Fabia Stanley, aged 41 years, visited your practice to discuss GST-related issues and a possible change in her business structure. 

She is currently working as a sole trader and often has to treat various customers to lunches to keep the sales contracts. The lunches are all business related. In addition, Fabia uses her private car to drive to the lunch venues. Fabia wishes to claim GST credits on the business lunches and car expenses. 

Fabia earns $170,000 (net of deductions) from her sole trading business. She wishes to change her business structure from sole trader to another structure commencing on 1 July 2023. 

She has provided you with the following financial and other family details. Fabia Stanley has the following family members living with her: 

• Jose Stanley: Fabia's spouse, who is 42 years old. Jose is a schoolteacher, earning $80,000. 

• Juan Stanley: Jose's father who is 68 years old. He retired from his job as a sales manager at Suncorp Bank last year and had no income since. Does not receive any income. 

• Daniella Stanley: Fabia's 18-year-old daughter. She is a full-time university student, who currently has no income. 

• Natacha Stanley: Fabia's 16-year-old daughter. She is a high school student. 

Fabia is considering one of the following options: 

• A partnership with Jose, Juan, Daniella, and Natacha Stanley in an equal profit-sharing ratio of 20% each. Two children will not be involved in the partnership business at all, but Fabia thinks this is a great tax planning strategy, as the profit will be divided by five partners. 

• An Australian registered private company. 

• A discretionary family trusts 

Case A Questions 

With reference to the relevant legal principles, advise Fabia Stanley on the following issues in your draft business letter of advice: 

1. Can she claim GST on business lunches? 
2.  Can a GST credit be claimed on her car expenses? Provide strategies for Fabia to claim GST credits regarding recording requirements. 
3. Would having a partnership with all family members be considered tax planning or tax avoidance? Advise her with examples to distinguish between tax planning and tax avoidance. 
4. Which of the above-mentioned business structures would best minimise her overall income tax? Comment on the tax implications of each business option considered. 

Answer rating: 100% (QA)

Dear Fabia Stanley I am writing to provide you with advice on the various issues you have raised regarding your business structure and tax implications Firstly in relation to your query about claiming ... View the full answer