Mahmood and Fawlty carry on a partnership. Gross income for the current income year is $40,000, of which $8,000 is made on sales outside Australia (for which no expenses are incurred). Business expenses of $25,000 include a salary paid to Mahmood of $5,000. All expenses relate to Australian source income.

Required:

Calculate the taxable income of:

1. Mahmood, assuming he is a resident; and

2. Fawlty, assuming he is a non-resident.