For Assessment 1A, I will use the 'cite, describe, apply' method to: Identify all tax issues. Cite,

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Question:

For Assessment 1A, I will use the 'cite, describe, apply' method to:

Identify all tax issues.
Cite, describe and apply the most directly relevant law to the tax issues raised on the assignment.
State a clear and definite conclusion that is consistent with the way you or your team applied the law to the facts.
Consider the overall presentation including correct grammar, spelling and punctuation and clarity of expression.
Adopt the required layout (refer to the instructions below).
Although basic calculations are required, I am not required to treat this as an accounting exercise. My answers need to be supported by reference to relevant taxation law using the 'cite, describe, apply' method. I should only cite, describe and apply relevant cases and/or sections from the course materials in my answer. Materials other than sections and cases are provided to help me understand the law, but they do not substitute for the law itself.

Assessment Question

Hillary Donat owns and operates Deluxe Desserts as a sole trader to manufacture and sell cakes and desserts from a shop in Adelaide.

Hillary loves baking cakes making desserts too and has spent considerable time acquiring and practicing her baking skills. This included spending a year in France to receive specialist training in making pastries of all kinds for which she earned the qualification Pâtissier Extraordinaire.

While she makes her desserts by hand as much as possible, Hillary has purchased some equipment to speed up manufacture including two mixing machines, two ovens, and various cooking utensils. She also has two refrigerators for storing finished items and a larger fridge and freezer to store ingredients. She only buys the best ingredients and stores them carefully in airtight containers or refrigerated at the appropriate temperature. Other plant and equipment is associated with the store front and general business operations. The most important of these items is a display counter, POS machine, cash register and a computer.

Most customers pay for their items in cash upon collecting them from Hillary's shop, but she also sells on account to corporations and business who purchase her items for events. These accounts must be paid in 30 days.

Details of her sales and receivables are provided below:

Cakes, desserts etc - cash received from customers $255,305

Accounts receivable as at 30 June 2022 3,125

Accounts receivable as at 30 June 2023 4,223

Required

In my own words and based on the information provided, calculate Hillary's assessable income for the year ended 30 June 2023. Justify my answers with reasonably arguable positions using the 'cite, describe, apply' approach.

For the purposes of this assignment part, I should assume that Hillary is an Australian tax resident individual taxpayer and that she is in the business of manufacturing and selling desserts, cakes and similar items. This means that her tax residency status and whether her cake etc manufacturing and sales activity is a business are not issues that do not need to be discussed.

Please note the following:

While the question asks to calculate Hillary's assessable income, I must NOT treat this as an accounting exercise. This is a law exercise and marks are awarded for the quality and correctness of reasonably arguable positions in accordance with the 'cite, describe, apply' approach.
Issues are NOT weighted equally in marks. Issues that require more law to be cited and described and/or more facts for it to be applied have more marks allocated to them.
There are numerous items listed above that may form part of Hillary's assessable income. Where items are treated in the same manner under the same law then you may discuss these together to save time and words.
It is recommended that I only use law discussed in the course materials. Indeed, this is all need.
Unless it is stated otherwise in the study notes, do not use income tax rulings or Australian Tax Office (ATO) advice of any kind in addressing the tax issues in this or any assessment piece. ATO advice is not law.
Assessment Instructions

The assignments should be in report form; however, no synopsis is required.
Address each tax issue under a separate heading and provide a calculation at the end.
The style guide and template for this assessment is clearly set out in the Assessment Advice and Resources section below under the heading 'Format/expectations for assessment'. The following are required:
Headings
Pagination
Paragraphs
Text of the Paper (refer to required font, font size and line spacing).
Citations of cases and legislation
Appendices are to be avoided.
A reference list is not required.