Question Four (15 marks)

Part A (9 marks)

During the year ending 30.06.2020, Vintage Ltd, a resident Australian public company, provided you with the following information:

The balance of Vintages franking account on 1 July 2019 was $5,000

Paid PAYG instalment $120,000 on 1 October 2019

Received a $350,000 distribution from its UK subsidiary on 1 October 2019

Paid a $300,000 distribution franked to 50% on 1 October 2019

Received a distribution of $500,000 franked to 60% on 1 November 2019

Paid PAYG instalment $125,000 on 31 December 2019

Paid dividends of $250,000, fully franked, on 1 May 2020

Received a $55,000 income tax refund on 30 May 2020

Required:

Prepare Vintages franking account and calculate its balance for the year ending 30 June 2020. State what effect each transaction has on the companys franking account, supporting your answer by referring to relevant legislation.

Date	Transaction	Debit	Credit	Balance
1 july 2019	Balance bf		5000	5000
1 oct	Paid Distribution franked 50%	64,285.71
	(300,000 x 30/70 x0.5)
1 nov	Received distribution franked 60%		128571.43
	(500,000 x 30/70x0.6)
	1 may Paid dividends fully franked (250,000 x 30/70)
	Income tax refund	55,000

(9 marks) (75 words not including calculations)

Part B (6 marks)

Shares in Idol Pty Ltd (Idol) at the beginning of 2017 were owned by individuals as follows:

A 12%, B 40% and C 48%= 100%.

Idol was in a tax loss position in the 2017, 2018 and 2019 tax years. However, in 2020 conditions improved and Idol produced a taxable income. The company wishes to apply some of its tax losses generated in 2017-19 to reduce its taxable income in 2020.

Assume that throughout 2018, 2019 and in 2020 the shares were beneficially owned as follows:

A 64%, B 23% and C 13%= 100%.

Idol ran a retail clothing store in 2017 when the first loss was made but has converted its business into hotel management in 2020.

Required

Indicate and explain whether Idol can carry forward its tax losses to 2020. Show all calculations and cite relevant legislation where appropriate to support your answer.

(6 marks) (100 words not including calculations)

Total (9 + 6 = 15 marks) (175 words not including calculations)