Wharf and Alexander are father and son. Together they operate a business partnership

providing security services. Wharf is aged 43. His son, Alexander aged 17, works full-time in

the partnership. Alexander left school at aged 16 to work full-time in the partnership they

had set-up.

During the 2018 income year the partnership began business and made a loss of $10,000.

This loss was distributed equally between both partners.

The partnership agreement states that all profits and losses will be shared after allowing for

wages to partners, superannuation paid for partners and interest on capital.

During the 2018/19 income year the partnership had the following transactions:

RECEIPTS

Gross Fees $ 610,000

Business Loan from Wharf 50,000

Gross Bank Interest 1,000

PAYMENTS

Interest on Overdraft 7,000

Interest on Loan from Wharf 5,000

Lease of all Security Systems Equipment owned by Wharf - Note 1 50,000

Interest on Capital - Wharf 3,000

Wages to Employees 250,000

Wages to Wharf 40,000

Wages to Alexander 45,000

Superannuation paid for Employees 10,000

Superannuation paid for Wharf 8,000

Other overheads (deductible) 160,000

NOTE 1

Wharf owns all the security equipment and leases all the equipment to the partnership.

Wharf is entitled to a deduction of $34,000 for decline in value of the equipment.

NOTE 2

Neither partner has any losses brought forward from prior years.

NOTE 3

Alexander also receives the following income amounts personally:

An income distribution from the estate of his late mother. The gross amount of the

distribution is $12,000 (which includes $2,000 of franking credits).

$3,500 of fully franked dividends from shares his father purchased on his behalf when he

was five years of age.

Alexander has adequate private hospital insurance cover.

REQUIRED:

( a ) Calculate net partnership income.

( b ) Prepare partnership distribution statement.

( c ) Calculate Wharf's taxable Income.

( d ) Calculate Alexander's taxable Income.

( e ) Calculate Alexander's tax payable.

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