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:
|
|
|
|
|
|
|
|
392,576
|
392,576
|
- Decline in value (depreciating assets)
|
|
|
13,592
|
13,592
|
|
|
|
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:
|
|
|
|
|
|
|
|
210,969
|
210,969
|
- Payments to community organisations
|
|
|
13,786
|
13,786
|
|
|
|
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:
|
|
|
|
|
282,498
|
110,078
|
392,576
|
- Decline in value (depreciating assets)
|
9,781
|
3,811
|
13,592
|
|
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:
|
|
|
|
|
151,813
|
59,156
|
210,969
|
- Payments to community organisations*
|
9,920
|
3,866
|
13,786
|
|
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.
This guide explains the principle of mutuality and helps not-for-profit clubs, societies and associations calculate their taxable income. (NAT 73436)