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Example – case study 2

Last updated 9 February 2017

This example uses information provided in Case study 2 in Mutuality and taxable income. Refer to Case study 2 for information to help you understand this example, such as the Celadon Club's financial statements and the calculation of its taxable income.

The Celadon Club has determined its taxable income for the year ended 30 June and is ready to complete its 2014 company tax return.

For guidance in completing its tax return, the club uses:

  • this guide
  • the Company tax return instructions 2014.

The following are extracts of the labels on the club’s completed return.

Relevant period

Example using Relevant period label

The club leaves this item blank, as the dates will default as 1 July 2013 to 30 June 2014.

Item 2 Description of main business activity

Example using Item 2 Description of main business activity label

The club’s main activity is providing licensed facilities to its members and the general public. It enters ‘Licensed club’ in the ‘Description of main business activity’ item and ‘45301’ at B Industry code.

Item 3 Status of company

Example using Item 3 Status of company label

The club is resident in Australia and is a non-profit company. It selects C1 and D3.

The club does not select any boxes from E1 to Z2 as none of them apply.

Item 6 Calculation of total profit or loss

Example using Item 6 Calculation of total profit or loss label
Item 6 amounts are from the following calculations. The club uses the revenue and expense items from its financial statements (to see their financial statements, refer to Case study 2 in Mutuality and taxable income).

T Total profit or loss equals the club’s net profit in its financial statements.

Income

Label

Revenue item

$

C

Bar sales

827,695

C

Bingo and raffle income

23,496

C

Club luncheons – ticket sales

22,500

C

Poker machine revenue

1,598,247

 

 

2,471,938

F

Interest received

54,322

G

Function room hire

6,000

G

Lease income – restaurant

10,000

 

 

16,000

R

Total of other revenue amounts

137,840

S

Total

2,680,100

Note: C Other sales of goods and services includes gross sales of trading stock and gross earnings from services. After filling in relevant specific labels, any remaining gross revenue (such as membership subscriptions) is included at R Other gross income.

Expenses

Label

Expense item

$

A

Bar expenses – cost of goods sold

392,576

A

Bingo expenses

4,533

A

Club luncheons – catering

13,500

A

Club luncheons – entertainment

3,000

A

Raffle expenses

24,851

A

Central monitoring service charges

26,183

 

 

464,643

D

Superannuation

66,499

X

Bar – decline in value

13,592

X

Decline in value (depreciating assets)

121,498

X

Gaming – decline in value

262,481

 

 

397,571

Z

Bar – maintenance and supplies

29,764

Z

Gaming – repairs and maintenance

36,438

Z

Repairs and maintenance

86,563

 

 

152,765

S

Total of other expense amounts

1,320,429

Q

Total

2,401,907

Note: X Depreciation expenses includes depreciation amounts for accounting purposes because the club is not using the simplified depreciation rules. After filling in relevant specific labels, any remaining expenditure (such as subscription expenses) is included at S All other expenses.

Item 7 Reconciliation to taxable income or loss

Example using Item 7 Reconciliation to taxable income or loss label
Item 7 amounts are from the following calculations. The club uses worksheet 2 in the Company tax return instructions 2014 for W Non-deductible expenses and Q Other income not included in assessable income.

T Taxable income or loss equals the club's taxable income in Case study 2 in Mutuality and taxable income.

Label

Classification item

$

W

Depreciation expenses – X item 6

397,571

W

Expenses incurred in deriving non-assessable non-exempt income:

 

 

  • members magazine 
 

8,000

 

  • membership cards 
 

2,000

 

  • subscription expenses 
 

9,226

 

  • other non-deductible expenses less non-deductible decline in value expenses (see note a)
 

1,352,186

 

 

1,768,983

F

Deduction for decline in value of depreciating assets (see note b)

111,479

Q

Other income amounts in the accounts that are not assessable income:

 

 

  • member subscriptions 
 

51,800

 

  • other non-assessable revenue (see note c) 
 

1,780,616

 

 

1,832,416

Notes:
The following figures are taken from 'STEP 3: Separate the apportionable items' in Case study 2 in Mutuality and taxable income:

a Total non-deductible expenses less total non-deductible decline in value (depreciating assets)

= $1,638,278 − ($9,781 + $87,430 + $188,881)
= $1,352,186

b Total deductible decline in value (depreciating assets)

= $3,811 + $34,068 + $73,600
= $111,479

c Total non-assessable revenue = $1,780,616.

Item 15 Licensed clubs only

Example using Item 15 Licensed clubs only label

As the Celadon Club is a licensed club, it calculates the percentage of its non-member income as follows:

Percentage of non-member income equals total non-member income divided by total income multiplied by 100. In this example $847,684 divided by $2,680,100 multiplied by 100 equals 31.6288%

Note: Total non-member income = Assessable income from 'STEP 4: Calculate the taxable income' in Case study 2 in Mutuality and taxable income.

The club rounds the percentage to whole figures and writes 32% at A.

The percentage of non-member income entered at this item differs from the club's non-member percentages calculated in Case study 2 of Mutuality and taxable income. This is because:

  • the club used more than one method of apportionment – that is, a simple method and the Waratahs formula
  • the club's total income includes non-member income such as bank interest.

QC88218