Sample exam question 6 - August 2015

Go Explore is the name of a popular retailer, supplying camping, fishing and outdoor equipment.

Go Explore is the trading name of Go Explore Pty Ltd which is a private company, incorporated in Australia.

Go Explore is seeking to expand and will be meeting with potential financiers in the near future.  As a result, it wants to maximise its taxable income as part of a broader picture of showing the best results it can.

You have a discussion with the CFO (who has no real idea about stock valuation for tax purposes) and that discussion involves talking with the CFO about the different methods of stock valuation available for income tax purposes.  You do not talk about obsolescence as you know (and have confirmed) it not an issue for Go Explore as they keep fairly low stock levels and the stock turnover is generally good.

The CFO advises that whilst some stock lines actually cost more than their market or replacement values, some cost significantly less.  The following information was provided to you:

Stock line	Units on Hand	Cost per Unit	Market Selling Value per Unit	Replacement Value per Unit
Kids Neon Blue Fishing Rod	400	$10	$15	$10
Self-inflating mattress	650	$60	$55	$58
Super warm sleeping bags	500	$70	$73	$75

You are not sure about the logic of the replacement value of the sleeping bags being higher than the market selling value but the CFO advises that it is soothing to do with the “super cold snap happening down south” which means that the suppliers have put up their price”.  90% of sales by Go Explore are from Brisbane and they cannot sell these super warm sleeping bags at high prices.

Go Explore has lots of other stock lines as well but wants to value these at cost as it does not have details on the other values.  The value of the closing stock (not including the stock lines detailed above) at cost totals $680,000.

All stock for the current year has been valued at cost for accounting purposes and in the prior year ‘cost’ was also used for both accounting and tax numbers.  Prior year closing stock was costed at $610,000.

Other results for the current year were:

Sales	$3,600,000
Purchases	$2,800,000
Operating Costs	$400,000

Go Explore is registered for GST and all amounts above are GST exclusive.
Required

a) What did your discussion with the CFO about the different methods of stock valuation involve? What were the key points you made?    (4 marks)

b) Calculate the taxable income of Go Explore Pty Ltd for the current year assuming that they wish to maximise their taxable income.  Show all workings.    (7 marks)

Click here to view the answers.

Making the most of your Monday

Nothing sends your productivity into overdrive like getting a flying start to the week. Although you might classify Mondays as the ‘weekend hangover’, it’s better to use the day as an opportunity to establish your priorities and beat your deadlines. Whether you’re facing five days filled with client meetings or the last phase of a project that requires your analytical skills to be razor-sharp, here are four top tips for making the most of your Monday.

Get an early start

There is a directly proportional relationship between waking up early and getting the most out of your day. According to recent research, those with a tendency to wake up early were found to feel happier, more productive and energetic than those who rose at an average time – a finding that can work wonders for productivity. From avoiding caffeine after midday to bringing your alarm forward, there’s plenty you can do to rise early on a Monday and prepare yourself for the week.

Factor exercise into your schedule

Do you find yourself spending long hours hunched over reading documents or staring at spreadsheets on a screen? Making exercise part of your Monday schedule can supercharge your concentration levels and help you focus on the task at hand. Whether you attend an early-morning yoga class before commuting to the office or swapping the train to cycle or walk into work, upping your endorphin levels after the weekend can make you more efficient in the days to come.

Build a buffer into your diary

We’ve all arrived at work on a Monday only to find there’s been an issue with a client’s financials or an obstacle that will delay a project. But setting aside time to troubleshoot on a Monday – even if it turns out you don’t need it – can help you sail into Tuesday calm, cool and prepared.

Prioritise the week’s most important tasks

When you’re staring at a week shaped by round-the-clock deadlines, it’s easy to feel overwhelmed. Unfortunately, this can give rise to the kind of reactive mindset that can create stress during the next five days. On Monday morning, spend some time looking at your diary, re-evaluating your goals and prioritising the week’s most important tasks. That way, you know when you’re hitting your professional targets and can change your course when you start to drift.

From fast-tracking your wake-up call to setting aside time to resolve issues that will inevitably arise, committing to making the most of your Monday can work wonders throughout the week. What do you do to get the most out of your Monday?

A successful career in tax will change your life. Figure out your aspirations and start taking action today.


Take the next step in your tax career with the Graduate Diploma of Applied Tax Law 

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Member profile: Abby Hinchcliffe

Employer: Thomas Noble & Russell

Position: Intermediate Accountant

As a mature aged student I completed my Bachelor of Business degree majoring in Advanced Accounting in 2013. Shortly after I kick started my career in a medium size private practice firm named Thomas Noble and Russell where I have been working for the last 22 months whilst undertaking my Diploma of Chartered Accounting. Thomas Noble and Russell (TNR) is a longstanding firm with a reputation for providing high quality and detailed service. With a strong focus on in-house training it is the perfect environment for me to develop a solid foundation as a Tax Practitioner.

Describe your current role

With almost 2 year experience in business services I am currently focusing on learning the mainly technical aspects of accounting. My daily activities include the preparation, lodgment and administration of Business Activity Statements, Monthly Payroll Tax Calculations, Instalment Activity Statements, Income Tax Returns, and Financial Reports for all types of entities. I correspond with the ATO, other government bodies, bookkeepers and other businesses on behalf of our clients. I liaise and build relationships with my clients and colleagues, which I find most rewarding.

Describe your involvement in The Tax Institute’s committees or contribution to the Institute

Having completed the CTA1 Foundations and CTA2 Advanced course through The Tax Institute. I was so impressed by the concise and practical content and delivery of these courses that I wanted to get more involved with The Tax Institute. I now sit on the Graduate Diploma Committee, which allows me to meet more young tax practitioners (like myself) and discuss how we can support ourselves more as upcoming Tax Professionals. Studying with The Tax Institute has hugely supported me to be more confident applying my knowledge and understand of tax on a daily basis.

What are your career highlights?

I am very thankful for being hired by TNR where the partner and the team I work for take the time to train me in all areas of tax. Other highlights include many moments of appreciation such as receiving client referrals and feedback, the satisfaction of working well with my team and getting to meet people I would not have the opportunity to meet elsewhere.

Why did you join The Tax Institute?

I joined The Tax Institute because I want my involvement in accounting to be broader than the sole office I work in and to network with other Tax Professionals. My commitment to The Tax Institute is a gesture of support and respect for the industry I work in.

What advice can you give to graduates?

Don’t be shy to upsell all your great qualities even if you have no experience, you are no less because you are at the beginning of your career. Understand and respect the wealth of understanding you will build over time. If there is something you don’t understand, make the time to research and discuss with other professionals for your own understanding. Appreciate anyone who is willing to support your learning. Get to know you clients and colleagues as best as you can.

Who or what inspires you?

Many people inspire me including my collegues, friends and family. I will use this opportunity to thank Natalie Benhayon specifically who inspired me follow my heart and peruse a career in accounting.

What do you do to unwind?

Walking, Conversations with my fiancée, family & friends, Cooking, Having a bath and an early night (especially on a Wednesday).

Favourite holiday destination?

Hoi An in Vietnam, it is super relaxing by the beach, lovely people, great food and full of tailors…and a baragin.

Where can a career in tax take you?

What do you want from your career? A new challenge every day? The opportunity to travel the world? To make a difference? Financial security? Whatever your reasons, it's important to give the question some genuine thought, especially if you have your eye on working in a competitive field like tax and accounting.

As industry experts at the recent Tax Institute webinar on working as a tax professional revealed, tax is alluring to today's graduates for many reasons. Here we examine several of their suggested benefits of entering the numbers game.

More advice

According to Stephen Holmes, CTA and partner at WMS Chartered Accountants, professional services firms are expanding knowledge so they can provide advisory in addition to tax compliance services.

“You need extra skills to ensure clients stay with you and have confidence in your abilities,” he says. For you, this means more exciting and challenging work, as well as opportunities to develop your potential.

Flexible options

Holmes added that a major challenge facing new entrants is how to become an indispensable expert. While you can specialise in an industry or technical area that interests you, he emphasised the importance of getting to know your niche really well.

International opportunities

The transferable skills you develop as a tax professional will give you confidence to pursue global opportunities. Speaking during the webinar, James Collacott, CTA and senior manager at DFK Crosbie, shared his experience in becoming a successful local tax professional after migrating from the UK.

“[The] tax systems are different,” he says. “You need to swallow your pride, knuckle down and work hard.”

Purposeful days

If you're seeking variety in your career (as well as in life), the tax and accounting path is for you. As Holmes reveals, there is really no ‘typical day’ once you reach partner level.

“Early on, your days are similar, but doing the same thing over and over is a good thing for your future career.” Your days will become more varied as you climb the ranks, although the repetition you experience at a junior level is still necessary – and extremely valuable, as it will help build your technical and client skills.

How can you kickstart your tax career today?

Collacott encourages budding tax agents to stand out from the crowd by demonstrating their abilities in all facets of the industry. You can undertake the Chartered Tax Adviser program, which increases your knowledge and bridges the gap between the theoretical and practical aspects of practice, or become a member of The Tax Institute. He also suggests gaining education in areas like marketing, management and communication.


Take the next step in your tax career with the Graduate Diploma of Applied Tax Law 

Find out more