• Worked example

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    This worked example is a continuation of case study 2 in our guide Mutuality and taxable income.

    Further information

    For the facts related to the Celadon Club, including its financial statements and the calculation of its taxable income, refer to Case study 2 in our guide Mutuality and taxable income.

    End of further information

    Once the Celadon Club determined its taxable income for the year ended 30 June, the club completes the 2011 company tax return.

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

    Below is an extract of the labels completed by the Celadon Club.

    Relevant period

    Worked example using 'Relevant period' label

    The club leaves this item blank, as the dates will default to 1 July 2010 to 30 June 2011.

    Item 2 Description of main business activity

    Worked example using 'Item 2 Description of main business activity' labels

    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

    Worked example using 'Item 3 Status of company' labels

    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 Z1 to E3 as none of them apply.

    Item 6 Calculation of total profit or loss

    Worked example using 'Item 6 Calculation of total profits or loss' labels

    Item 6 amounts are from the following calculations. The club uses the revenue and expense items from its financial statements (refer to Case study 2 in our guide 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

    Worked example using 'Item 7 Reconciliation to taxable income or loss' labels

    Item 7 amounts are from the following calculations.

    The club uses worksheet 2 in the Company tax return instructions 2011 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 our guide 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 our guide 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

    Worked example using 'Item 15 Licensed clubs only' label

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

    =

    total non-member income x 100        total income

    =

      $847,684   x 100
    $2,680,100

    =

    31.6288%

    Note: Total non-member income = Assessable income from 'Step 4: Calculate the taxable income' in Case study 2 in our guide 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 in our guide 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.
      Last modified: 20 Jul 2015QC 24465