• Step 2: Classify expenses

    Expenses

    Non-deductible expenses

    Deductible expenses

    Apportionable expenses

    Total

    Accounting - general

     

     

    7,000

    7,000

    Accounting - management of tax affairs

     

    3,000

     

    3,000

    Audit

     

     

    5,000

    5,000

    Advertising

     

     

    18,461

    18,461

    Bank charges

     

     

    1,927

    1,927

    Bar expenses:

     

     

     

     

    • Cost of goods sold

     

     

     

    392,576

    392,576

    • Decline in value (depreciating assets)

     

     

     

    13,592

    13,592

    • Maintenance and supplies

     

     

     

    29,764

    29,764

    Bingo expenses

     

     

    4,533

    4,533

    Cleaning

     

     

    45,000

    45,000

    Club luncheons - catering expenses

     

     

    13,500

    13,500

    Club luncheons - entertainer expenses

     

     

    3,000

    3,000

    Computer expenses

     

     

    9,664

    9,664

    Decline in value (depreciating assets)

     

     

    121,498

    121,498

    Directors expenses and honoraria

     

     

    19,712

    19,712

    Donations to deductible gift recipients

     

    12,869

     

    12,869

    Electricity

     

     

    82,478

    82,478

    Insurance

     

     

    48,192

    48,192

    Gaming machine expenses:

     

     

     

     

    • Gaming machine tax

     

     

     

    210,969

    210,969

    • Payments to community organisations

     

     

     

    13,786

    13,786

    • Repairs and maintenance

     

     

     

    36,438

    36,438

    • Decline in value (depreciating assets)

     

     

     

    262,481

    262,481

    • Central monitoring service charges

     

     

     

    26,183

    26,183

    Keno expenses

     

    2,157

     

    2,157

    Members magazine

    8,000

     

     

    8,000

    Membership cards

    2,000

     

     

    2,000

    Payroll tax

     

     

    9,586

    9,586

    Printing, stationery and postage

     

     

    22,544

    22,544

    Raffle expenses

     

     

    24,851

    24,851

    Rates and land taxes

     

    19,688

     

    19,688

    Repairs and maintenance

     

     

    86,563

    86,563

    Salaries and wages

     

     

    728,547

    728,547

    Pay TV

     

     

    21,665

    21,665

    Subscription expenses

    9,226

     

     

    9,226

    Superannuation

     

    66,499

     

    66,499

    TAB expenses

     

    3,661

     

    3,661

    Telephone

     

     

    15,297

    15,297

    Total

    $19,226

    $107,874

    $2,274,807

    $2,401,907

    Step 3: Separate the apportionable items

    Revenue

    Non-assessable

    Assessable

    Total

    Bar sales

    595,609

    232,086

    827,695

    Bingo and raffle income

    16,908

    6,588

    23,496

    Club luncheons - ticket sales

    18,000

    4,500

    22,500

    Poker machine revenue

    1,150,099

    448,148

    1,598,247

    Total

    $1,780,616

    $691,322

    $2,471,938

    Club luncheons

    The club held three special event luncheons during the year (Valentine's Day, Melbourne Cup and Christmas Day). The ticket price to attend each event was $50. The club apportions the revenue from the luncheons on the basis that a total of 450 tickets were sold to the events - 360 tickets to members and 90 tickets to non-members. The non-member percentage to apply using this method is 90/450 = 20%.

    Other revenue items

    The club regularly attracts members of the public, making it difficult to identify and separate its other revenue items. The club apportions these items using the Waratahs formula as follows:

    The percentage of members who attend on a daily basis is 5%, or 250 members on average who attend on a daily basis divided by 5,000 memberships. The total number of visitors for the year was 50,000, which included 43,000 members' guests - that is, visitors signed in by members.

    After putting in the figures, the non-member percentage to apply using the Waratahs formula is 28.04%.

     (B x 75%) + C  =  (43,000 x 0.75) + 7,000   =   0.2803571(R x S x T) + A   5,000 x 0.05 x 360) + 50,000   or 28.03571%

    Expenses

    Non-deductible

    Deductible

    Total

    Accounting - general

    5,037

    1,963

    7,000

    Audit

    3,598

    1,402

    5,000

    Advertising

    13,285

    5,176

    18,461

    Bank charges

    1,387

    540

    1,927

    Bar expenses:

     

     

     

    • Cost of goods sold

     

    282,498

    110,078

    392,576

    • Decline in value (depreciating assets)

     

    9,781

    3,811

    13,592

    • Maintenance and supplies

     

    21,418

    8,346

    29,764

    Bingo expenses

    3,262

    1,271

    4,533

    Cleaning

    32,382

    12,618

    45,000

    Club luncheons - catering expenses

    10,800

    2,700

    13,500

    Club luncheons - entertainer expenses

    2,400

    600

    3,000

    Computer expenses

    6,954

    2,710

    9,664

    Decline in value (depreciating assets)

    87,430

    34,068

    121,498

    Directors expenses and honoraria

    14,185

    5,527

    19,712

    Electricity

    59,351

    23,127

    82,478

    Insurance

    34,679

    13,513

    48,192

    Gaming machine expenses:

     

     

     

    • Gaming machine tax

     

    151,813

    59,156

    210,969

    • Payments to community organisations*

     

    9,920

    3,866

    13,786

    • Repairs and maintenance

     

    26,221

    10,217

    36,438

    • Decline in value (depreciating assets)

     

    188,881

    73,600

    262,481

    • Central monitoring service charges

     

    18,841

    7,342

    26,183

    Payroll tax

    6,898

    2,688

    9,586

    Printing, stationery and postage

    16,223

    6,321

    22,544

    Raffle expenses

    17,883

    6,968

    24,851

    Repairs and maintenance

    62,291

    24,272

    86,563

    Salaries and wages

    524,262

    204,285

    728,547

    Pay TV

    15,590

    6,075

    21,665

    Telephone

    11,008

    4,289

    15,297

    Total

    $1,638,278

    $636,529

    $2,274,807

    * These payments are required under a state law. The law requires clubs holding gaming machine licenses to make payments from their gaming machine revenue to community organisations at a rate prescribed by the state. For this year, the club made cash payments that met, but did not exceed, the prescribed rate.

    Club luncheons

    The club held three special event luncheons during the year (Valentine's Day, Melbourne Cup and Christmas Day). Catering was through the club's contract caterer at a cost of $30 a head. The club apportions the cost of the luncheons on the basis that a total of 450 tickets were sold to the events – 360 tickets to members and 90 tickets to non-members. The percentage to apply using this method is 90/450 = 20%. This percentage would also apply to other costs associated with the club luncheons - that is, the entertainer expenses.

    Other expense items

    The club regularly attracts members of the public, making it difficult to identify and separate its other expense items. The club apportions its other expense items using the Waratahs formula. The percentage to apply using the Waratahs formula is 28.04% (as calculated in Other revenue items).

    Step 4: Calculate the taxable income

    Assessable income ($156,362 + $691,322)

    $847,684

    Less: deductible expenses ($107,874 + $636,529)

    $744,403

    Taxable income

    $103,281

    As its taxable income is more than the taxable threshold, the Celadon Club will need to lodge a company tax return.

    For information on how to complete the company tax return, including a worked example that uses the figures from Case study 2, see Guide to company tax return for not-for-profit organisations.

      Last modified: 23 Jun 2016QC 23099