FNSACC501 Provide financial and business performance information

Assessment 1

ASSESSMENT 1 – PROJECT

For this assessment, students are required to liaise with your client and undertake a business needs
analysis. This can be undertaken in a business of the student’s choice in consultation with their
instructor, or alternatively can be done in a simulated working environment with the instructor role-
playing the part of appropriate management of a simulated business model.

You are to consult with appropriate personnel in order to undertake an assessment of your client’s
financial needs. You must undertake an interview / consultation process to achieve the following

Client - Anthony Long - CEO and 100% share holder

Company - Long Consultancy Service Pty Ltd
Product - Business Consultancy
Employees - Anthony Long and Sarah Long (Wife)
Anthony Long provides business consultancy services to companies throughout Australia. He has just
started his business (July 2014), and now that it is getting close to Tax Time, he is after help and
advice.

Anthony has had a good year so far with:

 Total Income $441,981.04
 Total Expenses $249,292.29
 Net Income $192,688.75

The business runs from his house, and Anthony claims pro-rata utility bills through his company
He has a company car, valued at $50,000 - which he purchased 8 months ago through a Bank
Equipment Loan (similar to a Chattel Mortgage). The car is primarily used for business, with some
private use on weekends.

All other assets (such as computer, desk, phone) is in his own name, but used in his business

LONG CONSULTANCY PROFIT AND LOSS

Income

Interest received 1,911.48

Professional fees 150.00
Sales 437,521.36
Service fees 2,398.20

Total Income 441,981.04

Gross Profit 441,981.04

Expense

Accountancy fees 2,400.00

Bank Fees 3,547.66
Donations 1,000.00
Electricity 1,508.73
Gas 1,052.49

Insurance

Workers compensation 2,699.82

Insurance - Other 3,307.24
Total Insurance 6,007.06

Licensing fees 243.00

Motor vehicle expense

Insurance and registration 860.64
Petrol and oil 3,261.35
Repairs 1,022.50
Motor vehicle expense - Other 1,962.57
Total Motor vehicle expense 7,107.06
Office Expenses 14,732.20
Parking 459.18

Payroll Expenses 85,000.00

Postage 176.80
Professional Fees 30,340.00
Rates
Water 913.93
Rates - Other 403.64
Total Rates 1,317.57

Stock - Business Policy & Procedures 12,350.00

Super contributions 50,000.00

Supplies

Marketing 22,918.23
Total Supplies 22,918.23

Telephone 7,920.38
Travelling and entertainment 1,166.48
Waste disposal 45.45

Total Expense 249,292.29

Net Income 192,688.75

#List all the financial objectives of the client, including but not limited to:

1. Tax liability reduction goals:

 Repay your private loans to your business before year end or review Division 7A loan
agreements

 Depreciation is an income tax deduction that allows a taxpayer to recover the cost or other
basis of certain property. It is an annual allowance for the wear and tear, deterioration, or
obsolescence of the property.
Most types of tangible property (except, land), such as buildings, machinery, vehicles,
furniture, and equipment are depreciable. Likewise, certain intangible property, such as
patents, copyrights, and computer software is depreciable.

“Cost segregation studies” to accelerate depreciation on assets:

To determine, and accelerate, depreciation so taxpayers can get the deductions today
instead of 20 years down the road, taxpayers can undergo what's called a 'cost segregation
study,' which divides assets into their respective categories and assigns the appropriate
deductions.

 Review useful life of fixed assets – there may be benefits in scaping or trading in assets
before year end
 Donate to charitable organisations
 Self-employed individuals are usually able to deduct your health insurance, and it's missed
all the time.

2. Wealth accumulation:

Retirement plans:

 With qualified retirement plans come tax benefits as well as wealth accumulation for the
future. Plans like the employer-sponsored 401(k) (limit $18,000 for 2015/2016) are funded
with 'pre-tax' dollars that decrease your taxable income.

3. Asset development:

Property investors:

Property investors can maximise the tax efficiency of their investment properties with some tax
planning.

Consider prepaying interest on fixed rate loans before 30 June to bring forward interest deductions
(particularly if you expect income in the 2013 tax year to be more than your expected income in the
2014 tax year) bringing forward other deductible expenditure (eg maintenance) to claim a deduction
for the expenditure in the current year making sure you are maximising all your depreciation
entitlements (including capital works entitlements) collating records so you can substantiate any
investment property related travel expense claims deferring sale of any investment properties until
1 July to defer any capital gains tax liability to the 2014 year (note a CGT event occurs on contract
date, not settlement date). There’s more in relation to capital gains in Section D.

#Identify relevant legal and financial requirements that will need to be considered in order to
achieve the client’s specific objectives

 Australian Securities and Investments Commission Act 2001

 Corporations Act 2001

 Business Names Registration Act 2011

 Business Names Registration (Transitional and Consequential Provisions) Act 2011

 Insurance Contracts Act 1984

 Superannuation (Resolution of Complaints) Act 1993

 Superannuation Industry (Supervision) Act 1993

 Retirement Savings Accounts Act 1997

 Life Insurance Act 1995

 National Consumer Credit Protection Act 2009, and

 Medical Indemnity (Prudential Supervision and Product Standards) Act 2003.

#Detail other processes the client will need to undertake in order to achieve their financial goals,
such as:

1. Personal investment strategies:

Renting to yourself:

When the tennis operation’s owner purchases the property of his or her business in a properly
structured, arm’s-length transaction, the tax benefits usually are also transferred. What may have
been a largely wasted depreciation deduction for the business becomes an income-reducing benefit
for the new owner. Also helping reduce the owner’s personal taxable income are the interest
payments for the funds borrowed to make the purchase.

Offsetting the deductions, which may be far more valuable to the owner than to the business itself,
is the income from the payments made under the terms of that lease. Rarely do the required “fair
market” lease payments made by the business offset the expenses of owning, repairing, and
maintaining that property. In other words, a loss is available to offset the owner’s income from other
sources.

2. Business registration

How to register a business name:

To register your business name:

 Go to ASIC Connect and log in to your account.

 If you don't have an ASIC Connect account, find out the steps to register.
 If you're logging in for the first time, make sure you say 'no', you don’t have a current
business. You don't need an ASIC key to register.
 Select the Licences and Registrations tab at the top of the ASIC Connect page.
 Select you would like to register a business name from the drop-down box.
 Read the information and tick the boxes. Select Get started.
 Select the relevant ABN option, enter your ABN and select Next. You must enter your ABN
without spaces.
 Enter the proposed business name exactly as you would like it to appear on our register.
Business names are case sensitive.
 Select the registration period.
 Enter the proposed business name holder details.
 Enter the addresses of the proposed business name.
 Confirm the eligibility to hold the proposed business name.
 Review your application. Make sure your business name is spelt correctly.
 Complete your declarations.
 Make your payment.
 If you don't pay within 10 days, your application will be cancelled and you will need to
reapply.
 Confirmation.

3. Insurance needs:

 Business Insurance
 Third Party liability Insurance for business
 Personal whole life insurance