Question
Nigel Nigella is an Australian resident sole trader who owns and operates the Business consultancy firm Strategy One. He provides consultation and advice around business
Nigel Nigella is an Australian resident sole trader who owns and operates the Business consultancy firm Strategy One. He provides consultation and advice around business management needs, for small/medium sized businesses and private individuals. He operates this business with the help of one secretary/receptionist and three management consultants who are all employed on a full-time basis. These employees often travel to provide advice to clients at their respective business premises. Although the firm is a small business, it does not use any of the small business entity concessions. Nigel is registered for the Goods and Services Tax (GST).
For the year ending 30 June 2024 Nigel has handed you the following information regarding this business (note, further information will be forthcoming in assignment part 2).
Receipts
For consultancy services rendered - cash received $850,000
Further information
Accounts receivable as at 30 June 2023 $95,000
Accounts receivable as at 30 June 2024 $102,000
Required
based on the provided information, calculate Nigel's assessable income for the income tax year ending 30 June 2024.
Justify the answers with reasonably argued positions by citing, describing (where appropriate) and applying all relevant law.
Use lots of sections from A NEW TAX SYSTEM (GOODS AND SERVICES TAX) ACT 1999 to refer to particular section and apply it.
important case laws for answering the question, Carden's Case, Brent v FCT, Henderson v FCT, Dixon v FCT etc.
also use these topics in the answer, Ordinary income, derivation and any other.
Please note the following that may be relevant:
Do NOT treat this as an accounting exercise. This is a law exercise and marks are awarded for the use of the 'cite, describe, apply' approach.
Please use the cite, describe and apply method and use more sections from the act mentioned, for example the answer shloud be similar like this but longer explanation, Jane's $55,000 from employment received in the 202X tax year is ordinary income under s. 6-5(1). How much as Jane derived in 202X? (Hint: Use 'Cite, Describe, Apply.')
Under s. 6-5(2) Australian residents are assessed on all income derived from all sources.
Carden's Case states that the method to be adopted is that which, 'is calculated to give a substantially correct reflex of the taxpayer's true income'.
Brent v FCT states that ordinary business and commercial principles ought to be used in determining the appropriate method AND that personal services income is derived on a cash basis.
Jane is providing personal services as an employee so cash basis is appropriate. This income is derived on receipt.
Since Jane has received $55,000 during the 2020 tax year, she has derived $55,000 under s. 6-5(2) and therefore she is assessed on it in the 202X year.
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