Exam 11: Taxation of Companies

Western Districts Business Pty Ltd is a base rate entity (tax rate of 27.5%) and in May 2020 the company distributed dividends as follows: (i) all franked dividends were to go to shareholders who were either residents or pensioners or retirees; (ii) all unfranked dividends to go to other shareholders. Can the ATO challenge the distribution made in May 2020 under its anti-avoidance measures?

Ace Developers Pty Ltd is an Australian resident private company. It has an annual turnover of $28.5 million, and has registered for the R&D tax concession with the Department of Industry, Innovation and Science. During the 2019-20 income year, it incurred expenditure of$480?000eligible R&D activities. What amount of the R&D tax offset is the company able to claim?

During the 2020 tax year, Bickle Pty Ltd (a private company for tax purposes) lent $100?000a shareholder (Travis). Assume that by the date of lodgement of the company's 2020 income tax return, the loan has not been repaid by Travis, nor has a loan agreement on commercial terms been drafted in relation to the$100?000to Travis. Assume also that the company had a distributable surplus of $180,000 as at 30 June 2020. How is this loan treated under Division 7A?

In the 2019-20 tax year Sky Pty Ltd paid its shareholders a $3,600 dividend franked to 70%. The franking credits attached to the dividend are?

Alpha Pty Ltd incurred a tax loss for the year ending 30 June 2020 of $15,000. Which statement is the most complete in determining the ability to deduct the tax loss in a future year?

Rankin Pty Ltd, a resident private company, paid an interim dividend of $7000 with a franking credit of $3000. The final dividend was $21,000 with a franking credit of $4,500. What is the overall effect on the franking account from the final dividend?

Ezy Cleaners Pty Ltd has a benchmark percentage of 60 per cent in the current franking period and a benchmark percentage of 20 per cent in the immediately preceding franking period. Ezy Cleaners is planning to pay this first dividend in this next franking period. Does Ezy Cleaners Pty Ltd have a disclosure requirement?

Holiday Fun Pty Ltd ran a caravan and leisure resort but ran into financial problems and for the year ended 30 June 2019 the company made a tax loss of $80,000. On 1 July 2019 the company decided to change its business completely and closed down the caravan and leisure resort and instead operated a public hotel in the town. For the year ended 30 June 2020, Holiday Fun Pty Ltd made a net profit (before any losses were applied) of $140,000. What is Holiday Fun's taxable income for the year ended 30 June 2020?

The Shareholders' Equity part of the Balance Sheet of Northeast Enterprises Pty Ltd shows the following: Paid up capital = $40,000; Retained Profits = $220,000; Non-Commercial Loans from prior years = $60,000. What is the distributable surplus for Northeast Enterprises Pty Ltd?

Which of the following loans would not give rise to a Division 7A deemed unfranked dividend for the year ended 30 June 2020?

Which of the following is not part of the proposed changes to Division 7A that were originally announced in the 2016/17 Commonwealth Budget?

On 15 September 2019, Balloon Flights Ltd made a frankable distribution of $2,200 that was franked to 80%. On 15 March 2020, the company made another distribution, this time of $2,000 that was franked to only 40%. Balloon Flights Ltd is not a base rate entity and has a tax rate of 30%. Does the company have any issue with the change in the franking percentages used?

Daisy, an Australian resident taxpayer, received a fully franked dividend of $2,800 from a small family company; Step Up Pty Ltd. Step Up Pty Ltd is a base rate entity (and so pays tax at 27.5%). What amount does Daisy have to include in her assessable income as a result of receiving this fully franked dividend?

Austronational Enterprises Pty Ltd had a balance in its franking account as at 1 July 2019 of $20,000 (credit). During the 2020 tax year the company paid $160,000 in PAYG instalments; received a refund of tax of $30,000 (for the 2019 tax return) and paid out a fully franked dividend of $600,000. The company's tax rate is 27.5%. What is the company's franking account balance as at 30 June 2020 and would there be any consequences for this balance?

During the 2020 tax year, Azure Services Pty Ltd (a private company for tax purposes) lent $80?000a shareholder (Jason). Assume that by the date of lodgement of the company's 2020 income tax return, the loan has not been repaid by Jason, nor has a loan agreement on commercial terms been drafted in relation to the$80?000to Jason. Assume also that the company had a distributable surplus of $60,000 as at 30 June 2020. How is this loan treated under Division 7A?

If accounting net profit for BBC Hardware Pty Ltd was $450,000, what would the taxable income in light of the following (which were all included in accounting net profit): · Meal entertainment for client expenses of $62,000 · Amortisation expenses for goodwill of $50,000 · Franked Dividend received by the company of $70,000

Which of the following is true for the similar business test in section 165-13 ITAA97?

Nifty Enterprises Pty Ltd is an Australian resident private company. It has an annual turnover of $9 million, and has registered for the R&D tax concession with the Department of Industry, Innovation and Science. During the 2019-20 income year, it incurred expenditure of$120?000eligible R&D activities. What amount of the R&D tax offset is the company able to claim?

Rhesus Services Pty Ltd (a private company for tax law purposes) has an opening franking account surplus of 35,000. During the 2019-20 income year the company entered into the following transactions: On 28 July 2019, paid a PAYG instalment of $26,400 On 31 August 2019, paid a dividend of $80,000 with a franking percentage of 80% On 28 October 2019, paid a PAYG instalment of6,400 On 28 February 2020, paid a PAYG instalment of6,400. On 14 April 2020, paid a dividend of280?000a franking percentage of 80%. On 29 April 2020, paid a PAYG instalment of6,400. On 15 May 2020, paid FBT owing of12,800. Assume that the company has a company tax rate of 30 per cent. What is the closing balance of the company's franking account for the year ended 30 June 2020? Round all transactions to the nearest whole dollar.

ABC Pty Ltd is a resident private company with a taxable income of $2,000,000 in the 2019-20 tax year before the following information is processed The Australian Taxation Office (ATO) considered that the company paid an excessive salary to an employee who is also a shareholder in the company. ABC Pty Ltd had paid the employee a salary of $300,000 which the tax office considered was excessive and it should have been $200,000. What effect does this decision have on the taxable income of ABC and the employee/shareholder's assessable income?