Johnstone and Joleen Straw are the operators of a motor mechanic workshop in your local

area, currently operating in the form of a partnership called $$J & J Straw Motors$.$ They

have two children Samantha who is $18$ and Jed who is $16.$ Johnstone was born in Australia

and Joleen was born overseas and is from a different cultural heritage to you. Both

Johnstone and Joleen enjoy the traditions of Joleen$$s culture. Joleen is a great cook and is

renowned for making traditional dishes which her friends love.

They are concerned about a number of issues and risks they face in business.

Accounting data for the year ended the $30$th of June of the current year:

Income $

Gross Sales $395,000$

Less Consumables $105,000$

Gross Profit $290,000$

Expenditure $

Accounting Fees $5,000$

Advertising $5,000$

Bank fees $2,500$

Depreciation $4,575$

Hire of equipment $750$

Interest $$ business $2,000$

Insurance including workers compensation $6,500$

Motor vehicle expenses $(100\%$ business use$)21,500$

Other deductible expenses $8,850$

Printing & Stationery $750$

Rents and outgoings $25,000$

Superannuation $8,850$

Wages staff $($excluding the Straws$)95,000$

Total Expenditure $186,275$

Additional Information:

$$ All the above amounts are net of GST$,$ if applicable.

$$ All Business Activity Statements have been lodged and the appropriate taxes paid.

For the purpose of this and subsequent case studies, ignore the impact of PAYG

income tax instalments.

$$ Joleen Straw has received fully$-$franked dividends from BHP Limited amounting to

$$5,000($you will need to calculate the imputation credit attached to the dividend,

based upon tax paid of $$0\mathrm{.}30$ per dollar of dividend received$).$ Further, Joleen has

paid interest of $$1,500$ pa in relation to the loan taken out to buy the shares.

$$ Johnstone has paid premiums for a sickness and accident insurance policy $($income

continuation$)$ for himself at $$1,259$ pa$.$

$$ The Straws have private health insurance costing $$1,200$ per quarter.

$$ Depreciation is calculated as disclosed in the above report. There were not any

purchases or disposals during the year.

VR$190324$

Case Study $(1)$

International Institute of Technology $5$

$$ The Straws are to be assessed for taxation purposes in the current financial year

as a small business on the cash basis.

$$ The business does not have any work in progress $($WIP$)$ at the beginning and end

of the financial year as the Straws traditionally take their annual leave at this time

and the business is closed for one week.

$$ There is no inventory to account at the beginning and end of the financial year as

all purchases of consumable are on needs basis purchase daily from the local

supplier down the road.

$$ The Straws are to be assessed for taxation purposes in the current financial year

on the cash basis.

Relevant to partnership senario

$$ Each partner owns an equal proportion of the partnership that is $50\%$ each.

$$ The partnership pays Joleen a salary of $$50,000$ with PAYG of $$11,500.$

$$ The partnership pays Johnstone a salary of $$50,000$ with PAYG of $$11,500.$

Relevant to company$/$trust senario

$$ Use correct taxation rates applicable include the company tax rate.

$$ Johnstone and Joleen Straw each own $50\%$ of the issued shares in the company.

$$ The company contributed $$20,000$ into a superannuation fund on Johnstone$$s

behalf, which is a taxation deduction to the company. For the purpose of this case

study, ignore the impact of the commissions paid or incurred on the

superannuation contributions paid into the superannuation fund for Johnston

Qustion

$($a$)$ Using Microsoft Excel calculate the tax payable for both Johnstone and Joleen for the year ending on the $30$th of June of the current year, knowing that the Straw$$s operate in a partnership called J & J Straw Motors. A written partnership agreement provides that income$/$losses will be shared equally. Summarize the total tax and Medicare levy paid under this scenario.

$($b$)$ Calculate the total tax payable by the Company or company and trust structure and Johnstone and Joleen for the year ending on the $30$th of June of the current year, on the assumption that the partnership was incorporated into a private company, J & J Straw Motors Pty$.$ Ltd$.$ at the beginning of the current financial tax year. Summarise the total tax and Medicare levy paid under this scenario.