Sarah lives in Eastwood and commutes daily to the accounting firm in Sydney CBD where she is employed full-time as an accountant. She receives a salary of $90,000 in the 2020/21year of income, from her accounting job. Sarahs employer also provides her with a laptop computer (valued at $3000) to use for her work. Sarah is an Australian resident for tax purposes. For the 2020/21year of income, Sarahpays $800 membership fees for her membership of the Association of Chartered Accountants, Australia & New Zealand.

Sarah is required, by her employer, to wear all black clothing while working as she often meets with clients. During the 2020/21year of income, she spends $700 on all black skirts, trousers, and tops to wear to client meetings. She is so busy working at the accounting firm that she often has to bring work home on weekends. She completes this work using her work laptop at a small table in the kitchen while her housemates are cooking and washing dishes. During the 2020/21year of income, the heating and lighting costs for the kitchen are $500.

Sarah is very hardworking and in addition to her full-time job, she also teaches oil-painting classes at a community college in Epping during the week, in the evenings. She travels from the accounting firm in Sydney CBD, to the college in Epping to teach. During the 2020/21year of income, she incurs travel expenses of $2,000 in travelling from the accounting firm to the college in Epping. She receives $20,000 from teaching at the college during the 2020/21income year. In December 2020, Sarah sees an advertisement in an Art Teachers magazine about an oil-painting competition for art teachers. Sarah decides to enter as she has previously won several prizes in art competitions. Over the next few weeks, Sarah paints a beautiful landscape of a field of flowers and submits her painting in the competition.

She wins a cash prize of $30,000 and an anon-transferable annual pass to exhibitions at the Art Gallery of NSW(valued at $200).

While exploring some local sales in January 2021, Sarah came across a bargain and purchased a 120-year old, antique dressing table for $2300. She subsequently discovered that the dressing table had previously belonged to a lady who had testedCovid-19 positive. A few weeks later Sarah sold the dressing table for $2,000.

Sarah also owns an investment property in Chippendale, which she purchased in 2015 for $200,000. The annual rent from the property is $25,000 and the annual expenses for the property have been fairly steady-around $2,000 for insurance, $3000 for agents fees, and $25,000 for various other expenses in relation to the property. In addition to these expenses, in December 2020, Sarah discovers that the swimming pool on the Chippendale property is leaking. In January 2021, Saraharranges for her brother Sam, who is a builder, to fix the holes in the pool lining. Sarah pays Sam $10,000 for the work (the market rate for the work is $3,000).

In 2017, Sarah purchased a house in Bowral which she only makes available for use by her relatives. Sarahs uncle suggested that she should place an advertisement for tenants in the newspaper occasionally and claim tax deductions for the property expenses. The purchase price was $800,000 and Sarah was required to pay $40,000 stamp duty on the transfer. She borrowed money from a bank to fund the purchase price and paid $100,000 in interest on the loan. In February 2021, she also paid $40,000 to a builder to renovate the bathrooms. In addition, she paid $20,000 in legal fees to block a proposed development nearby which would have obstructed the houses picturesque views of the surrounding countryside. On 7 June 2021 Sarah entered into a contract of sale of the property to a third party at the market value of $1,200,000. Settlement occurs in August 2021.

Required: Advise Sarah regarding any relevant tax implications arising from the above facts in relation to the 2020/21 income year. In your answer, make sure that you apply the HIRAC methodology and refer to any relevant cases, legislative provisions, tax rulings and principles of tax law, and include any relevant calculations.

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