You are required to advise Sarath whether the receipts are assessable and whether the payments are allowable deductions.

You must refer to relevant sections of the Income Tax Act or case law. It is not sufficient simply to say it is subject to tax or deductible. You must provide a reason and analysis for your answer/conclusion?

During the year ended 30 June 2022, Sarath who ran a second-hand clothing stall in Werribee, received the following amounts:

RECEIPTS:

2. Sales of clothing$75,000
4. GST received$5,250
6. Gifts from customers$350

The gifts were given by loyal customers due to the closure of his business based on COVID restrictions. The customers said that the money was to help support the local businesses.

He also paid the following amounts:

PAYMENTS:

1. Mobile telephone expenses$890

He tells you that he used the phone for work purposes 85% of the time.

1. Donations$750

$500 was donated to an approved deductible gift and $200 was a donation to the Liberal party of Australia for the upcoming State election in November.

1. Geelong Football club subscriptions$250

Saratha used the dining facilities at the club to take valued clients and his staff for lunch or to the football.

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Answer rating: 100% (QA)

Receipts Sales of Clothing 75000 This income is assessable under Section 65a of the Income Tax Assessment Act 1997 ITAA 1997 which includes ordinary i... View the full answer