Case Study One -

Part A

You are currently working as a graduate accountant and are provided with the following information from a client. The client, Joe, has the following income and expenses for the financial year ended 30 June 2019. Joe is employed as a manager of operations at a local transport company. In addition to his employment Joe also operates a market stall selling wood carvings on the weekend.

Income

$

• 45,000
• 1,000
• 5,000
• 125,000
• 5,000
• 10,000
• 35,000
• 25,000
• 1,000

Sales of wood carvings from the market stall

An anniversary gift from his employer for Joe's 10th wedding anniversary Bonus received from his employer for successful completion of large project Salary received from his employer (including PAYG Withholding of $22,000) Interest on Bank Deposits

Joe gambles on the horses and during the year had won $10,000 on betting Sale of his personal motor vehicle (he brought the vehicle for $15,000)

Sale of shares (he brought the shares 13 months ago for $10,000) Received Manager of the year award from the Institute of Managers

Rent on market stall for his business

Purchase of wood for carvings, Joe estimates in cost he has $2,000 in wood as at 30 June 2019 as stock on hand and advises that as at 1 July 2018 his wood stock at cost was $3,000.

Joe purchased steel capped work boots for $500, protective sunglasses for $220, New jeans for $80 (which he also wears on the weekend) Bookkeeping fees for the market stall business

Purchase of new carving tools for the market stall business

Cost of meals and entertainment that his employer did not reimburse

Train fares for travel to and from work

Rates on family home

Electricity for family home

Advertising packaging for market stall business

Purchase new table and counter for market stall

Expenses

$

• 2,000
• 5,000
• 800
• 1,500
• 12,000
• 400
• 200
• 3,200
• 900
• 1,000
• 1,000

Joe does not have any children. Joe does have private health insurance. Joe also advises you that he had carried forward tax losses from last year of $2,000 relating to his market stall. In addition to the above Joe advises he does work from home as he attends to emails late night after dinner at least 4 nights a week.

College of Business and Law

Required:

• Determine which Income and Expenses are assessable income or allowable deductions. Note you will need to cite legislative references, case law and tax rulings as applicable. Emphasis is on providing substantiation for you reasoning to include as assessable income or allowable deduction. Also refer to the relevant item number on the 2019 tax return where the amount would be disclosed, i.e. (interest income is item 10). An Example format is provided below.
• Assume Joe is a resident for Australian taxation purposes, calculate his tax liability including any tax offsets and levies.