Question 1:

Keith and Nicole are both Australian resident individuals for tax purposes. They carry on confectionary business as a partnership together in Coorparoo selling a range of sweets and lollies.

During the year ended 30 June 2018, their trial balance showed the following:

$

• Gross sales 412,000
• Interest income 250
• Purchase of trading stock 106,000
• Wages to employees (other than Keith and Nicole) 42,000
• Drawings by Keith 56,000
• Drawings by Nicole 34,000
• Motor vehicle expenses (refer additional information) 12,000
• Repainting shopfront 1,600
• Accounting fees 1,200
• Other tax-deductible expenses 116,450

The motor vehicle expenses of $12,000 represent the total motor vehicle expenses incurred during the 2018 income year. Based on a logbook maintained for the car, it was revealed that the car was used 75% for business purposes.

According to the partnership agreement, Keith and Nicole share profits and losses as follows:

• Keith: 60%
• Nicole: 40%

Stock on hand at 1 July 2017 was $54,000. Stock on hand at 30 June 2018 was $38,000.

For the year ended 30 June 2017, the partnership made a tax loss of $20,000.

Required:

(a) Calculate the net income of the partnership for the year ended 30 June 2018.

(b) Calculate the amount to be included in the assessable income of each partners personal income tax return for the year ended 30 June 2018.

(c) How would your answer in part (a) and (b) change if Keith was paid a salary of $40,000 for the year ended 30 June 2018 from the partnership?