1. CASE STUDY SCENARIO You are a Graduate Tax Advisor, employed by Tax Advisors Pty Ltd. Your Partner has assigned you the following client file after attending a meeting with the client. Client Background Judy Somerville is employed by Ansett Airways Limited (Ansett) since 2003 as a long-haul flight attendant based in Melbourne, Australia. The nature of Judys position with Ansett sees her flying to international ports where she spends 183 days away from her home base each calendar year. The remaining days of each calendar year are spent in Australia, and Judy uses this nonflying time to organise the importation of textiles into Australia from Textiles Inc. (a company registered in the USA). Until recently, Judy was the exclusive distributor of textiles to retailers in Australia. .

Candidates must apply the IRAC principle when addressing the relevant issues (i.e. I= Identify the key issues, R= Cite the relevant legislative provisions and case law (rules) where appropriate, A = apply the relevant rules to the facts presenting arguments for and against and C = form a conclusion based on your stronger argument). Your Partner has requested that you review the file in its entirety (as below) in order to undertake the engagement work as agreed between Tax Advisors Pty Ltd and Judy Somerville, as outlined in the Required section of this document

using Australian Tax Laws

Judy Somerville has engaged Tax Advisors Pty Ltd to advise her of all her tax issues which will arise from the documents provided in respect of the income year ending 30 June 2020. Your Partner has requested that you: Prepare a letter of advice to Judy Somerville which identifies all relevant tax issues that will arise out of all the documents provided, critically analyzing and applying the taxation treatment to the issues, i.e., you will need to argue and support your view and consider differing views (if applicable), and finally, indicate your recommended action based on your better view, i.e., your conclusion. Be sure to consider all issues, including but not limited to issues that may not be as obvious, for example tax accounting, tax periods, potential levies, surcharges, offsets and substantiation requirements. You must ensure that your analysis used to determine your recommended action is fully supported with relevant authority, for example, tax legislation and case law.

Credit Note 1 Debit 14.128.00 Balance 7.293.00 2 2,345.00 4,948.00 5,203.00 10.151.00 3 54,000.00 64,151.00 4 1,920.00 62,231.00 10,000.00 52,231.00 5 629.00 51,602.00 6 1,008.00 50,594.00 7 220.00 50,374.00 Date Transaction 1 Apr 20 Norman Harvey Ltd Debit Card Transaction 1 Apr 20 Myer Coles Pty Ltd Invoice 65 Textiles 15 Apr 20 Ansett Airways Ltd Salary Deposit 3 May 20 Real Property Pty Ltd Early Deposit Release 6 May 20 Textiles Inc. Textiles Purchase 15 May 20 Stillwell Bib Pty Ltd Debit Card Transaction 15 May 20 Skin Care Australia Debit Card Transaction 15 May 20 Tim Rivers Salary Payment 17 May 20 Traffic Infringement Office Speeding Fine 20 May 20 Abel & Abel Solicitors Invoice 13129 25 May 20 Maze Restaurant Debit Card Transaction 21 May 20 First Newspapers Advertising Invoice 39221 10 Jun 20 Institute of Aviation Course Fees 30 Jun 20 Victoria State Bank Interest Charge 30 Jun 20 Australian Taxation Office PAYG Instalment 30 Jun 20 Textiles Inc. Damages 30 Jun 20 Westfields Ltd Dividend 30 Jun 20 Woodlands Pty Ltd Serviced Office Rent 30 Jun 20 Tim Rivers Redundancy 8 5,950.00 44,424.00 9 450.00 43,974.00 10 2,550.00 41,424.00 6,300.00 35,124.00 430.00 34,694.00 11 3,000.00 31,694.00 8 49,950.00 81,644.00 12 700.00 82,344.00 13 1,500.00 80,844.00 6 7,500.00 73,344.00 $ AUD Notes Regarding Bank Statement Extract Note Description / Further Information 1 Acquisition of Furniture & Office Equipment Desks and Chairs (acquired 1 July 2019) Partitions acquired 20 August 2019) 2 Outstanding debtors at 30 June 2019 Debts written off > 12 months old Judy provisions bad debts equal to 3% of the outstanding debtors. 9,865 4,263 23,000 20,000 3 72,000 (18,000) 4 Obtained an Early Release of Deposit for Property Sold. Net of Agents Commission of $18,000. Stock Purchase of Textiles (USD $2,000.00 = AUD $1,920.00) Stock at Start Stock at End Skin care products purchased due to flight attendant role. Salary Payment for Employee Tim Rivers Redundancy Payment for Employee Tim Rivers 1,920.00 25,500.00 12,500.00 5 629.00 6 1,008.00 7,500.00 7 220.00 8 5,950.00 49,950.00 9 Note the minimum superannuation guarantee contribution is included in the above amounts, where relevant. Speeding fine incurred whilst travelling from Melbourne Airport to Retailer for Textiles business. Legal fees incurred in relation to distributor agreement. Settlement sum received in relation to distributor agreement. Client dinner at Gordon Ramsey's Maze Restaurant. Advertising contract payment. Paid one month in arrears and prepaid up to 30 September 2020. PAYG instalments (quarterly equal payments). Fully-franked dividend received (refer Dividend Statement) Office rent paid for 1 June 2020 to 31 July 2020. 450.00 10 2,550.00 11 3,000.00 12 700.00 13 1,500.00