I need to help writing a Business Letter Of Advice, only the executive summary and details of advice as shown under attachment
3108AFE Taxation Planning PROBLEM SOLVING ASSIGNMENT - 35% This problem-solving assignment is designed to assess the learning outcome of students expressing their understanding of Australian taxation system in resolving hypothetical tax problem. Students will be required to provide “tax planning” advice to the client Students are required to complete the File-Note and Business Letter of Advice Students are provided comprehensive facts about a client seeking tax advice. Looking at these facts, identify the issues, the relevant law; apply the relevant law to the client’s facts; and provide a final conclusion in the File Note. The final conclusions will support or form the basis of your recommendations in the Business Letter of Advice. File Note · Apply the law to the client’s facts, and ensure that appropriate law has been identified and referenced to the Income Tax Assessment Act 1936, and Income Tax Assessment Act 1997. Use the STEP document to ensure all law is applied in the required format. · File-Note will be around 15 to 20 pages in length; · The recommendations in the File Note will support the advice provided in the in the Business Letter of Advice. Business Letter of Advice Students are able to express their understanding of the law and recommended tax advice (as supported in the File-Note) in the Business Letter of Advice. The assessment of the BLA will focus on the ability to express the operation of the tax system clearly in a language the client understands. Check the marking criteria (Rubric) to ensure the BLA and File Note meet the requirements of the assessment, in terms of format and language. Your Supervisor from Right Tax and Financial Services, provides the following information on a new client, seeking tax planning advice. Matt (31 years of age) and Elliott Lark (28 years of age) are brothers who commenced a partnership, growing and selling organic vegetables and supplying the produce at the farmers markets and select retail grocery stores in 2020. The business is registered under the name “Pure Organic Fruit and Vegetables”. It was agreed at the time of forming the partnership that Matt would contribute towards the equity and Elliott would run the organic farm, part-time, until the business earned a profit. The business is registered for GST, and the Commissioner issued a private ruling confirming that Matt and Elliott are carrying on a business. The farmland in Warwick, has been leased from the Matt and Elliott Lark’s grandfather for a nominal fee of $21,000 per year. The property was purchased in 1980 for $120,000. The market value of the leasehold is $538,000. Matt and Elliott, hope to buy the 10 hectares of land from their grandfather in the foreseeable future. To transport materials, seedlings and organic crops, the partnership purchased a Toyota Utility Truck (known as an ‘ute’) on 1 July 2019, for $35 000 (excluding GST). As at 30 June 2020, the Ute has a tax written down value of $22,625. The ute is only used for business purposes. The depreciation claimable each year (for taxation purposes) is $7,800. A second-hand tractor was purchased on 1 July 2019 for $60,000 (excluding GST), and the depreciation claimable each year (for taxation purposes) is $11,000. To earn extra income, Elliott works 28 hours per week in the neighbouring farm, earning $55,000 for income tax year in 2020, and the same for 2021. As the business grows, Elliott will increase his time spent on the farm. In contributing equity, Matt is employed full time with the Queensland Government and has an annual salary of $210,000. In addition to his salary, he receives fringe benefits amount of $45,000 and has reportable superannuation contributions of $5,000 per year and investment losses of $65,000 Business Plan In the first financial year ended 30 June 2020, assessable income (excl GST) was $13,000 and deductions were $41,000. Matt and Elliott decided to expand their business from 1 July 2021, and need to restructure their current business structure. The business is projected to make the following net losses and or net income: Projected Net Income or Net Loss Year ended 30 June Assessable Income Deductions Net income/Net loss 2021 17,000 58,000 (41,000) 2022 58,000 91,000 (33,000) 2023 101,000 129,000 (28,000) 2024 534,000 132,000 402,000 In the year commencing 1 July 2022, Matt and Elliott will expand operations to “online” home deliveries of organic fruit and vegetables, projecting gross sales to double. Within ten years, the business will diversify and net income is forecast over $1 million. Equity and future diversification On 10 July 2022, George Regan, a long-term friend of both brothers will join the business and contribute $900,000 for half ownership in the business. The equity will be used to buy additional plant and equipment, and provide capital towards the purchase of the land in Warwick. With the future expansion, the assessable income is forecast to double in 2023 and net income is projected for the year ended 30 June 2024. FACTS FROM MEETING Matt (42 years) and Lucy (39 years) Lark Matt Lark’s spouse, Lucy does not work as she is a full-time parent to their 3 children: Jill 5 years old; and 17-year-old twins: Lucas and Flynn. Both twins work at the markets, each earning $6,000 for the year. No superannuation was paid by the partnership for the year ended 30 June 2020. Matt and Lucy own their own home in 20 Maryland Street, Cleveland purchased in December 2014 for $500,000 with no mortgage. (Market valuation was $1,700,000, at the end of 2020). Matt and Lucy own a (negatively geared) investment property in Byron Bay (20 Bay Street) purchased in March 2016 for $1,200,000, with a mortgage of $900,000. (Market valuation was $2,800,000, at the end of 2020). Elliott (38 years) and Janice (34 years) Lark · Elliott (38 years) and Janice (34 years) Lark Elliott and his wife, Janice own their residential property in South Brisbane, (203 Vulture Street) purchased in April 1989 for $500,000, with a mortgage of $100,000. (Market valuation of $950,000 on 30 June 2020). Janice is a lawyer earning $150,000 per annum. Janice had a baby girl, Ava, on 1 February 2021. She is currently on maternity leave and undecided whether she will return to her employment as a lawyer. George Reagan (44 years) George, a company director of Coles Mining Ltd, earns $300,000 per annum and has no partner or children. Matt and Elliott Lark request advice on the following: (1) Financial year ended 2020 and for 30 June 2021 Matt and Elliott have not submitted their tax returns for 2020. They have asked if they able to offset the net losses in the Partnership against their assessable income? (2) From 1 July 2021 Given the information above, Matt and Elliott would like to restructure their “partnership” business. Prepare advice for Matt and Elliott and recommend which tax structure will meet the future needs of the business taking into account: · Introduce George Reagan’s future equity into the business (in the 2023 year of income), and request for half ownership in the business; and · Offset the projected losses (earned by the business) for years ended 2022, and 2023 against future projected income in 2024; and · Outline how the new structure can/will minimise future taxable income for Matt and Elliott. (Matt and Elliott want a general discussion and have not requested any calculations.) Required For the above advice required, prepare a Business Letter of Advice for Matt and Elliott Lark. The advice in the BLA must be supported in a File Note. Is your BLA in the required format? · “Our Understanding” set out the facts as you understand them; · “Executive Summary” provides a summary of all key recommendations; · “Understanding of the law” will the client understand “what is being recommended” and “why “? · Careful with your use of language – in the BLA, will your client understand the advice or is it too technical and confusing? With a BLA, comprehensive referencing to the Income Tax Assessment Act is NOT required to support your recommendations. 1 [Insert your firm’s address] Example format of a Business Letter of Advice Tax Planning [Insert your firm’s address] May concisely assesses the client’s options on each matter or action, and makes specific recommendations for each one [Include contact person in firm] [Insert Date] [Insert client’s address] Dear [Insert particular contact person’s name if known] [INSERT SUBJECT HEADING] We refer to our meeting on [insert date] and your request for advice in respect of the purchase/sale of ………. In particular, you requested advice concerning: · [Insert advice requested details]; · [Insert advice requested details]; and · [Insert advice requested details]. Below is detailed our understanding of your relevant circumstances, as well as our detailed advice in regards to ....[insert topic]. Our understanding Pursuant to the information supplied by yo, we understand that: · [Insert relevant circumstances of client that affect your advice]; · [Insert relevant circumstances of client that affect your advice]; and · [Insert relevant circumstances of client that affect your advice]. If our understanding is incorrect or there are any material omissions, please advise us immediately, as it may affect the conclusions reached in our advice. Executive Summary After considering your circumstances we recommend………. Detailed below is the precise basis for our recommendations. Detailed advice [Insert precise details of advice and circumstances…i.e.…In purchasing or selling a business….] [Insert references to Appendices, if any. IE In Appendix A ‘Title’ is more detail concerning…] Accordingly, we recommend……. Disclaimers [Insert any relevant disclaimers]. [For example: “The advice given in this letter is for the recipient only and may not be suitable for other applications. The firm takes no responsibility for liability as a result of incorrect use of the above information. This advice is made on certain assumptions and using a particular case, if these circumstances change then any advice in this letter becomes void.” * * * * Please do not hesitate to contact [insert name] on [insert direct phone number] if you have any questions in relation to this advice. Yours sincerely {use if letter addressed to a particular person. IE Dear Joanne} Yours faithfully {use if letter is generally addressed. IE Dear Sir/Madam/Public Officer} [Insert signature] [Insert the person’s name is signing the letter] [Insert the position of person signing the letter] [Insert page break] Appendix A: “Title of Appendix A” [Insert page break] Appendix B: “Title of Appendix B” File note Because you have only recently started in professional practice, a supervisor in your firm will be actually signing the letter. So the