Ling Qi is a 30-year old fitness trainer with a gross income from her training activities of $108,600 for the 2020-2021 financial year. To earn this income Ling pays the large gym chain that provides the gyms where she trains her clients $325 per week, for 50 weeks in the year. Ling must give three months’ notice or pay out 12 weeks of rent if she decides to stop training her clients there or decides to cease her business. Ling spends $1,190 per year on sportswear that she wears in her role as a personal trainer. Ling also pays an average of $595 each year for membership of a personal trainer’s association through which she gets professional insurance coverage, and $850 per year on professional development (compulsory) and senior first-aid training. Ling owns her own two-bedroom apartment located about 5 kilometres from the city, which is valued at $525,000. Against this she holds a mortgage of $345,000 on which her annual mortgage repayments are $21,853. Ling has furniture and other personal effects valued at $55,000. Her other assets are: $10,500 which she holds in a transaction account at her bank, earning her $12.60 in interest for the year; a term deposit of $15,000, earning 2.75 per cent per year; and an industry superannuation account balance of $94,000, to which she contributes an additional $4,950 per year. Ling does not like credit cards, so she only uses her debit card to make payments (and so keeps a relatively large transaction account balance so it is available for emergencies). To get to and from her client sessions Ling has a car, valued at $9,900, on which she still has 12 payments of $218.55 per month to make. The interest rate on the car loan is 8.5 per cent per annum compounded monthly. Ling’s other expenses for the car are $4,650 per year, including registration and compulsory third party (CTP) insurance. Ling keeps a logbook of the distance that she travels moving between the gyms she uses to train her different clients and has estimated that she covers 1,600 kilometres each year for this purpose. Ling knows that she will need to replace her car’s tyres (cost of approximately $850) in the next year. Ling’s other major expenses are comprised of electricity ($2,450), strata fees on her apartment ($1,350), council rates ($1,280), water ($950), groceries and household products ($14,560), non-work-related clothing ($3,125), private health cover ($3,380 per year), medical and other health-related costs ($675), mobile phone and Internet ($1,920 per year), and eating out and entertainment ($5,950 per year). 

Required: 

1. Determine Ling’s net tax and levies liabilities for the 2020-2021 financial year (use appropriate information identified from the ATO website https://www.ato.gov.au/Individuals/) . 

2. Prepare personal financial statements (balance sheet and income and expense) for Ling for the 2020-2021 financial year. 

3. Ling believes that she will be able to earn an additional $6,250 from small group client training sessions in the 2021-2022 financial year. Assume that Ling’s health insurance, 4 council rates, electricity charges, and water charges all increase by an average 3.5 per cent next year, and that all other expenses, etc., bar those specified in the mini case and above, remain unchanged. Develop a personal financial budget for Ling for 2021-2022.

4. Identify whether there are any apparent gaps in Ling’s insurance coverage. What are your specific recommendations? 

5. Ling wishes to grow the value of her non-superannuation investments in a tax-effective manner and believes that she has a high tolerance for risk. However, she does not wish to spend significant time on managing these investments. What would you recommend Ling consider, if anything, regarding her current investment choices? Show all workings and state any assumptions that you have made in developing your estimates.