Johnny and Leon are adult partners in a business selling sporting goods The partnership records, excluding GST, for the current income year disclose the following Receipts ($) 400,000 Sales of sporting goods (see Note3) 10,000 Interest on bank deposits 21,000 Dividend franked to 60 received from an Australian resident company 10,000 Bad debts recovered 50,000 Exempt income 30,000 Capital gain from the disposal of shares acquired in 2009 and sold in June this income year (see Note4) Payments ($) 10,000 Salary to Johnny 15,000 Salary to Leon 16,000 Fringe benefits tax 2,000 Interest on capital provided by Johnny 4,000 Interest on loan made by Johnny to the partnership 3,000 Johnny's travelling expenses from home to work and return (see Note5) 2,000 Legal fees for the renewal of lease of the office building 1,200 Legal expenses for preparation of a partnership agreement 700 Legal expenses for preparation of new lease of business premises 500 Debt collection expenses paid to a solicitor 500 Council rates on business premises 25,000 Staff salaries (see Note6) 30,000 Purchase of sporting goods supplies 20,000 Rent on retail shop 30,000 Provision for doubtful debts (see Note10) 10,000 Business lunches (see Note11) Notes 1 Partnership profits and losses are shared between Johnny and Leon on an equal basis 2 The partnership is registered as a Small Business Entity (SBE) 3 On 1January this income year the partners discovered that an employee had stolen $3,000 cash in respect of money received from sales to customers 4 Johnny and Leon made a capital loss of $15,000 from the disposal of shares acquired in 2006 and sold in 2011 5 Johnny often takes work home as he finds it convenient to plan the next day's work in his home study 6 Staff salaries include $10,000 paid to Johnny's son Johnny Jr for washing the partners' cars The Commissioner considers $5,000 to be a reasonable commercial rate for washing the cars 7 Stock at beginning of the year was $20,000 8 Stock at end of the year was Cost $16,000 (a) Market selling value $18,000 (b) Replacement $17,000 9 Johnny and Leon did not make an election under s328 285 of ITAA97 10 Johnny and Leon are owed $30,000 by a debtor who is bankrupt They believe it is very unlikely that they will recover any money from the debtor, and do not take any action to recover the money 11 Johnny and Leon spent $10,000 on business lunches with overseas buyers at expensive restaurants 12 In the last income year, Johnny and Leon made a net partnership loss of $40,000 13 Johnny and Leon wish to minimise their tax liabilities for the income year Calculate the net income for the partnership for the income year

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Johnny and Leon are adult partners in a business selling sporting goods. The partnership records, excluding GST, for the current income year disclose the following:

Johnny and Leon are adult partners in a business selling sporting goods.

The partnership records, excluding GST, for the current income year disclose the following:

Receipts ($):

400,000

Sales of sporting goods (see Note3)

10,000

Interest on bank deposits

21,000

Dividend franked to 60% received from an Australian resident company

10,000

Bad debts recovered

50,000

Exempt income

30,000

Capital gain from the disposal of shares acquired in 2009 and sold in June this income year (see Note4)

Payments ($):

10,000

Salary to Johnny

15,000

Salary to Leon

16,000

Fringe benefits tax

2,000

Interest on capital provided by Johnny

4,000

Interest on loan made by Johnny to the partnership

3,000

Johnny's travelling expenses from home to work and return (see Note5)

2,000

Legal fees for the renewal of lease of the office building

1,200

Legal expenses for preparation of a partnership agreement

700

Legal expenses for preparation of new lease of business premises

500

Debt collection expenses paid to a solicitor

500

Council rates on business premises

25,000

Staff salaries (see Note6)

30,000

Purchase of sporting goods supplies

20,000

Rent on retail shop

30,000

Provision for doubtful debts (see Note10)

10,000

Business lunches (see Note11)

Notes

Partnership profits and losses are shared between Johnny and Leon on an equal basis.

The partnership is registered as a Small Business Entity (SBE).

On 1January this income year the partners discovered that an employee had stolen $3,000 cash in respect of money received from sales to customers.

Johnny and Leon made a capital loss of $15,000 from the disposal of shares acquired in 2006 and sold in 2011.

Johnny often takes work home as he finds it convenient to plan the next day's work in his home study.

Staff salaries include $10,000 paid to Johnny's son Johnny Jr for washing the partners' cars. The Commissioner considers $5,000 to be a reasonable commercial rate for washing the cars.

Stock at beginning of the year was: $20,000.

Stock at end of the year was: Cost $16,000

(a)

Market selling value $18,000

(b)

Replacement $17,000

Johnny and Leon did not make an election under s328-285 of ITAA97.

10.

Johnny and Leon are owed $30,000 by a debtor who is bankrupt. They believe it is very unlikely that they will recover any money from the debtor, and do not take any action to recover the money.

11.

Johnny and Leon spent $10,000 on business lunches with overseas buyers at expensive restaurants.

12.

In the last income year, Johnny and Leon made a net partnership loss of $40,000.

13.

Johnny and Leon wish to minimise their tax liabilities for the income year.

Calculate the net income for the partnership for the income year.