Purple Rain Pty Ltd - Rental Property - Tax Return and a Letter of Advice - Tax Law Assignment Help

Assignment Task:

Purple Rain Pty Ltd Tax Law Assignment Help

EMPLOYMENT:
Your client (use your own name as the client name) is the sole director of Purple Rain Pty Ltd. The business employs five staff members, including your client who holds the position of managing director. Purple Rain analyses financial information and provides investment advice to registered clients.

The payment summary from Purple Rain Pty Ltd shows the following:

•  ABN 84 111 122 223
•  Gross Payments $156,000
•  Tax Withheld $48,337

Purple Rain also paid $94 a month for your client’s mobile phone account and additional superannuation contributions of $5,200 under a salary sacrifice arrangement. This amount is in addition to superannuation guarantee requirements. The phone payments related to a fixed monthly contract in the employee’s name and payments were made directly to the phone company by the employer.

Your client owns an BMW X5. They purchased the car on 1 June 2018 for $99,000. The car travelled 36,500 kms during the year and your client has indicated that about 70% is work related but they have not kept a log book. Your client pays for all the running costs for the vehicle. During the year these costs included:

DIVIDENDS & INVESTMENTS:
Purple Rain Pty Ltd is a large company with two (2) shareholders, your client and their spouse. Your client owns 40% of the issued shares in the company. The shareholders were paid a lump sum of $140,000 in April. They explained that the company had been very successful over the last couple of years and had accumulated significant cash reserves. They described this payment as a fully franked dividend. The proceeds were used to reduce the line of credit that was taken out to purchase the home in which they live. Interest paid on the home loan for the year was $36,000.

The client also has a portfolio of shares that were inherited from their father. The father passed away on July 15, 2018. On finalisation of the estate the following shares were transferred to your client and the client received notification that all the shares had been transferred on 1 December 2018.

The following fully franked dividends were received by your client during the year:
 CBA           $ 680.00
 COH          $ 900.00
 FLT            $ 450.00
TLS            $ 210.00
The taxpayer sold the BHP and MYR Shares on 5 January 2019 to raise the deposit for the property purchase discussed below. The BHP Shares sold for $26.54 each and the MYR Shares for $1.31 each. The brokerage fee was based on a percentage of the sale proceeds for each parcel of shares and amounted to $120 for the BHP Shares and $45 for the MYR Shares. These amounts include GST where appropriate.

RENTAL PROPERTY: 4/285 Pacific Parade, Bilinga, 4225
The taxpayer owns a unit on the Gold Coast which is rented to their daughter. A contract was entered into to purchase the property on 22 January 2019 for $600,000 and settlement took place on 1 March 2019. The taxpayer’s daughter moved in immediately. She pays rent in advance of $440 on Wednesday each week and is made in full weeks. The first payment was made on the day she moved in. (HINT: You need to research the issues around renting properties to relatives and include your findings in your workpapers and letter of advice.)

The building was originally constructed in 2005. A quantity surveyor’s report commissioned at the time of purchase shows the construction cost of the unit was $190,000.
The taxpayer purchased a refrigerator for $1,180 and a washing machine for $1,600. These were installed in the unit for use by the tenant on settlement date. The taxpayer elects NOT to use a low value pool for depreciating assets and chooses the diminishing value method of depreciation where applicable.

Other costs paid in relation to the property before 30 June 2019 include:

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