Business OverviewPeter and Leanne Webb, aged 54 and 52 respectively, own an electrical appliances retail business in partnership called Webb Electrics, which operates in Hawthorn, Victoria. The business has operated from these premises for 5 years. The Webbs decided to expand their business and have recently opened a new store on the 1 April 2021, in Croydon.Each year the Webbs go overseas to a Electrical Retailers conference, to become aware of the latest developments in electrical appliances. During the 2020-21 financial year the conference was held in Auckland, New Zealand, where the Webbs were fortunate to sign a franchise agreement to distribute Bosch a new range of electrical equipment. The cost of the franchise included a sign on payment of $30,000 plus a payment of 5 % of sales revenue on this merchandise. While Peter and Leanne own the shop in Hawthorn they decided to lease the premises in Croydon. One of the reasons for doing this was because of the offer of a lease incentive by way of a twelve-month rent-free period and a free fit out, valued at $40,000.In November 2020, the Webbs became aware that a developer had sought approval to redevelop the Croydon site as it was suitable for their business expansion. Consequently, theWebbs spent $10,000 in legal costs in successfully opposing the development. The Webbs also jointly own a rental property in Wantirna, which yielded a rental of $54,000 during 2020-21 and the expenses claimed including, repairs and maintenance came to $12,000 for the year.Peter independently also provides private on-line consultancy advice to clients with regards to common electrical appliances and derived $8,000 from this activity incurring expenses of $1500 and further, Peter derived $4,000 of bank interest and received dividends of $12,000 (including $5,142 franking credits) during the 2020-21 tax year. Peter had no other deductions for the year and the Webbs do not have any children. Results of the Business Operations of Webb Electrics for the year ended 30/6/21: Cash receipts$Sales to Customers 1,600,000Sales Bonus15,000Cash expenditure$Purchase of Stock500,400Salaries300,000Set up costs 15,500Rental payments140,000Telephone3700Electricity2,850Overseas travel expenses17,750Franchise: Cost Royalty 30,00020,000Car expenses(Running costs)26,600Legal costs9,380Advertising12,500GST30,000Furniture28,500Entertainment9,800Gas3,300Miscellaneous1,750

ACC30005 Taxation Semester Two 2021 Case Study / Assignment Page 3 of 14 3 Note: All amounts include Australian GST where applicable.Notes:$ (i) Outstanding creditors 30/06/21 15,500 Outstanding debtors 30/06/2190,000At the year ending 30/6/21 a provision for doubtful debts has been raised equal to 1.8% of sales. Also, during the year $16,550 of outstanding debts were written off as bad. (ii)Opening stock:Cost490,500 +Purchases500,400 -closing stock at cost420,000 Closing stock values: 30/6/21 Cost420,000 Replacement Cost540,000Market Selling Value580,000 At the end of the year a stocktake reveals that some of the stock is obsolete. Consequently, a write down of stock (at cost of $15,000) has been made to $7,000. (iii)Office Furniture:Opening adjusted value25,000 Acquisition of furniture during 2020/21:CostAcquis date Desks and Chairs2,00001/07/20 Computers18,000 15/07/20 Partitions8,500 9/07/20 (iv)Car Expenses related to the following vehicles: CostAcquis dateHyundai Tucson24,50021/09/17 Toyota Delivery van36,00010/7/16 Ford Falcon* 55,00002/11/16 BMW * 75,00004/12/16 * The two cars are used by Peter and Leanne Webb and it is estimated that they are used 55% for Business.During the year on 1/3/21, the engine in the Delivery van broke down. As a result, a new engine was put in the van at a cost of $5,800. The engine was a more powerful engine modified to run on gas. (v)Set- Up Costs - New Premises in Croydon:Stock removal and relocation 4,500Staff Training 6,000Special cabinets and office set up5,000(vi)Salaries:General Staff160,000 Wages Peter70,000 Leanne 70,000

ACC30005 Taxation Semester Two 2021 Case Study / Assignment Page 4 of 14 4 (vii)Overseas Travel Airfare9,000 Accommodation6,000 Fare Registration 500 Meals and incidentals2,250(viii)EntertainmentChristmas Parties-staff 1,800Clients8,000 (ix)Sales BonusThe sales bonus of $15,000 was received from the Electrical Retailers Associationfor Web Electrics achieving the highest sales for their products in the June Quarter.(x) Legal CostsRedevelopment Action 7,500 General880 Lease Agreement1,000 REQUIRED:You have been approached by Peter and Leanne Webb in your capacity as their tax agent. They have asked you to prepare the necessary documentation (including the Partnership tax return and Peters individual tax return)to meet the tax compliance obligations for Webb Electrics, for the income year ending 30 June 2021. Prepare a letter of advice/report which identifies all relevant tax issues, critically analysesand applies 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(apply the IRAC principle where appropriate). 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.Note that the assignment will require you to undertake your own research, since it will cover some areas which will not be dealt with explicitly in class. The referencing convention required for this assignment is Australian Guide to Legal Citation 4 -see canvas under Assessment Information Module.In addition, you will be required to satisfactorily complete the Partnership tax return for Webb Electrics and Individual Tax return for Peter Webb using XeroTax by transferring the relevant information from your analysis and letter of advice to the tax return. You will also be required to complete and submit a group contract (See Appendix A below).The letter/report must not exceed 2,500 words,excluding footnotes, the reference list and Partnership and Individual tax returns. Assignments exceeding 2,750 words (10%) will not be assessed and you will receive zero marks (fail grade). You must indicate your word count on the cover sheet