Taxation Law – and franking account

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  • Taxation Law – and franking account

    Question 1 

    Thomas is in the business of selling computers and software. Most customers pay at the time of delivery. However, Thomas provides credit to his largest customers. During the year ended 30 June 2019 Thomas received $2,800,000 in cash for sales of computers and software. Sales which had been made during the year ended 30 June 2018, but which were paid for in the year ended 30 June 2019 were $260,000 and are included in the $2,800,000 above. At 30 June 2019 sales of computers and software not yet paid for amounted to $430,000. During the year ended 30 June 2019 purchases of computers and software were $1,800,000 and at the end of 30 June 2019 stock on hand was $150,000. Thomas’s closing stock for the year ended 30 June 2018 was $630,000. During the year ended 30 June 2019 Thomas took 2 computers from his stock for private use. The computers cost him $1,240 each and had a market value of $1,630 each. He also gave away another 4 similar computers to friends during the year.

    Required: 

    What is Thomas’s taxable income, assuming there are no other relevant transactions.  

    Question 2 Gareth had an overall loss for the year ended 30 June 2018 from all his activities of $180,000 (there were no capital losses). Included in this loss of $180,000 was a donation to a charity of $25,000. During the year ended 30 June 2018 Gareth earned exempt income of $11,000. Gareth had business income of $500,000 for the year ended 30 June 2019. During the year ended 30 June 2019 Gareth also received an inheritance of $80,000 (lump sum) and real estate of $1,630,000 from a distant relative who died on 14 August 2017. 

    Required: What is Gareth’s taxable income for the 2019 tax year, assuming there are no other relevant transactions? 

    Question 3 On 1 July 2018 Maxwell bought a rental property for $820,000. He borrowed $530,000 on the same day from the bank to buy the property. The term of the loan was 4 years. The property was leased on 1 July 2018. He received rent in cash from his tenants during the year ended 30 June 2019 in the amount of $85,000. Included in this amount was a payment of $11,000 on 28 June 2019 as rent for the month of July 2019. 

    Required:

     What is Maxwell’s assessable income for the year ended 30 June 2019?    

    Question 4 

    Maxwell (from Question 3) also incurred the following expenses during the year ended 30 June 2019 in relation to the property: 

    ? Repairs to the front fence damaged by his tenant            $1,750 

    ? Agent’s Commission for collecting rent           $3,780

     ? Loan Repayments ($6,250 principal and $40,250 interest) $46,500 ? Loan application fee (paid on 1 July 2018)               $1,200

     ? Stamp duty on the mortgage for the loan (paid on 1 July 2018)             $1,800

     ? Stamp duty on the purchase of the property (paid on 1 July 2018)               $33,000

     ? Building a garage at the side of the property on 1 January 2019                      $103,500

     ? New microwave (purchased 1 July 2018 with an effective life of 5 years)                $1,650

     ? Repairs on 2 July 2018 to the Stove damaged in June 2018                    $470 

    Thomas wants to minimise his taxable income for this year. 

    Required: 

    Calculate Maxwell’s allowable deductions for the year ended 30 June 2019. 

    complete case study is attached below

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