QUESTION 1 Part A 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 He operates his own business selling computers and related equipment. Over the last financial year, sales of computers and equipment were paid for at the time of sale. During the year ended 30 June 2019, Suman received $3,000,000 in cash for sales of computers. Purchases during the year ended 30 June 2019 were $1,200,000 and at the end of the year ended 30 June 2019 his stock on hand was $950,000 (valued at cost). Suman's closing stock for the year ended 30 June 2018 was $650,000. Suman took 2 comput- ers 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 10 similar computers to his friends during the year. He paid wages of $1,420,000 to his 20 staff 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 staff's 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 allowed for the year ending 30 June 2019. (Australia) Part B One of Suman's 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 cus- tomer 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 In- come Tax return for the year ending 30 June 2019 (Australia) You must give reasons for your answer. Your discussion must include an analysis of the pertinent sections of the relevant legislation, rulings and the relevant case law. If relevant, you must show your calculation. Ignore residency, Fringe Benefits Tax and Goods and Services Tax issues You must apply the law to the facts given in this question and provide YOUR OWN analysis of the issues. Calculations must be included where relevant. Nil Individual Resident Income Tax Rates Resident tax rates 2019 tax year (year ended 30 June 2019) Taxable income Tax on this income $0 - $18,200 $18,201 - $37,000 19c for each $1 over $18,200 $37,001 - $90,000 $3,572 plus 32.5c for each $1 over $37,000 $90,001 - $180,000 $20,797 plus 37c for each $1 over $90,000 $180,001 and over $54,097 plus 45c for each $1 over $180,000 These rates do not include the Medicare levy of 2%. Resident tax rates 2018 tax year (year ended 30 June 2018) Taxable income Tax on this income $0-$18,200 $18,201 - $37,000 | 19c for each $1 over $18,200 $37,001 - $87,000 $3,572 plus 32.5c for each $1 over $37,000 $87,001 $180,000 $19,822 plus 37c for each $1 over $87,000 $180,001 and over $54,232 plus 45c for each $1 over $180,000 These rates do not include the Medicare levy of 2%. Nil Type of company 2018 Tax Year and 2019 Tax Year Private companies Private companies (other than life insurance companies) that are not base rate entities (BRES) 30% Private companies (other than life insurance companies) that are BRES 27.5% Public companies Public companies (other than life insurance companies) that are not BRES 30% . Public companies (other than life insurance companies) that are BRES 27.5%1 QUESTION 1 Part A 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 He operates his own business selling computers and related equipment. Over the last financial year, sales of computers and equipment were paid for at the time of sale. During the year ended 30 June 2019, Suman received $3,000,000 in cash for sales of computers. Purchases during the year ended 30 June 2019 were $1,200,000 and at the end of the year ended 30 June 2019 his stock on hand was $950,000 (valued at cost). Suman's closing stock for the year ended 30 June 2018 was $650,000. Suman took 2 comput- ers 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 10 similar computers to his friends during the year. He paid wages of $1,420,000 to his 20 staff 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 staff's 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 allowed for the year ending 30 June 2019. (Australia) Part B One of Suman's 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 cus- tomer 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 In- come Tax return for the year ending 30 June 2019 (Australia) You must give reasons for your answer. Your discussion must include an analysis of the pertinent sections of the relevant legislation, rulings and the relevant case law. If relevant, you must show your calculation. Ignore residency, Fringe Benefits Tax and Goods and Services Tax issues You must apply the law to the facts given in this question and provide YOUR OWN analysis of the issues. Calculations must be included where relevant. Nil Individual Resident Income Tax Rates Resident tax rates 2019 tax year (year ended 30 June 2019) Taxable income Tax on this income $0 - $18,200 $18,201 - $37,000 19c for each $1 over $18,200 $37,001 - $90,000 $3,572 plus 32.5c for each $1 over $37,000 $90,001 - $180,000 $20,797 plus 37c for each $1 over $90,000 $180,001 and over $54,097 plus 45c for each $1 over $180,000 These rates do not include the Medicare levy of 2%. Resident tax rates 2018 tax year (year ended 30 June 2018) Taxable income Tax on this income $0-$18,200 $18,201 - $37,000 | 19c for each $1 over $18,200 $37,001 - $87,000 $3,572 plus 32.5c for each $1 over $37,000 $87,001 $180,000 $19,822 plus 37c for each $1 over $87,000 $180,001 and over $54,232 plus 45c for each $1 over $180,000 These rates do not include the Medicare levy of 2%. Nil Type of company 2018 Tax Year and 2019 Tax Year Private companies Private companies (other than life insurance companies) that are not base rate entities (BRES) 30% Private companies (other than life insurance companies) that are BRES 27.5% Public companies Public companies (other than life insurance companies) that are not BRES 30% . Public companies (other than life insurance companies) that are BRES 27.5%1