Facts: Jill is employed full-time as an accountant at a top tier accounting firm
ID: 2342747 • Letter: F
Question
Facts:
Jill is employed full-time as an accountant at a top tier accounting firm. In the 2017/18 year of income, she receives a salary of $100,000 and a bonus of $30,000 for her outstanding dedication in assisting with the training of new graduates at the accounting firm. Jill spends many evenings working past 8pm at the accounting firm and her employer pays for her taxi travel to go home. Jill lives in the suburb of Epping. During the 2017/18 year, Jill also spends $5,000 on a range of contemporary suits, shirts and other ordinary items of clothing that she regularly wears to important client meetings which she is required to attend in the course of her work at the accounting firm. In September 2017, Jill receives an award for “Best Accountant in Sydney” from the Chartered Accountants Association, which includes a cash prize of $3000 and a top-of-the- range coffee machine (valued at $2000).
Jill is very hard-working and in recent years she has been able to supplement her income from the accounting firm, by also undertaking specialist consulting work for a company, CorpCo Ltd (located in Epping) where she works in the early mornings from 7:00 am to 9:00 am, before commuting directly to the accounting firm in Sydney where she is employed full-time. During the 2017/18 year of income, Jill incurs travel expenses of $6,000 in commuting from CorpCo Ltd’s premises in Epping, to the accounting firm in Sydney.
Jill is also very talented at sewing curtains. Her friends are very impressed with the curtains that she has sewn for her home, and several of Jill’s friends suggest that she should consider sewing custom-made curtains and selling them to customers. Jill is very keen on the idea of designing and sewing custom curtains for profit and she is confident of her ability to design and sew the curtains. In October 2017, Jill takes photographs of her various curtain designs, and puts together a glossy catalogue, which she distributes to her friends, colleagues and other potential customers. She keeps meticulous records of her expenses, including travel expenses incurred on her weekend visits to potential customers in their homes to give quotes and take measurements for custom-made curtains. During the 2017/18 year of income, she received and fulfilled four (4) orders for custom-made curtains, and gross receipts from the sale of curtains were $10,000.
Jill has also become quite a collector of rare books. In December 2017, she purchased a set of three (3) rare books for $900. The books are of equal value. In May 2018, she received an offer of $1800 for the set. She negotiates with the buyer to sell each book to them separately.
On 1 July 2017, Jill borrowed $1,200,000 from CashBank Ltd (an Australian resident bank) on an interest only basis at a rate of 5% per annum to partly fund the purchase of an investment property in the Blue Mountains. The balance of the purchase price was paid from Jill’s savings. Jill also paid stamp duty of $50,000 and legal fees of $2,000 in relation to the purchase.
At the time of the purchase, the property was already rented out to tenants who continued to live in the property following the purchase. During the 2017/18 year of income, in relation to the property, Jill received rent of $60,000, and incurred the following expenses: council rates of $2,500, water rates of $500, and insurance premiums of $1,000. Unfortunately on 1 June 2018, during a bushfire in the Blue Mountains, caused by a lightning strike during a severe storm, the rental property was destroyed by fire. Jill received compensation of $500,000 from her insurer in August 2018.
Required:
Advise Jill regarding the income tax consequences of the above transactions for her, in relation to the 2017/18 income year. In your answer, make sure you consider whether any of the amounts/benefits that Jill receives will be included in her assessable income, and whether any of the expenditures that she incurs will be deductible to her for Australian income tax purposes. Also make sure you apply the HIRAC methodology and refer to any relevant cases, legislative provisions, tax rulings and principles of tax law.
Explanation / Answer
A rapid overview of the organizations
%is the largest via sales and essentially the most prestigious of the tremendous four with a robust and centered audit client base.
Headquarters: London, UK
revenue: $35.Four billion
quantity of workers: 208,109
Deloitte is just a fraction smaller than PwC. It gets tremendously much less of its income from audit services and extra from consulting.
Headquarters: big apple, usa
income: $35.2 billion
quantity of workers: 225,four hundred
EY is likely one of the higher organizations by way of employees members, with a relatively balanced spread of offerings. In 2015 it had the fastest overall income development of the enormous 4.
Headquarters: London, UK
sales: $28.7 billion
quantity of employees: 212,000
KPMG is the smallest and most European-centered of the enormous 4, with a powerful consultancy and advisory part to enrich its audit work.
Headquarters: Amstelveen, Netherlands
income: $24.Forty four billion
quantity of employees: 173,965
workplace culture
all the gigantic 4 are keen to inform you their culture makes them stand out. Unluckily this may make them sound very similar. The first-rate approach to appreciate the cultural variations is via talking to individuals who've labored for more than one. Listed here are a number of facets to maintain in mind:
percentis essentially the most prestigious of the four and individuals working there know it. The companys fame and strong audit business means theres a sense of stability you would not in finding at Deloitte for illustration
Deloitte is smaller than percentin the UK and keen to seize up. It has a greater focus on consultancy this means that it's at all times in search of new tasks. Together this makes for an bold, competitive and outcome-headquartered culture
EY has a popularity for variety with a comparatively good document for selling females and a historical past of assisting LGBTQ rights. It's said to be some of the friendlier places to work
KPMG is well recognized for its exceptional staff progress with go premiums for key skills higher than the industry regular. Its tradition is quirky with less strain to fit into the stereotypical metropolis graduate culture
What roles are there for pupils?
The entire massive organizations offer:
Two day residential programmes for first years (or 2nd years on a four year path). They're a hazard to be taught extra about working at the company and when you do well, you could be speedy-tracked for a summer internship
summer time internships for pupils in their penultimate 12 months. These are in the targeted area of accounting you're excited by. Over six to eight weeks you'll study the ropes and likewise work as a part of the group. Do well and you would be furnished a everlasting position for after graduation
Work placements for 12 months in industry scholars. A full yr placement for anybody who wants to spend a yr in enterprise as a part of a four year path
at the same time all of these programmes are very identical, the firms additionally present some extra wonderful opportunities. Listed here are a number of examples:
p.C.Presents a short Tech Academy for students within the technical and IT facet of the trade. There also an eight week data Analytics Academy aimed toward university leavers
%additionally runs an Africa industry crew Programme aimed at students eager about establishing trade in Africa
EY offers a role referred to as student Digital company Ambassador you utilize your contacts and social media presence to promote the EY company for your campus
KPMG runs a females in technological know-how perception Week geared toward getting feminine students concerned in the technology facet of the business
It's fundamental to note the entire firms offer some type of placement or mentorship scheme aimed above all at females. They'll even be present on campus for the period of profession gala's - often offering advantage drop-ins, knowledge periods and even mock interviews.
Who're they watching for?
The important thing expertise each firm highlights on their software pages must give you an inspiration of where you would fit in quality.
PwC - entire management, technical capabilities, industry acumen, global acumen and relationships
Deloitte - a clear curiosity in business a pointy and inquisitive mind, awesome interpersonal knowledge, a willingness to roll up your sleeves and get concerned
EY - Excellence, teamwork, integrity, respect for others, and vigour.
KPMG - A powerful consciousness of business, a curiosity to find out more and the capacity to think of recent methods to resolve issues
advantages
There's little to opt for between here as all 4 corporations present benefits packages an person can tailor. There's the natural 25 days vacation with the alternative to buy extra or cash in some for extra pay. You could decide on and prefer from private healthcare, lifestyles assurance, childcare vouchers, health club membershipâa sharp and inquisitive mind, outstanding interpersonal skills, a willingness to roll up your sleeves and get involved
EY - Excellence, teamwork, integrity, respect for others, and energy.
KPMG - A strong awareness of business, a curiosity to find out more and the ability to think of new ways to solve problems
Benefits
There’s little to choose between here as all four firms offer benefits packages an individual can tailor. There’s the usual 25 days holiday with the option to buy more or cash in some for extra pay. You can pick and choose from private healthcare, life assurance, childcare vouchers, gym membership…the list goes on. Importantly, all four offer a graduate loan to help you get started.
Salaries
None of the Big Four publish a graduate starting salary on their website, preferring just to say it will be ‘generous’. They’re all likely to be fairly similar. In London accountant salaries start around £26,000 to £28,000, rising to £30,000 or more by the time you complete your training contract.
There is supposedly some variation in salaries for summer internships. PwC and EY are more generous offering £2,000 to £2,500 per month, whereas Deloitte and KPMG offer £1,650 to £1,850.
The pay ranges for qualified accountants in all four firms are quite wide. PwC is the highest with £40,000 to £55,000 if you stay on after passing your exams – but there’s a lot of overlap. You could be offered £45,000 at any one of the four.
Check out our guide to salaries in accountancy.
Training
Your first few years at any of the Big Four will be heavily focused around gaining a professional qualification. Depending on your area of interest you may become a Chartered Accountant, a Chartered Tax Advisor or a qualified Actuary. If you’re going into consultancy you may not need a professional qualification but you will still undergo a lot of training.
All four firms believe in flexible development and acknowledge everyone learns differently – but they still have slightly different takes on what this means.
PwC works on the buddy system with a slightly more senior colleague showing you the ropes. You’ll also have a partner or director mentor to help you on your way.
Deloitte also stresses mentorship and flexible development programmes alongside your professional qualifications.
As well as using e-learning, EY focuses on teaching through experiences and coaching. It’s the only one of the firms whose training web pages mention using your skills to give back to the community.
KPMG is perhaps the best for guiding you through your professional qualifications and has a trainee community called the Academy to help give training a more social feel.
Now you've met the firms - have you got a favourite? Wherever you decide to build your career, explore opportunities at Deloitte, EY, KPMG and PwChe record goes on. Importantly, all four present a graduate mortgage to help you get began.
Salaries
none of the significant four post a graduate beginning salary on their internet site, preferring just to say it will be beneficiant. They're all prone to be relatively equivalent. In London accountant salaries around £26,000 to £28,000, rising to £30,000 or more by the time you complete your coaching contract.
There's supposedly some variation in salaries for summer season internships. P.C.And EY are extra generous supplying £2,000 to £2,500 per 30 days, whereas Deloitte and KPMG present £1,650 to £1,850.
The pay degrees for qualified accountants in all four companies are fairly wide. %is the best possible with £40,000 to £55,000 if you keep on after passing your tests however theres various overlap. You could be supplied £forty five,000 at any individual of the four.
Examine out our guide to salaries in accountancy.
Training
Your first few years at any of the enormous four will probably be heavily targeted around gaining a legitimate qualification. Depending to your field of interest you may also emerge as a Chartered Accountant, a Chartered Tax marketing consultant or a qualified Actuary. Should you're going into consultancy you may not want a legitimate qualification but you're going to nonetheless undergo a variety of training.
All four corporations feel in flexible progress and well known all people learns differently however they nonetheless have reasonably exceptional takes on what this means.
Percentworks on the pal method with a moderately extra senior colleague showing you the ropes. You'll actually have a accomplice or director mentor to aid you on your way.
Deloitte additionally stresses mentorship and bendy development programmes alongside your authentic skills.
As well as utilising e-finding out, EY makes a speciality of teaching via experiences and coaching. It's the only one of the most organizations whose training internet sites point out making use of your expertise to offer again to the neighborhood.
KPMG is maybe the excellent for directing you through your legitimate skills and has a trainee group referred to as the Academy to aid provide training a more social believe.
Now you've gotten met the corporations - have you ever bought a favourite? Wherever you come to a decision to construct your career, discover possibilities at Deloitte, EY, KPMG and PwC.
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