AUSTRALIAN TAX

- Sophie moved from her rented Sydney apartment to Wagga Wagga in July 2019.

- Sophie has continued to work part time as a university academic; primarily working from home teaching and coordinating an online undergraduate course.

- Sophies gross wages for the 2020-2021 income year are $60,000 and you have confirmed Sophie has $1,700 in work-related deductions allowed by section 8-1 ITAA97.

- In July 2020, Sophie gave her friend Scott a 101-year-old mirror for his birthday. Sophie had purchased the mirror five years ago for $600. The current market value is $1,500. Sophie spent $100 on repairing a chip in April 2018 (non-capital cost).

-Sophie began to plant flowers approximately one month after moving to Wagga Wagga.

-In January 2020, Sophie began to take bouquets to her friends and family due to an excess of flowers blooming in her garden.

-During the period between January 2020 and June 2020, Sophie sold bouquets, mainly to her friends and family, earning approximately $1,000 in sales.

-In August 2020, Sophie set up an Instagram page dedicated to her creative bouquets, began researching techniques and methods, as well as subscribing to the Australian Florist Network.

-Not long after, Sophie invested in a website and business cards and approached her local florist and entered into an agreement to sell the florist flowers wholesale.

-Between August 2020 and June 2021, Sophie earned $40,000 in flower sales and her Instagram followers reached 25,000.

Required: Advise Sophie as to the tax consequences of her activities for the year ending 30 June 2021 by responding to the following FOUR questions.

You may assume Sophie is an Australian tax resident. Ensure you refer to relevant legislation, case law and tax rulings in your analysis for questions 1 and 2. You must show a complete analysis and/or workings for ALL questions

1.Analyse Sophies fact situation and determine whether her activities amount to a business or a hobby

2.Calculate the net capital gain (loss) for Sophie

3.Calculate Sophies Taxable Income, ignoring any allowable deduction that may have been available to Sophie in relation to her flower sales

4. Calculate Sophies basic tax payable and explain the impact of her floristry activities and gifting of the antique mirror on that liability