Bessie and Sam are carrying on a business together in a partnership providing dog grooming services known as "Pampered Pooches". The Pampered Pooches Partnership uses an accruals basis for deriving its income, however, customers are usually required to pay for services at the time the services are provided. Under the partnership agreement Sam is to get a partner's salary of $45,000, and the balance of the net income is to be shared equally between both partners. Rather than borrow money from a bank, Sam had lent the partnership $30,000 for working capital at a commercial interest rate.

Bessie and Sam had purchased a block of land on 1 September 2018 for $250,000 with the intention of building a grooming salon. However, they decided it would be more cost effective to continue renting their current salon and sold the land for a total of $298,000. The signed the contract of sale on 5 June 2022 and the contract settled on 5 July 2022.

Bessie and Sam provided the following information for the year ended 30 June 2022. Note all amounts include GST where applicable:

Receipts

Invoiced service fees (Note 1) $198,000

Expenditure

Rent of salon $57,200

Salary for casual employee $10,959

Superannuation guarantee 1,041

Sam's salary $45,000

Interest paid to Sam $3,000

Depreciation of grooming equipment $3,300

Grooming products (shampoo, sprays, etc.) $4,400

Parking fine $130

Electricity, internet and telephone expense $3,520

Drawings - Bessie $10,000

Drawings - Sam $6,000

Note 1

The partnership had only received $187,000 (incl GST) in cash as at 30 June 2022 as they invoiced a boarding kennel for services provided in June and did not receive payment until 15 July 2022.

Required:

a. In relation to the above facts, discuss and calculate what the 'net income' of the partnership is for the 30 June 2022 income year. To answer this question you will need to:

Determine the assessable income of the partnership, including relevant law and explanations for including/excluding items in the calculation.

Determine the allowable deductions for the partnership, including relevant law and explanations for including/excluding items in the calculation.

Determine which items include GST and calculate the GST payable or input tax credit available to the partnership.

b. Calculate Sam and Bessie's share of net income of the partnership. Include relevant law and explanations for your calculation.

c. Calculate the tax payable or refundable by Sam for the 30 June 2022 income year. Sam provided the following additional information for his income tax return:

Interest received on his bank account totalled $230.

Fully franked dividends received totalled $1,400.

Sam has net capital losses carried forward of $6,000 from the sale of shares, and net capital losses carried forward from artwork of $1,000.

PAYG instalment paid by Sam totalled $5,300.

Sam has no private health insurance and has no spouse or dependants.

Interest income from Partnership for Sam of $3,000

Assume share of 'net income' from partnership is $73,750