Part A (10 Marks)

Suman gained a Degree in Business when he was a young lad and with skill and hard work, he has used that knowledge to start his own business

Heoperateshisownbusinessselling computers and related equipment. Over the last financial year, salesofcomputers and equipmentwerepaid for atthetimeofsale. Duringtheyearended30June2019, Suman received $3,000,000 in cash for salesof computers.

Purchasesduringthe year ended 30 June 2019 were$1,200,000andattheendoftheyearended30June 2019 his stockonhandwas$950,000(valuedatcost). Sumans closingstockfortheyearended30June 2018 was $650,000. Suman took 2 computers from his stock for his own use during the year. These computers cost him $220 each and had a market value of $330 each. Suman also gave away another 10similar computers to his friends during the year.

He paid wages of $1,420,000 to his20staff members. This included an amount of $30,000 paid to his brother, who is still at school. The work of the brother could have been done by an unrelated person for $10,000. He also paid $200,000 into his staffs complying superannuation funds as concessional employer contributions.

Explain how you would calculate the income from his business and the amount of all deductions that would be allowedfor the year ending 30 June 2019.

Youmustgivereasonsforyouranswer.Yourdiscussionmustincludeananalysisofthepertinentsectionsofthe relevantlegislation,rulingsandtherelevantcaselaw. Ifrelevant,youmustshowyourcalculation.Ignoreresidency, FringeBenefitsTaxandGoods and ServicesTaxissues. Youmustapplythelawtothefacts given in this question andprovideYOUROWNanalysisoftheissues. Calculations must be included where relevant.

QUESTION 1 (Cont.)

Part B (10 Marks)

One of Sumans customers bought some computer equipment for $600 on credit on 21 June 2018 but could not pay the account, which was issued on the same day. The customer went bankrupt in November 2018. Suman wrote off the debt on 1 July 2019.

In May 2018, Suman decided to take a night off and go to Star City Casino. It was his lucky night. He won $300,000 playing the card game blackJack. His friends told him it was beginners luck.

Explain how you would account for these events from the perspective of the Income Tax return for the year ending 30 June 2019

Youmustgivereasonsforyouranswer.Yourdiscussionmustincludeananalysisofthepertinentsectionsofthe relevantlegislation,rulingsandtherelevantcaselaw. Ifrelevant,youmustshowyourcalculation.Ignoreresidency, FringeBenefitsTaxandGoods and ServicesTaxissuesYoumustapplythelawtothefacts given in this question andprovideYOUROWNanalysisoftheissues. Calculations must be included where relevant.