the future goals. The estate planning would form the integral part of the Herbert and Dorothy overall financial plan (Taylor et al. 2018). They can protect their assets and reduce the risk of conducting business as estate planning would help in minimizing the burden of taxation. It is recommended that Herbert and Dorothy should start up with wealth management. While in the current environment of uncertainties it is not always possible to predict the financial future goals but with estate planning Herbert and Dorothy can structure their investment and their retirement savings by significantly reducing the risk and would ultimately help in attaining their respective goals. Herbert and Dorothy can consider creating Trusts as the means of minimizing tax burden.  

Among the numerous life insurance plans that are available to the Australians there are types of insurance cover that Herbert and Dorothy can consider enrolling themselves.

1. Income protection insurance:The income protection insurance can be termed as the type of insurance that pays a steady amount of income on the monthly basis. Herbert and Dorothy can contribute around 75% of the gross monthly income or may be in the different manner depending upon their contributions (Woellner et al. 2018). Such benefits would cover both the illness and injury.
2. Critical illness Insurance:Critical illness insurance is also regarded as the trauma insurance. Herbert and Dorothy can consider enrolling themselves for the critical trauma insurance as it falls under the category of the living insurance. As this fall under such category, it would provide both Herbert and Dorothy with the benefit of leading the quality life. Such insurance would provide both Herbert and Dorothy with the lump sum payment when either or both the member faces any critical illness.
3. Life cover:The life cover helps in easing the burden of the extra amount of expenditure that might cause the finance of Herbert and Dorothy by paying them with the lump sum during the event of the death (Robin 2017). Furthermore, it would help both Herbert and Dorothy to adapt to the mental and emotional changes that happens because of the death or disability from the financial benefit that Herbert and Dorothy can receive from such events. Rather than being financially or emotionally hurt by the sudden misfortunes the life cover helps in assuring that both Herbert and Dorothy can enjoy the same lifestyle.

Balance transfer credit cards: It is noticed from the case study that Dorothy uses credit cards. There may be an instances where debt accumulation may occur or the holder of credits may struggle to manage the repayments or the higher rate of interest (Blakelock and King 2017). It is recommended that Dorothy can consolidate the credit card accounts under a single balance transfer account. Multiple number of balance transfer credit cards are available that may help Dorothy in moving the debt to the new credit or taking the advantages of the introductory period. For instance managing the credit card under one account may led to payment of 0% interest on the balance transfer for the first six months.

The recommendations provided may help in serving the purpose of the Herbert and Dorothy as they are aimed at reducing structure of debt and also aimed at improving both the short and long term position.

References 

Barkoczy, S 2014. Foundations of taxation law.

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

Brokelind, C. 2015. Principles of law.

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

James, S. 2013 The economics of taxation.

Jover-Ledesma, G. 2014. Principles of business taxation. Cch Incorporated.

Kenny, P. 2014. Australian tax.

Kenny, P., Blissenden, M. and Villios, S. 2018. Australian Tax.

Martin, F. and Connor, M., 2017. Using Blended Learning to Aid Law and Business Students' Understanding of Taxation Law Problems. J. Australasian Tax Tchrs. Ass'n, 12, p.53.

McCouat, P. 2018. Australian master GST guide 2018.

Morgan, A., Mortimer, C. and Pinto, D. 2015. A practical introduction to Australian taxation law.

Robin, H., 2017. Australian taxation law 2017. Oxford University Press.

Sadiq, K. 2018. Australian taxation law cases 2018. Pyrmont, NSW: Thomson Reuters.

Sadiq, K., Coleman, C., Hanegbi, R., Jogarajan, S., Krever, R., Obst, W., Teoh, J. and Ting, A. 2018. Principles of taxation law 2018.

Taylor, C., Walpole, M., Burton, M., Ciro, T. and Murray, I. 2018. Understanding taxation law 2018.

Woellner, R., Barkoczy, S., Murphy, S., Evans, C. and Pinto, D. 2018. Australian taxation law 2018.