ACCT2001 Navigating Tax and Business Challenges: A Consultation with Peta Jones

Background

You have now completed the tax return for Peta Jones. Peta has emailed you some questions that she would like to discuss in the meeting. Peta is very busy with work and cannot meet with you personally. Instead, you will pre-record a video with responses to questions she has forwarded to you, which she can then watch in her own time. Peta’s questions are:

1. Peta was not expecting a large tax bill from the lodgement of her 2022/2023 tax return (she thought with the PAYG withholding already paid on her salary and the franking credits on the dividend, all her tax was paid!). Peta would like you to take a few minutes to explain the key drivers behind the high tax bill.
2. With her new focus on fitness coaching/personal training, Peta decided to trial selling fitness related products in some of the PJ Healthy Life Pty Ltd stores, with one of the products being Garman sports watches. In November 2022, PJ Healthy Life purchased 20 Garman watches during the year from a wholesaler at $660 per watch (including GST) and advertised them for sale for $880 per watch (including GST). All 20 watches sold within a month and buoyed by the apparent success, in January 2023, PJ Healthy Life purchased another 100 watches (again at a cost of $660 per watch). However, by April 2023, they had sold only another 14 watches (for $880 each, including GST) – Peta had failed to realise the strong sales in November/December were due to people buying them as gifts! To move some of the stock, Peta decided to give two watches each to 5 of the store managers (free of charge) as a gift for their hard work during the year.

To make matters worse, in February 2023, one of PJ Healthy Life’s stores was broken into and five (5) of the watches were stolen. PJ Healthy Life was insured, and they received $3,000 insurance proceeds from their insurance company for the stolen watches.

The run of bad luck continued. In June 2023, Garman announced that it was releasing a new model of the watch. By year’s end (30 June), the old model stocked by PJ Healthy Life could be purchased from the wholesaler for $330 per watch (including GST) and from 1 July, PJ Healthy Life had to heavily discount the sale price on the As this is the first time PJ Healthy Life has dealt with buying and selling Garman watches to customers, Peta would like a summary of the following:

• The Income tax impact of these transactions for the 30 June 2023 year (i.e. you will need to provide her a high-level calculation). Note, given the lack of success, PJ Healthy Life would like to maximise their deductions.
• GST impact of these transactions for the 30 June 2023 year (i.e. you will need to provide her a high-level calculation) Given PJ Healthy Life’s turnover, you can assume they are registered for GST. Hint for the insurance proceeds: PJ Healthy Life has told their insurer that they claim back all the GST input tax credits on their insurance premiums (fees)).
• Finally, Peta would also like to know what the FBT implications are of giving the watches to the store managers free of charge.

Submission requirements

Your task in this assessment is to prepare an 8-to-10-minute video presentation to send to Peta answering the questions described above. This video should be in a meeting format. You should also prepare a “hand-out” to provide to Peta with the video showing the calculations of the impact of her questions.

In detail:  

• Your video should be no more than 10 minutes in length.
• Your video should include answers to Peta’s emailed questions described above.
• As a suggestion, you could use Zoom to record your video as it allows for group meetings, sharing screens and recording. That said, whatever video recording software you use, please ensure the file is in MP4 format. Once recorded, you should upload the file using the submission link provided in the assessment tasks and submission section of the unit’s MySCU site. It is your responsibility to ensure that it can be viewed by your tutor.
• Your “handout” to provide to Peta showing the calculation of the impact of her questions should only 2-3 pages long (for example, it can be a PowerPoint slide, word document or PDF). It should also be uploaded as a file attachment using the submission link.
• At the beginning of the video you each must identify yourselves by showing your face and student ID card (passport or driver’s license only if you are an online student without an ID card). This will be the first 10 seconds of your video. Your name and photo on your ID must be clear and it must be obvious that you are holding this card. After this, you can start your presentation and your camera must remain on throughout the video. If these steps are not done, you may be asked to re-submit your video.
• Every member of the group needs to present in the video. Assume that you are all employees of the accountant’s office, and you are recording the video for Peta to watch later.
• The video meeting should not be too technical and needs to be communicated clearly and understood by your client (hint: your client will not be interested in you recalling sections of the legislation - technical analysis is for your own purposes when you are determining the correct tax treatment of the information provided by the client).
• Professional looking attire is recommended as you are in a workplace setting presenting to a client.

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