Question

Philip and Kim finally decided not to sell either 151 or 153 Temple Street. They continued to reside in 153 and rent 151 to the cousin. They borrowed additional funds and employed a builder to complete the renovation at 155 Temple Street. The property was sold on 1 June 2020 and the gain on sale was $150,000. Philip earned a salary of $98,000 (tax withheld under pay as you go was $25,792) and had job related expenses of $7,800 including $600 for flights and $1,000 for hotel accommodation to attend a conference in Port Douglas in November 2019. Philips employer paid for the conference registration which included all meals and the cost of travel between home and airport, airport and hotel accommodation. The conference was for 5 days, Monday to Friday but the accommodation included an additional 4 days for the weekend before and the weekend after the conference. Philip flew to Port Douglas on the Saturday morning and flew back to Sydney late on the Sunday after the conference. Kim subcontracted plumbing services to a five builders over the year and earned a total of $112,000 with tax withheld under voluntary agreements of $22,400. Business deductions were $17,500. Kims plumbing van travelled 4,900 km, all business and expenses were $2,100 for registration and insurance, $900, for fuel, $670 for parking fines. Kim joined Philip in Port Douglas for the Interior Design Conference from Tuesday to Sunday. Both Philip and Kim have private health insurance, they have no dependents.

Required

Advise Philip and Kim of their tax obligations including an estimate of any tax payable or refund entitlement. Your response will have two parts,

i. a report itemising amounts to be included and deducted stating relevant legislation and case law (refer to ILAC style for discussion of any contentious matters) and a calculation of tax payable including any refund if applicable, which will form client working papers (15 Marks), and

ii. a draft letter to Philip and Kim summarising their tax position (5 Marks)