Simran and Thorin are partners in a business selling handmade wedding invitations. According to their Partnership Agreement, net profits and losses of the business will be distributed 60/40 in favor of Simran after providing for the following:

• Salary to Simran: $80,000
• Salary to Thorin: $70,000
• Superannuation payments to Simran: $15,500
• Superannuation payments to Thorin: $13,500
• Interest on Capital Contribution by Simran: $5,000

During the 2020 income year, business records also showed the following transactions:

• Sales of wedding invitations: $300,000
• Salary payments to staff: $25,000
• Superannuation payments to staff: $4,750
• Business expenses eg rent, electricity etc: $29,500
• Interest incurred on a business loan from BCA Bank: $4,500
• Interest incurred on an arms length loan from Simran to the business: $950

Other transactions: During the same financial year, Thorin earned $100,000 from his private investments (outside of the partnership). He also made a $3,500 donation to the RSPCA (a registered charity) plus $2,000 donation to the Animal Justice League (a registered political party).

QUESTIONS:

1. Identify the partnership type
2. Calculate the s90 PNI
3. Prepare a Distribution Statement
4. Calculate each partner’s Assessable Income
5. Calculate each partner’s Taxable Income

Answer rating: 100% (QA)

1 The s90 Partnership Net Income Note As you have not provided the gross receipts for the partnership I have assumed the amount to be 500000 for demonstration purposes for the accuracy of the calculat... View the full answer