Question 1

Sue, Ruby and Tess are carrying on a business together in a partnership providing accounting services known as the "Three Amigos Partnership". The Three Amigos Partnership uses the cash basis to account for income tax.Under the partnership agreement, Ruby is to get a partner's salary of $60,000, and the balance of the net income is to be shared equally between all three partners.Any franking credits are to be shared according to the partners' relative share of net income.

During the 2016/17 income year, the partnership had invoiced clients $645,000 (including GST) for services rendered.However, the partnership had only received $561,000 (including GST) in cash as at 30June2017. In addition, the three partners had also disposed of a block of land that they had acquired on 12 October 2014 one third each - with each spending $100,000 each (total $300,000). They sold the land for a total of $375,000. The three partners were going to build office premises on the land, but the location was found to be unsuitable.

Other receipts and expenditure items of the partnership were as follows:

Receipts

Interest income $90,000

Expenditure

Rental expense $85,800 (incl. GST)

Secretary salary $50,000

Ruby's salary $60,000

Telephone expense $5,720 (incl. GST)

Depreciation on office equipment $10,000

Fringe benefits tax $4,800

Speeding ticket (penalty) $ 900

Electricity expense $2,200 (incl. GST)

Drawings - Sue $25,000

Drawings - Tess $30,000

Required:

1. In relation to the above facts, discuss and calculate what the 'net income' of the partnership is for the 30 June 2017 income year.
2. Calculate Sue, Ruby and Tess's share of net income of the partnership.
3. Calculate the tax payable by Ruby for the 30 June 2018 income year, assuming that she has no private health insurance, no dependants and no other income. You are also advised that Ruby has net capital losses carried forward of $5,000, plus net capital losses carried forward from collectables of $1,000.