John operates his own business selling pool equipment and materials as well as servicing swimming pools. Sales of equipment and materials are paid for at the time of sale. However, pool services are carried out by his staff and these invoices are generally paid within 30 days. During the year ended 30 June 2019 John received $1,915,000 in cash for sales of equipment and materials and for pool services. Service calls which had been made during the year ended 30 June 2018 but paid for in the year ended 30 June 2019 were $37,000 (and are included in the $1,915,000 above). At 30 June 2019 unpaid pool services totalled $51,000. Purchases of pool material during the year ended 30 June 2019 were $675,000 and at the end of the year ended 30 June 2019 his stock on hand was $145,000 (valued at cost). Included in the purchases of pool materials of $675,000 were $225,000 of pool materials purchased from Johns brother. John could have bought a similar quantity of pool materials for $125,000 from another supplier.

Johns closing stock for the year ended 30 June 2018 was $178,000. John took 20 containers of chlorine from his stock for his own private swimming pool during the year. These containers cost him $220 each and had a market value of $330 each. John also gave away another 17 similar containers of chlorine to his friends during the year. Wages of $275,000 were paid to his staff. One of Johns customers bought some pool materials for $600 on credit on 21 June 2018 but could not pay the account which was issued on the same day because he went bankrupt in November 2018. John wrote off the debt on 1 July 2019.

John entered into a number of pool cleaning contracts during the tax year ended 30 June 2019. By 30 June 2019 he had received from customers $210,000 (which is included in the $1,915,000 above) related to services to be provided after 30 June 2019. John kept two accounts in relation to these contracts. When the money was first paid by the customer John recorded this in the Unearned Income Account but as each pool was cleaned he would transfer the relevant amount to the Pool Cleaning Income Account.

On 1 June 2019, John paid $4,530 to his lawyer to complete the winding up of a business he had operated at a loss in earlier years. During the year ended 30 June 2019 John paid rates and taxes of $5,270 on a vacant block of land. John was thinking of putting a holiday house on the block of land.

Required:

Calculate Johns taxable income or loss for the year ended 30 June 2019.

You must give reasons for your answer. Your discussion must include an analysis of the pertinent sections of the relevant legislation, rulings and the relevant case law. If relevant, you must show your calculation. You must apply the law to the facts in the question and provide YOUR OWN analysis of the issues.

Use the attached template to set out your answer.