Capital Gain Tax To Income Tax Department – Overview And Requirements

Regulations for Tax Compliance

Discuss About The Capital Gain Tax To Income Tax Department.

According to the Income Tax Assessment Act 1997, a company has to pay taxes for their taxable income allocated to them by the Act. In the case of Houzit Pty Ltd, the amount of tax allocated to them is quite big in figures. After preparing the financial budget of the company, it has to pay the income or capital gain tax to the income tax department. The tax that is allocated to the company is 30% of their profit. In such scenario, the company also has to imply some provisions along with the GST Act, as it is mandatory. GST is mandatory to claim input tax credit for the payment of the suppliers (Cucchiella et al., 2015). In addition to this, another important and mandatory requirement for tax compliance is to file Income Tax return to identify income and deduction. Some other reports that the company has to prepare are business activity statement, GST annual return, PAYG withholding annual reports and tax payments and returns.

As par the Corporation Act, 2001, companies which are registered under this act, has to fulfil various requirements stated in that act in order to continue business (DiMuro et al., 2014). It is mandatory to follow the regulations issued by the government in order to perform the tasks of the company. Some of those regulations are:-

• One resident of Australia should be in the directorial bodies of the company.
• Registered office and a permanent postal address are mandatory for the company.
• Financial statement of the company should be recorded.
• In case of substituting any board member of the company, it should notify the Australian society about the affair.

Nowadays, as the electronics technology is progressing in a rapid speed, it is very common to get an electronic assistance to make a task easier. As for accounting, there are several good accounting software to help in the task of accounting. However, as far as usability and affordability is concerned, two most popular accounting software available in Australia are MYOB and Quick Book. MYOB is likely to be popular for its low price, presenting, and preparing the required task for financial management (Nesticò & Pipolo, 2015). The security level of MYOB regarding the encryption of data is also up to dated. However, Quick Book can provide more analyzed data based on the financial statement of the company regarding the management tasks. It also works well both in online and offline format. It also makes the company up to date by providing regular updates regarding the development taxes. Thus, the software suits the best according to the needs of the company.

The term matching principle means to keep tracks of all the expenses and revenues at the same time in order to match them within the specific period of time. It is a major point to be observed responsibly in order to monitor the financial condition of the business. It is required to record all the expenses made in order to track the overall condition. The data can be used while making the financial statement of the company and thus, the upcoming planning for the business can be decided easily with a chance of less error (Rai & Evans, 2015). Thus, some problems regarding the funding can easily be solved by implementing this method. It is also helpful to keep the lucidity of the company.

Accounting Software

Account group means a group of accounting items recorded as a whole. This makes accounting easier to identify certain areas of the business by analysing those groups instead of going through the entire financial statement. This is more time saving and effective in order to make better analysis of a business.

Time of preparing a budget is very essential as it determines the effectiveness of the budget. Budget can be made in two time periods, one is short term budget and the other is short term budget. While long-term budget is made for stating the financial changes the company has made, short-term budget is used for framing the long-term budget and analysis the error and mistakes so that it can be compensated in the near future (Shouman et al., 2016). The short-term budget can be the basis of the long-term budget as it is more reliable than the long term budget.

Probity is a term to describe the act of doing a job with sincerity, honesty and willingness.  It is mandatory to maintain probity while preparing the financial statement and budget. To maintain the lucidity and truthfulness of the budget, it is highly recommended to maintain the same amount of probity from start to end. These decrease the chances of any error and mistakes while preparing the budget (S?y? & Kordana, 2014). To maintain the probity while preparing the budget, proper analysis, honest and thoughtful examination should be done.

Regarding the past affairs in the statement of Houzit Pty Ltd, it seems necessary to make some improvements in certain sector of the company in order to generate resources in the next financial cycle. There can be three possible steps to make the business more successful. Which are:-

• Reducing the rate of gross profit by 0.9% will help the company to keep up with the steady growth in sales.
• To generate the demand in market more effectively, the company may increase the advertisement budget.
• Some extension to the salaries and wages budget will surely motivate the employees of the company to earn more commissions in sales, which will surely help to reach the company its sales target.

Apart from the items, which has been shown in the budget of Houzit Pty Ltd, there are, some other items which be included and proved beneficial to the company. These are:-

• The loans should be paid in time to get rid of the expenditure of paying additional interest.
• The discount given by the company can be reduced to a certain percentage in order to rise the net profit.
• The payroll system can be improved in order to keep exact account of the salary and wages budget. This can reduce additional costs regarding the expenses.

Risk management is a very important task to do for a management team of the company in order to secure the purpose of it. Thus, some additional modification is required to manage the risks in a more efficient manner (Vogel, 2014). As for Houzit Pty Ltd, following suggestions can be granted in order to manage the risks from various aspects.

• The customers’ base should be secured in a more dignified manner in order to measure the demands in the market more effectively.
• The discounts given should be reflected in the invoices given to its clients estimate it properly in the later budget.
• The cash balance should be verified after every specific period of time to get rid of the treachery.
• It should be ensured that the workers are being paid after completing the work given to them. It is the duty of the service manager to keep monitoring about the workers and the work done by them.
• The assets should be identified with the unique code to keep track to them.
• Debtors balance should be settled within a specific period of time.
• It must be accounted about the newly employed workers and the quitters in order to maintain the clarity in the payroll system. Sometimes, the supervisors are responsible for making error in the payroll for their own benefits (Vittorini & Cipollone, 2016).
• An individual person should do the reconciliation of cash balance so that the lucidity in accounting can be maintained well.

Table 1: Variance Re4port

(Source: Created by Author)

As it has been shown in the report, the assumptions in the budget have not quite met with the reality in many cases. The sales has decreased to 1%, the cost of goods sold has also decreased as the same. Thus, the gross profit also reduced to 1% regarding the budget made last year. The expenses also increased in some cases such as advertising, bank charges, electricity expenses and wages and salaries (Chen et al., 2015). However, some items such as internet expenses, store supplies, cleaning, repairs and maintenance, telephone bill was reduced in term of the budget. Some expenses were assumed exactly in the budget with the reality. Such as accounting fees, depreciation, insurance, luxury car tax, fringe benefits tax superannuation, payroll tax and workers’ compensation (Mitrovic et al., 2015). However, most of them are not changeable in such short period. For this, the expenses also increased to 3% and the net profit decreased to 1874%. Thus, it can be assumed that the budget was not proved itself totally based on the economic reality of the company.

Financial Statement Essentials

Reference

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