University : Macquarie University UniLearnO is not sponsored or endorsed by this college or university.
Subject Code : ACCG3020
Country : Australia
Assignment Task


Task Overview:
• Your written response to this assignment must be presented in an essay format.  

 

BFF Fine Jewellery Pty Ltd (“BFF”) Scenario

BFF Fine Jewellery Pty Ltd (“BFF”) is an Australian resident company that manufactures jewelry which it sells directly to retail shops around Australia. The business premise is located in Macquarie Park, Sydney. The company has two directors and shareholders, Mr. and Mrs. Baldwin who each hold 10 shares in BFF. These shares were acquired for $1,000 per share on 10 January 2000 by Mr & Mrs. Baldwin when BFF was incorporated.

Balance sheet

 

Additional information:
1)
Accounts receivable as of 30/6/2019 Nil
2) Trading stock on hand – 1/7/2019 Nil

  • Trading stock on hand – 30/6/2020
  • Cost $120,000
  • Replacement cost $165,000
  • Market selling value $350,000
  • The trading stock account doesn’t include the stock costing $25,000 that is yet to be delivered because it is still on a freighter at sea. BFF holds the bill of lading for the trading stock and delivery to the warehouse is expected on 1 July 2020.

 

3) Mr. and Mrs. Baldwin decided to relocate their business operations to Singapore from 30 June 2020 and sold the following assets:
 
Business premises: acquired on 1 May 2000 for $2,620,000 which included the administration office, factory, and warehouse. Entered into a contract on 20 June 2020 to sell for $4,500,000. The legal fees and agent fees on the sale totaling were $225,000. The sale was settled, and the capital proceeds received on 30 July 2020.
Residential premises: acquired from Mr & Mrs. Baldwin for $1,100,000 on 10 February 2014. However, a registered valuer had advised BFF that the market value of the premises was only $750,000 at the time. Entered into a contract on 1 June 2020 to sell for $2,300,000. The legal fees and agent fees totaling $115,000. The sale was settled, and the capital proceeds received on 1 July.


Required:
1) Advise Mr. and Mrs. Baldwin on what amounts may be included in BFF’s assessable income for the 2019/20 tax year (Assuming Mr. and Mrs. Baldwin want.

2) Calculate BFF’s assessable income for the year ending 30 June 2020. 
3) Mr. and Mrs. Baldwin decided to relocate to Singapore indefinitely and left Australia on 30 June 2020 to set up their business. In addition to their shares in BFF as of 30 June 2020, Mr. and Mrs. Baldwin also own their investment property, a vintage motor vehicle (built-in 1950), an art collection, and 2,000 units in ABC trust, a large publicly listed commercial property trust. 
Q-Explain the CGT consequences of the relocation to Singapore assuming Mr. and Mrs. Baldwin would be considered foreign residents of Australia for tax purposes from 30 June 2020. 
4) The business is flourishing and expanding rapidly in Singapore. Mr. and Mrs. Baldwin received an offer on 1 February 2021 to sell their shares in BFF for $100,000 per share. Mr. and Mrs. Baldwin also sold their artwork for a capital loss of $35,000 in the same tax period.
Q-Explain the possible CGT implications if they accept the offer to sell their shares in BFF.

 

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  • Posted on : February 19th, 2019

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