1.Discuss about the “Financial Probity”.
2.What are accounting and Financial Information Management Systems and how do they assist Business Operations?
3.List at least 10 forms of legislation and Conventions (Australian, international and/or local) that could apply to Financial Management
4.Explain a maximum of 150 words for each answer the requirements for each of the following:
Good and Services Tax
Probity can be referred as procedural integrity. It comprises variants such as moral excellence, integrity, uprightness, conscientiousness, honesty, and sincerity while procuring processes. In terms of finance, it can be said that it is necessary for ensuring that business activities include specification such as:
- Consistency and objectivity for the assessment as per published criteria
- To ensure confidentiality of sensitive information and assets
- Determination and resolution of identified conflicts of interest.
It is the accountability of the business entity to ensure fairness while maintaining probity in the financial and operational activities. The same could be done through providing ethical behaviour in their business procedures (Saidin & Badara, 2014). As probity offers assurance to stakeholders regarding the fact that operational activities were conducted in a reasonable manner which is equitable, fair, and defensible. Financial probity is one of the main variants which is included while developing the procedures and policies of an organization. In case of financial terms, it can be said that the funds are required to be generated and invested by implementing probity values through codes of practice and policies (Keay, 2015). It is also applied on managerial authorities to demonstrate probity values through leadership, in order to positively underline the values.
2.Accounting & Financial Management Information Systems (FMIS)
Accounting Information system can be specified as a structure which is applied to an organization or business to collect, store, retrieve and manage the financial and accounting information so that the same is available for accounts, tax consultants, auditors and other officials at the time of requirements (Allen, Hemming & Potter, 2013). On the other hand, Financial Management Information System is referred as a system of accumulating and analysing the financial data which assist in taking financial decisions in order to run the business in an efficient way. Its main aim is to meet company’s financial obligation with minimum usage of financial resources with a margin of safety.
The manner in which they assist in business operations:
Financial Management Information Systems is required by public financial management processes in the process of preparation and execution of budgets (such as commitment control, treasury operations cash/debt management,), accounting and reporting and the data for these procedures is procured from AIS. FMIS improves the efficiency and productivity of government operations, and offer a great potential for increasing participation through providing transparency and accountability. Various accounting reports, working capital reports, cash flow forecast, operating and capital budgets, and What-If Analysis reports are generated as outputs of the system (Smith, ). It can be facilitated when used with Decision Support System (DSS).The World Bank is a provider of financing and technical help for FMIS development. The development, implementation and maintenance of the financial information management system, comprises adequate internal controls provided for recording, storage, retrieval and destroying financial information of the business. It should be ensured that financial information is secure by enforcing user access controls to prevent unauthorized users from accessing the system. A variety of advantages can be gained through implementing FMIS Systems like integrated information about financials; reporting is flexible, control over expenditure and minimum administration of business is required.
3.Legislation and convention applicable to financial management
- Financial Management Act 1996
- Corporation Act 2001
- Australian Securities and investment commission
- Financial Management and Accountability Act 1997
- Financial management Act 2006
- Australian Prudential Regulation Authority (APRA)
- Commonwealth Funds Management Limited Act 1990
- Financial Framework (Supplementary Powers) Act 1997
- Financial Ombudsman Service (Australia)(FOS)
- Australian Bankers' Association Inc.
4.Goods and service tax
GST is an acronym for goods and service tax. Tax rate of 10% regarding GST is applicable on most of the products and services sold or consumed in Australia. The GST is imposed on taxable supplies. Individual carrying on an enterprise will be entitled to reimbursement for the GST paid on business inputs in the form of input tax credits. GST can be charged on the goods and services supplied to the customers and are entitled to remit this amount to ATO (Tang, 2016). Henceforth, owner of the enterprise acts as a collection agent on behalf of ATO. In the case when GST liability is comparatively higher than credit entitlements of input tax than individual need to pay the only difference amounts to the ATO. While on the other hand individual will receive a refund in case of where liability of GST is less in comparison to input tax credit entitlements. Individual must have registration if following conditions are satisfied:
The individual is running an enterprise.
Annual turnover is $75,000 or higher (or $150,000 if organisation is non-profit).
If business turnover is lower than cited limit than registration under GST is optional.
Companies which are residents of Australia are required to pay taxes on their worldwide income. However, non-resident companies are required to pay tax charges only on their Australian income. The company is a tax is applicable to corporate entities on the basis of profit generated by them. However; tax rate is not uniform for all companies as it varies on the basis of their nature of operations and financial status (Harding, 2014). For companies, the tax rate is 30% however small business entities (if their aggregated turnover is lower than $10 million) are required to pay tax at 27.5%. This also generates franking credit to prevent double taxation on dividend income. The maximum rate of franking credit is 30 cents on per dollar of the dividend.
PAYG is an acronym for Pay as you go tax system. It is a system developed for constant payments towards their income tax liability on expected annual revenues. If an individual earns income through business or investment sources over certain amount than it is applicable. PAYG instalments should be paid before Annual tax return. An individual can opt for paying PAYG instalments in two ways.
It is the amount calculated by making use of business and investment income assessed on the basis of recent income tax return (Ediev, 2014). This method helps in knowing the amount of instalment on quarterly basis, which may help in making plan and budget for the payment.
It is an amount based on definite income which is multiplied by a concerned tax rate. This method helps in knowing the amount paid, and which reflects business and investment income for the quarter. If income fluctuates, then this method is preferred
Allen, R., Hemming, R., & Potter, B. (Eds.). (2013). The international handbook of public financial management. Springer.
Ediev, D. M. (2014). Why increasing longevity may favour a PAYG pension system over a funded system. Population studies, 68(1), 95-110.
Harding, M. (2014). Personal tax treatment of company cars and commuting expenses.
Keay, A. (2015). Board accountability in corporate governance. Routledge.
Saidin, S. Z., & Badara, M. A. S. (2014). Assessment of the Principles of Corporate Governance Practice in the Public Sector Organizations in a Developed Domain. Assessment, 1(1), 7-13.
Smith, B. (2017). Determinants of sound budgeting and financial management practices at the decentralised level of public administration. OECD Journal on Budgeting, 16(2), 109-128.
Tang, C. (2016). Australian GST update—2015. World Journal of VAT/GST Law, 5(1), 32-41.