AP Pty Ltd (AP), a resident company provides you with the following information for the year ended 30 June 2021:

Revenue

Operating income $320,000

Fully franked dividend received on 1/10/2020 (not base rate entity) $100,000

Unfranked dividend received on 15/12/2020 $70,000

60% franked dividend received on 2/3/2021 (not base rate entity) $60,000

Total revenue $550,000

Expenses

Operating expenses $96,000

Interest Expenses $14,000

Entertainment expenses employees $3,500

FBT paid on Entertainment expenses employees $3,422

Total expenses $116,922

Net Profit $433,078

Additional Information:

- AP is not a base rate entity

- Operating expenses are tax-deductible

- Interest on a loan taken out to purchase shares in public companies

APs franking account balance as at 30 June 2020 was $15,000 in credit. The following taxes were paid during the year 2021:

- Three company tax instalments of $18,000 each paid on 21 October 2020, 21 February 2021 and 21 April 2021

- Paid GST of $28,000 on 28 October 2020

- Paid FBT of $3,422 on 21 May 2021

AP paid each a fully franked dividend of $8,000 on 1 February 2021 and a 70% franked dividend of $7,000 on 1 June 2018 to its two shareholders listed below:

a) Neil Owen, a non-resident individual

b) Peter Smith, a resident individual covered by private health insurance, with salaried income of $150,000 for the 2020/2021 tax year

REQUIRED

a) Calculate the taxable income of AP for the year ended 30 June 2021. Please cite relevant authorities. (5 Marks)

b) Calculate APs tax payable (refundable) for the year ended 30 June 2021.(4 Marks)

c) Prepare the franking account for AP for the year ended 30 June 2021. Any taxes excluded from the franking account must be explained.(12 Marks)

d) Advise each one of APs shareholders listed in this question on the correct tax treatment of the receipt of their distributions from AP for 2020/2021 tax year.(9 Marks)