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You are working as a tax agent at Rocket Tax Pty Ltd (456 George Street Sydney NSW 2000) and one of your clients (Julie Palmer:

You are working as a tax agent at Rocket Tax Pty Ltd (456 George Street Sydney NSW 2000) and one of your clients (Julie Palmer: Unit 15/69 Smail Street Ultimo NSW 2007) has come to you for assistance. Julie is a self-employed web designer and due to her heavy work load and unpredictable working hours has not had the time to sort out her tax matters. Julie spends a lot of time organising her business expenses for tax, however she has lost a few receipts and tax invoices for the last quarter of the financial year. She said that she has already lodged the tax return based on the details provided in Table 1 (she estimated income & expenses for the June quarter 2020, as listed in the table 1 below).

Table 1: estimated income & expenses

Business Income$10000
Education expenses$2000
Software subscription$800
Internet expenses$225
Telephone expenses$240
Rent$6000
Income tax expense (PAYG instalment)$1200
Travel to work (city rail)$500
Health insurance$300
Child care$1000
Uniform$200
Depreciation on Computer (3 years useful life)$567

During December 2020, Julie advises you that she found the missing bank statement and receipts, which list the business income and expenses & other payments for the period June quarter 2020. Assume all amounts were correctly reported for other periods. Julie asked you to review the following Bank statement and identify discrepancies in the income/expense claims made versus the actual income/expenses incurred.

Details of the Bank statement are as follows:

Period: 01 April 2020 to 30 June 2020

DateTransaction detailsWithdrawalDepositBalance
Opening balance (April 2020)7,500
1/04/2020Paid for workshop webinar – Design course1607,340
3/04/2020Storage boxes for shoes2257,085
4/04/2020Monthly city rail (home to work)1506,935
9/04/2020Fitness first (direct debit)996,836
13/04/2020Vodafone (direct debit)806,756
12/04/2020Services Income4,50011,256
15/04/2020Electricity (Energy Australia) Home37510,881
14/04/2020Medi Bank Private (Health)9510,786
16/04/2020Telstra Internet7510,711
17/04/2020Office rent2,0008,711
23/04/2020Bavarian café - cake for birthday2558,456
25/04/2020Interest charges on her personal loan1258,331
28/04/2020March quarter PAYG instalment tax paid8,331
1/05/2020Paid for workshop webinar – Design course608,271
4/05/2020Monthly city rail (home to work)1508,121
8/05/2020Jobkeeper payments - Business participant3,00011,121
9/05/2020Fitness first (direct debit)9911,022
13/05/2020Vodafone (direct debit)8010,942
14/05/2020Medi Bank Private (Health)9510,847
15/05/2020Gas (Energy Australia) Home15510,692
16/05/2020Telstra Internet7510,617
17/05/2020Office rent2,0008,617
23/05/2020Dodo Coffee808,537
1/06/2020Yearly software subscription8007,737
4/06/2020Monthly city rail1507,587
7/06/2020Cash Boost from the ATO5,00012,587
9/06/2020Fitness first (direct debit)9912,488
10/06/2020Jobkeeper payments - Business participant4,50016,988
13/06/2020Vodafone (direct debit)8016,908
14/06/2020Medi Bank Private (Health)9516,813
15/06/2020Apple computer for 100% work purposes1,70015,113
16/06/2020Telstra Internet7515,038
17/06/2020Office rent2,00013,038
23/06/2020HBA Learning Institute for Design course1,20011,838
25/06/2020Services income5,50017,338
28/06/2020Jumbo Child care98016,358
30/06/2020Blouse and black pants15016,208
Closing Income (Month ending June 2020)16,208.00

Additional information:

• Julie’s business is not registered for GST as her annual income is less than $75,000.

• Julie uses her phone and internet 40% for work purposes.

• Julie pays child care fees so that she can go to work.

• Julie purchased blouse and black pants only to wear at work.


Task: You are required to:

Draft a business letter to Julie Palmer. In the letter, students must

1) Identify any discrepancies by reconciling the bank statement against the claims made by Julie Palmer (table 1 provided).

2) Recalculate the assessable income and allowable deductions with explanations. Include section numbers and/or cases in your explanations.

3) Advise any further actions required due to the discrepancies.


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