Anne Beaton a 31-year-old woman has asked you to assist her with the preparation of her June 2021 Income Tax Return. She is comfortable with completing her own tax return but requires your assistance to ensure that she gets it right.

Income

Her PAYG Payment Summary shows the following:

Gross Payments $120,000 Allowances:

Car Allowance $12,000

Entertainment Allowance 6,000

Clothing Allowance 2,000

PAYG Withholding $ 29,000

In addition to her salary, she also received the following amounts during the year ending 30 June 2021:

Interest from Bendigo Bank $ 2,400

Fully franked dividend from BHP Ltd (a listed company) 2,100 (including franking credit)

50% franked dividend from Qantas (a listed company) 1,500 (including franking credit)

Distribution from The Beaton Family Trust 5,000

Prize in a National Tennis Championship 1,000

Rental income 30,000

Proceeds from the sale of an investment property of 500,000

Note that she had owned the investment property for 5 years, until she sold it in December 2020. When she purchased the property, she had paid $250,000. She received the proceeds in March 2021. She purchased a new rental property in July 2021 for $850,000.

Expenditure

During the 2020-21 income year, Anne incurred the following expenses. She is not sure whether all these amounts can be deducted, but she would like to deduct as much of the expenditure as she legally can.

Mortgage interest on her rental property is $ 9,000

Repairs and maintenance (see note 1 below) 12,800

Car expenses (see note 2 below) 10,000

Travel and accommodation (see note 3 below) 6,000

Work clothing (see note 4 below) 3,000

Tennis Club membership (see note 5 below) 500

Tennis coaching fees (see note 5 below) are 1,200  

Notes

1. Repairs to Anne’s rental property included: $10,000 to repaint the property prior to sale (some of the paint had started to peel and crack because of wear and tear).

$2,800 to replace the ceiling in the bathroom. The hot water cylinder had a small leak when Anne purchased the property. However, because the leak was minor, Anne did not bother to have it repaired. Over time, however, the leak became worse and damaged the ceiling in the bathroom requiring it to be replaced.

2. Car expenses included the following:

Fuel $ 5,000

Service $ 2,000

Car washes $ 1,000

New Tyres $ 2,000

The figure of $10,000 does not include depreciation, so this will need to be calculated separately. The car cost $50,000 when Anne purchased it on 1 July 2019, and she used the diminishing value method to calculate her depreciation last year. She used the Commissioner’s effective life of 8 years in the calculation.

3. Travel and Accommodation

Anne attended a one-day business conference in Brisbane. Since her family lives there, she took one week of her annual leave to spend time with them. She spent one night in the hotel prior to attending the conference, and the rest of the time she spent with her family. Since she flew Business Class, her airfares cost $3,000 (it would only have cost $800 had she flown economy class). The accommodation was $1,200 for the one night she spent at the conference venue and the conference cost $1,800.

Her employer was happy for her to attend the conference but did not contribute anything towards it, because her boss did not see the relevance of the conference to her job.

4. Work clothing Anne purchased three new outfits for her job. The clothing had no logos or other distinguishing characteristics, but Anne feels that she should be able to deduct the clothing since she only wears the outfits to work. (Someone told her that a flight attendant had been able to deduct similar expenses in Mansfield’s case).

5. Membership and Coaching fees Anne has been a member at the Hobart Tennis Club for over 10 years, and regularly enters competitions, both locally and interstate. She practices regularly and this year she won a tournament in a national competition.

Required

1. Advise Anne on which of the income items would be assessable to her in the 2020-21 income year. Your advice must include references to ALL applicable legislation and case law. If there are relevant Rulings, Determinations, or Advice you should include these as well.

2. Advise Anne which of the expenditure items would be deductible in the 2020-21 income year. Your advice must include references to ALL applicable legislation and case law. If there are relevant Rulings, Determinations, or Advice you should include these as well.

3. Calculate Anne’s Taxable Income and Income Tax payable for the 2020-21 income year showing ALL calculations and references to ALL applicable legislation.