INDIVIDUAL TAX RETURN - CASE STUDY

Introduction:

You are the tax agent for a new client Jenny Price, a single Australian resident who works as a Beauty Therapist.  She has sent you a letter containing the information you require to complete her tax return.  You will be required to review the Jenny’s documentation (see attached CSD pdf file) and determine what is relevant.  You have also added her as a client on your tax agent portal and run a pre-filling report (see attached CSD pdf file). If the TFN number doesn’t work, use the ATO dummy TFN 000 000 001.

Note: Your teacher will play the part of the client.  You can seek clarity or more information from the client however please note that the client will not be able to assist you with technical questions.

If the tax software has not been updated for the current year, then it is acceptable to use the previous year’s software. 

REQUIRED:

1. Prepare Jenny’s 2018 individual tax return using the relevant tax forms. Do not lodge with ATO. Detail worksheets are to be completed for work related expenses and rental property transactions. 

2. Print/save reports and worksheets to PDF and submit to the teacher (who is playing the part of the client).  

3. Prepare an email to your teacher by the due date, responding to the client covering:

a. Information about any tax payment/obligations required to be made and applicable dates

b. Instructions about the steps required to lodge the income tax return – include:

• client review, signoff, authorisation & lodgement due date

• ATO Notice of Assessment, payment due date & late fees

c. Expenses not included in the tax return and why (if any)

d. Must include any further advice that may be useful for the client in future returns.

Dear Tax Agent,

It was great meeting you last week.  Please find enclosed the documents you requested relating to my 2018 individual income tax return.  I also note the following:

EMPLOYMENT

• I received a genuine redundancy payment from my previous employer, Patonga Beauty Clinic on 1 July 2017.  I am now working for a new employer, Beauty on the Go.  I have attached both 2018 PAYG payment summary forms.

• I have some great clients and some of them pay me tips.  This year I collected $1,300 in tips, will I get taxed on that?

• I had to buy the compulsory uniform for “Beauty on the Go”.  They are white and we are required to keep them in pristine condition.  I had to buy a few replacements again during the year.  I have attached the receipts.  I wash 3 times a week in a mixed load (I worked 52 weeks this year).

• I spend all day in my car because I see my clients at their homes. My previous accountant told me I should keep a logbook but I have not had time this year.  On average I travel about 180 kilometres a week for business in my Toyota Prado 3000cc, registration JP 111.

• I also bought a watch to make sure I keep on time for my work appointments.  Receipt attached.

• I incurred a parking fine whilst working a few months back (receipt attached).  My car was in a time limited spot and the client asked me to do more than the appointment time allowed for.  I didn’t have time to move my car.  It was definitely work related.

• I had to pay for parking twice this year.  Both occasions related to required visits to Beauty on the Go head office for work meetings.  The highlighted tolls on my toll statement are work related.

• Optus bill me internet and mobile together.  I claim 30% of my mobile phone expenses as work related and 20% of internet charges is work related.  The Optus bill is attached.

HEALTH

• When I go to the GP it is bulk billed and I have not had any medications during the year.  I am reasonably healthy however I have had significant medical bills during the year.  I had two tattoos removed in February 2018 and I had a large dental bill in September 2017.  The last time my medical bills were this high I got some money back in my tax return.  My health insurance or Medicare did not refund me any amounts on these bills.

• You mentioned last week that my private health insurance details are on my pre-filling report.

RENTAL PROPERTY

• As we discussed in our first meeting I have a residential investment property that was purchased on 1 July 2010.  The purchase documents show a purchase price of $570,000 plus incidentals amounting to $24,240 (provided at the meeting last week).

• I rented the property out for the whole year and then I sold it on 30 June 2018.  I have attached the following:

• Annual rental statement.  This includes all income and costs relating to renting out the property with the exception of:

1. Interest paid to the bank on the loan which was $3,152 (I gave the annual loan statement to you last week) and 

2. Capital works deduction.  At the time I purchased the property I had a quantity surveyor provide a statement certifying that the property was constructed and completed on 1 July 2008 at a construction cost of $300,000. (This report was given to you at our meeting last week)

- Settlement statement from the sale.  

OTHER

• Following our discussions I have attached my dividend statements just in case they haven’t all shown up on the prefilling report.

• There are some other various receipts that may be relevant.

Please let me know if you have any questions.

Kind regards

Jenny