Taxation -AW-Q16

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Taxation Final Assessment

Question 1: GST Returns

Part A Case study:


Ian McDougall is a sole-trader and a registered person who returns GST on an invoice basis using a 6 month taxable period.

A machine purchased two years ago (1st Oct 2010) costing $147,375 GST inclusive, was used for a total of 900 hours during the half year ended 30 November 2012. Of this total, 315 hours (35%) use was in respect of private work. In the taxable period ending 30 November 2012 the following GST inclusive transactions (relating to the machine) took place.

  Incurred Date of Inv Inv Paid $
Repairs 10 Oct 2012 20 Oct 2012 31 Oct 2012 2,000
Repairs 25 Nov 2012 30 Nov 2012 08 Jan 2013 615
Power Oct- Dec 2012 31 Jan 2013 15 March 2013 134
Power Oct-Nov 2012 06 Dec 2012 15 Jan 2013 220


The depreciation rate allowed on this machine for income tax purposes was 6.67% straight line.


  1. Calculate the period-by-period adjustment(s)  required  for  the  period  ended  30 November 2012.

(6 marks)



Part B: GST Return

Paula’s Accessories Limited, imports and sells various plastic ware to customers within Auckland. Paula’s Accessories operates out of a factory shop in Kelston, West Auckland and is registered for GST on a payments basis and has a monthly GST filing frequency.
The following receipts were received through Paula’s Accessories bank account in the month of Feb: 2012

  • Sales of $31,805, of this $850 were export sales
  • $60 as rent for a small room above the warehouse (Paula rents this out to help cover the rent on the factory). The upstairs room floor area is 5% of the whole building. The monthly rent includes the use of utilities.

The following payments were made from Paula’s Accessories bank account during the month of Feb 2012

Purchases 5,976
GST on imports 238
Rent 2,000
Rates 86
Power 239
Wages 10,000
Purchase of a second-hand computer from Trademe 1,500
GST for May 2,875
Accident Compensation Levy 32


Other Information

  • Paula noted from the NZ Herald that one of the companies that she had provided goods to totalling $125 was being removed from the companies register. She wrote this debt off in Feb 2012 as a bad debt.
  • Paula’s accountant advised that the total non-deductible entertainment for the year ended 31 Jan 2012 was $175 (ie. 50% of $350). He recommended that an adjustment be made for this in the Feb GST Return.
  • Paula Accessories received an amount of $9,584 of sales via their Barter card account.

Note: all figures are GST inclusive unless GST is not applicable.



  1. Complete Paula’s GST return for the period ended 28 Feb 2012 using form 101A provided. For any amounts not included in the GST Return, please give reasons for their exclusion.
  2. Advise Paula of the amount of GST payable or refundable and the due date for payment.

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Question 2: Companies & Imputation Credit Account

Part A


  1. Briefly discuss the significance of the imputation mechanism from the perspective of the company and the shareholders
  1. What is an imputation credit account and is it part of the financial statements of the company?
  1. Dividends are subject to a deduction of RWT at the rate of 33 cents in the dollar. Due to the change in the tax rates, some dividends may carry imputation credits of only 30% or 28%. What could be the possible reasons for this?



Part B

Eric’s friends Alison, Amber and Brian are shareholders in a movie consultancy company, AAB Limited, which seeks out and provides movie location sites, stunt doubles, costume hire and props to movie production companies. Alison and Amber are shareholder/employees however Brian is not.

The company’s taxable income before interest and dividends, (included below), for the year ending 31 March 2012 was $126,345.



Other transactions for the year were
20 June 2011               Received net interest of $4150 from the BNZ. RWT has been deducted                              at 33%

28 August 2011           Paid the first instalment of 2012 provisional tax of $11,371

30 August 2011           Received  a  net  dividend  from  Warner  Productions  Ltd  of                                             $1,785. The dividend was imputed at 25%

5 October 2011           The company declared and paid an interim dividend of $45,650 to the                               shareholders. The dividends are fully imputed with the maximum                                      imputation credits attached of 30%

20 October 2011         Paid fringe benefit tax of $3120

11 November 2011     Brian purchased a VW convertible from the company.  He paid                                          $25,000 for the car and it had a market value of $30,000.

15 January 2012          Paid the second instalment of 2012 provisional tax of  $11,371

31 January 2012          Received an income tax refund of $2,110  for the 2008-2009 year                                      following reassessment of the return

20 March 2012           Declared and paid a final dividend of $49,750 . This has been imputed                               at the same ratio as the interim dividend.

7 May 2012                 Paid the third instalment of provisional tax of $11,371




  1. Prepare the Imputation Credit Account for the year ending 31 March The opening balance of the imputation credit account on 1 April 2011 was $3,150 debit and this amount and the imputation penalty tax were paid on 20 June 2012. Show all workings.

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