complete tax return including tax estimate to show the tax payable OR refundable for Alberto Cortes

Alberto Cortes is a single resident Australian taxpayer employed as a lecturer by Universal Training College. During the 2018 /19 tax year, Alberto also sold two properties and some shares.
His Payment Summary from Universal Training College (ABN: 12 345 678 901) showed the following for the year ended 30 June 2019:

Payment Summary
Gross Wages $40,000
Performance Bonus 2,000
PAYG tax withheld 5,347
Union fees deducted and forwarded to Academics Federation 700
Alberto has also disclosed other amounts received during the 2018 /19 tax return:
Winnings from casino (Alberto won a jackpot at one of the card tables) 15,480
Proceeds from sale of rental property on Gold Coast 432,000
Proceeds from sale of shares in Golden Mining NL 9,340
Proceeds from sale of shares on Blackpitt Ltd 415
Proceeds from sale of holiday house in Nelson Bay 397,000
Proceeds from sale of artwork (partially destroyed during cleaning) 750
Interest on Commonwealth Bank account 150
The shares in Blackpitt Ltd were sold before any dividends for 2018 /19 were declared.
Golden Mining NL only paid one dividend which Alberto Received before selling his shares of $200 cash with a franking credit of $86.

Details Relating to Assets Sold:

  • The rental property was originally purchased for $276,800 during 2007 /08.
  • The purchase price of the rental property included eligible capital works from which a deduction of $19,400 had already been claimed by Alberto during the period held.
  • The Golden Mining shares were purchased for $2,770 during 2008 /09.
  • The Blackpitt shares were purchased for $4,075 during 2012 /13.
  • The Holiday House was originally purchased for $428,000 in 2013 /14. Alberto has incurred a further $20,000 in building extensions
  • The artwork classified as Collectable asset was originally purchased in 2015 /16 for $5,000.

Other Expenses:

  • Alberto has kept an estimate that he has used his 1,500cc car for 3,200 work related kilometers. He has also estimated that the petrol used for this amounted to $480.
  • Alberto has incurred a net rental loss of $2,090from his rental property for the 2018/19 tax year prior to selling it. This loss was made up $1000 in rental income, $3000 in mortgage interest and $90 in agent’s commission.
  • Alberto uses a room in his home exclusively for work preparation. The room accounts for 25% of the floor space of his home. Alberto’s mortgage interest, rates and insurance for the tax year amounted to $27,590 while electricity used for the room was estimated at 10% of $1,800.
  • Tax agent’s fee of $290 paid in August 2018 when last income tax return was prepared.
  • Alberto made the following charitable donations during the year (receipts available): Queensland Cancer Fund $100, Doctors Without Border Pty Ltd $50. (Hint: Check Australian Business Registry to see which organization is registered as Deductible Gift Recipient)
  • Alberto contributed to the Medibank Private Ltd Health Fund. The Policy Number is 2356578 and the policy type is ‘combination’. The Private Health Insurance Rebate has been claimed through the health fund.

Alberto’s personal details are as follows:
Address: 23 Nonesuch Street
Bracken Ridge Qld 4017
Telephone contact: 07 6543 2109
Tax File Number: 322 666 553
Date of Birth: 16/4/1968
Alberto requests his tax refund cheque, (if any), to be sent directly to his bank account by electronic transfer from the Tax Office. He advises his BSB No is 064999 and the account is in his name at the Commonwealth Bank – Account Number: 71234.
Additional questions from Alberto:
This is only the second time that Alberto has used a tax agent to prepare his tax return and he has some additional questions for you:

  • Alberto is aware he is a bit late seeing an accountant this year and as a consequence his return will probably be lodged late. He inquires as to the time frame for lodgment of taxation returns and the penalty he could incur.
  • He is also aware that there are different ways to calculate capital gains and would like them explained to him.
  • Alberto is a little uncertain as to the meaning on his dividend statements of the terms “franked amount” and “franking credit” and would like you to explain them to him.
  • Finally, Alberto heard that there have been changes to the methods available to claim car expenses/depreciation and would like these changes explained to him.

Responding to Alberto’s questions:
To respond to Alberto’s questions you are required to:

  1. Prepare a letter providing him with the requested information
  2. Meet with “Alberto” and explain the letter contents in person. This meeting will take the form of a role play and you will need a friend or relative to play the part of Alberto for the meeting. You will need to record this meeting (with video and audio – a mobile phone is ideal for this purpose).

Note: This is a simulated business meeting designed to demonstrate your communication skills. You should not read from a pre-prepared script or simply read out the contents of your letter. You are required to explain/discuss the topics as you would in an actual meeting.
During the meeting you should cover the items listed in the checklist below:

Alberto meeting checklist: Done
1 Introduce yourself
2 Explain the answers provided in your letter
3 “Alberto” should ask a question about at least two of the items*
4 Clarify that you understand what information “Alberto” is requesting
5 Answer “Alberto’s” question and confirm that he understands your response
6 Conclude the meeting in an appropriate manner

*Suggested questions Alberto could ask:

  • Do I have to pay Capital Gains Tax if I sell my car?
  • Is Capital Gains Tax different to income tax?
  • Do I pay tax on an Unfranked dividend?
  • How do I find out if my dividend is franked?
  • What do I record in a log book?
  • I sold my small hatchback and now have a four wheel drive wagon. Is the rate per km the same?
  • You may also use questions of your own choice.

Required tasks:

  1. A complete tax return including tax estimate to show the tax payable OR refundable for Alberto Cortes
  2. Work papers clearly showing your workings in determining Alberto’s net capital gain or capital losses available to carry forward.
  3. A Client Engagement Letter
  4. A Client Substantiation Declaration
  5. A Client Interview Form (which collects basic client details and the tax return information for the current year including income, deductions, asset sale details and all other relevant details for the tax return).
  6. A letter providing Alberto with the answers to the four questions he asked above and seeking his confirmation that:
  • The tax return and other documents are correct and
  • He authorises you to lodge the return electronically.
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