CASE STUDY - FACTS Eva and Ian are a married couple, with no children, aged 52 and 50 respectively. Ian runs an accounting & consulting business in the Sydney CBD. The business was set up as a company "Goodwill Accounts Pty Ltd" on 29 September, 1996. Ian has continued to be Goodwill's CEO since its incorporation. Of the total 50,000 shares of Goodwill, Ian holds 60% and Eva has 40%. Ian and Eva are both directors of Goodwill Accounts Pty Ltd and Eva is the chairperson of Goodwill's board. Ian specialises in business consultancy and accounting whereas Eva is responsible for general management and marketing. For the current income tax year, the business has made $2,000,000 total income and $ 850,000 net profit, and distributed the cash dividends (fully franked) $52,500 between Ian and Eva according to the ownership ratios. Ian's normal remuneration consists of $200 500 salary, from which $35 000 is deducted as PAYG. Eva is also a fashion designer who works at home and sells products via her on-line shop. She operates as a sole trader. Details of her business income and expenses (including car expenses) are outlined below. Eva has converted one garage of their home into a workshop office where she undertakes all her work related activities. The workshop has separate power and a separate phone number from that of the house. Ian undertakes some work from home in a study area within their house. He also uses this office to work on his Master of Professional Accounting degree which he is undertaking at the University of Sydney. The tuition fee for the current income tax year is $20,000. Ian and Eva jointly own an investment property located at the centre of Melbourne valued at $980,000, the rental income of which for the current income tax year amounts to $36,000. This Melbourne apartment was available for rent all year and this tax year however, due to a change in tenants, it was rented out for nine (9) months. Ian and Eva seek advice from you in respect of calculating their tax liabilities and planning their tax situation for future periods. They both have the private health insurance cover. The couple provides the following financial information: 1. Goodwill Accounts Pty Ltd - key Information for year ended 30 June 2023 Consulting Fees (turnover) Net profit Loan from Eva Capitalised Research and Development- Special Information System Overall Net Assets $ 2 000 000 $ 850 000 $ 950 000 $ 1 250 000 $ 5 550 000 Personal information of Eva and Ian 2. Balance sheet, other income and interest expenses (all assets are owned/ held jointly except where indicated). Assets (not including assets of Eva's business which are disclosed separately in Table 5) Home and contents $3 000 000 CBD office for Goodwill Accounts Pty Ltd Investment property Melbourne (rental income this year $36 000) Bank account (interest earned this financial year $3 500) Shares in Goodwill Account Pty Ltd (fully franked dividends of $52 500 paid this financial year) ownership of shares 60% Ian, 40% Eva Superannuation- Eva (after-tax return of $90 000) Superannuation- Ian (after-tax return of $95 000) Total assets Liabilities and interest expenses Mortgage on Melbourne investment property (interest paid this year, $39 600) Personal Credit card (interest paid this financial year $1 680) Total liabilities $1 500 000 $980 000 $90 000 $900 000 $1 200 000 $1 000 000 S 8 670 000 $ 900 000 $ 10.000 $1 000 000 3. Other expenditure In addition to their interest and loan repayments, the couple incurred the following expenses during the year: Expenditure Eva Ian Self-education Work related expenses Living costs Total $6 600 Tax agents' fees see table 5 $ 5400 $20 000 $22 000 $22 000 Expenses (not including interest) related to investment property- $ 3 300 $ 3 300 $ 770 S 990 4. Additional information All of the assets are jointly owned in the names of Eva and Ian except where otherwise indicated. The investment property is available for rent all year and this year however, due to a change in tenants, it was rented out for nine (9) months. 5. Eva's Business Information Details Sales Purchases of stock (no inventory kept) Purchases of design magazines and journals Electricity bills Phone and internet bills Other work related expenses Motor vehicle details: Total Km travelled for work purposes for the income tax year: 5,000 Eva's used the cents per km method to calculate car expense LIABILITIES: Business credit card, balance as at 30 June 2022: $14,000 (interest for the 2022-23 tax year was $960) Amount $206 800 90 000 1 800 3 800 1 320 5 500 REQUIRED: Calculate the net tax payable/refundable for the current year for both Eva and Ian and briefly justify any inclusions in the calculations in the "Reasons for inclusion" column (refer to legal sections where relevant). Please format your answer in the form of the following table (obviously with extra rows as necessary). + Item Salary income Other income and expenses (itemised individually under this heading) Deductions (itemised individually under this heading) Taxable income (then individually list and calculate all other items which impact on payable/refundable) tax Tax payable (refundable) (this amount should be the result from adding/subtracting all other relevant amounts) Eva Amount$$ Ian Amount$$ Reasons for inclusion income from ordinary concepts s 6-5 ITAA1997