Himanshu Patel, a resident taxpayer aged 59, runs a sole trading business selling imported food items. His business is registered for GST. He also works on a casual basis as an import/export agent at Blue Marlin Pty Ltd (ABN: 89 125 678 968). He has a rental property in Lakemba, Sydney. Himanshu is taking care of his wife Hayali Patel, who has lost eyesight in her left eye 9 months ago, on the 1st of October 2018 as a result of a car accident. Himanshu is solely taking care of Hayali.
Personal Information
Name: Himanshu Patel
TFN: 300 001 000
Date of Birth: 15 July 1974
Address: 23 Market Street, Newtown NSW 2200
Contact: 0456 587 987 (Work: 02 9578 3648)
Bank account: BSB 225887 Account 378458
Himanshu is not covered by a private hospital cover.
Spouse: Hayali Patel
Date of Birth: 30 July 1989
Currently receives disability pension from Centrelink $9,200 for the 2020 tax year. She has no deductions to claim for the 2020 tax year.
Income/Expense Information
Himanshu and Hayali have a joint term deposit account at ANZ. Total interest received from the joint account was $500 for the 2020 financial year.
Himanshu has paid $400 to a registered tax agent for preparing his tax return for 2019 tax year.
In addition to the above, the following information relates to his employment (Part A), business income/expenses (Part B) and rental receipts/payments (Part C). All expenses have been substantiated unless it states otherwise.
Part A: Regarding his employment
Employer: Blue Marlin Pty Ltd (ABN: 11 235 365 874)
Gross wages for the 1st of July 2019 to the 30th of June 2020: $7,800 (PAYG withheld: $200)
He also received a $2,000 shift allowance and $800 reimbursement for work-related software fees from his employer.
Himanshu received a car from the employer as a fringe benefit (showing as reportable in his PAYG summary, valued $60,000 not exempt from FBT)
Work-related allowable deductions to claim (telephone & stationery) $300
Part B: Regarding his Business
During the year, Himanshu has had the following transactions in relation to sales, purchases, and inventory (trading stock). Himanshu did not choose Small Business Entity option nor low-value pool.
Cash received from accounts receivable for credit sales
$85,000
Cash paid to accounts payable for purchases of trading stock
$43,000
Inventory (trading stock) on 1 July 2019
$7,100
Inventory (trading stock) on 30 June 2020
- at cost
$8,400
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- at the market selling
$8,600
- at replacement
$8,500
Himanshu has taken home some food items from the stock purchased for consumption by his family at total value of $2,500
Ledger balances were as follows (GST inclusive)
1 July 2019
30 June 2020
Accounts receivable
$17,600
$19,800
Accounts payable
$5,280
$5,830
Additional cash receipts included:
• Volume rebates from overseas suppliers $3,500
• Insurance recovery from the insurance company due to extensive damage
caused by a hailstorm and included
- Compensation for loss of income $7,900
- Repairs carried out on shop caused by storm damage $2,700
- Medical costs incurred by Himanshu from injuries $900
• Capital contributed by Himanshu to expand the business $10,000
Cash payments included:
• Cash Drawings by Himanshu $3,000
• Fines for breach of Australian Customers regulations $900
• Net wages to employees $12,000
• PAYG withheld from employees and paid to the ATO $2,900
• Superannuation for employees $1,230
• Superannuation guarantee charge $190
• Fringe benefits tax $850
• Lease payments on shop fittings and plant equipment $940
• PAYG installments for Himanshu’s personal tax commitments $2,500
• Fee for maintenance of computer systems –
Covering the period 1/4/2020 to 30/9/2020 $1,680
• Other tax-deductible operating expenses $9,200
• Decline in value (see note 1) $?
Other information regarding Himanshu’s Business
Note 1) Himanshu uses plants and equipment in his business as follows. Himanshu wishes for a maximum deduction for the 2019/20 tax year. Ignore SBE concession. You must show clearly decline value to claim this year and closing adjustable value balance of each asset in the word report.
Assets
Cost ($)
Purchase date
Effective life
Adjustable vale (30/6/2019)
Business usage
DIV method
Mobile phone
3,000
1/6/2018
4 years
2,188
60%
Diminishing Value
Office Furniture
15,000
1/6/2018
10 years
13,375
100%
Prime Cost
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Laptop Computer
4,000
1/8/2020
3 years
100%
Printer
150
1/3/2020
2 years
100%
Part C: Regarding his Rental property
Himanshu purchased a house as a residential investment property on the 1st of July 2019. The purchase price of the property was $300,000 comprised of the following payments. All amounts include GST where applicable.
• Land and buildings $276,800
• Depreciable assets adjustable value on the 1st of July 2019 (See Note 1)
- Carpets $5,000
- Hot water system electric $1,200
- Ceiling fans $1,600
- Barbecue (fixed) $1,400
- Window blinds internal $8,000
- Window curtains $6,000
$300,000
The previous owner provided a statement to Himanshu certifying that the property was constructed and completed on the 1st of January 1996 at a construction cost of $100,000. The house was in good condition except that the outside walls required complete repair.
Himanshu recorded the following receipts and payments for the 2019/20 tax year in respect of the rental property:
Receipts Rent received (net of agent commission withheld $1,250) by 28 June 2020 $23,750
Compensation from Rental bond board for tenants who left and
did not pay the rent they owed (see note 2) $1,300
Rent in advance from new tenants on 29 June for the period 1 July to 30 July 2020 $3,000
Insurance recovery for storm damage to roof $2,100
Payments
Mortgage repayments to Westpac Bank – principal $4,500
– interest $23,800
Loan application fees to Westpac Bank for a 10-year mortgage loan
to buy the house – paid on approval of the loan 1 July 2019 $825
Council & Water rates $3,400
Building Insurance premium $850
Payment to solicitors – for lease preparation fees $150
– to eject tenants for non-payment of rent $375
Repairs – to paint the outside walls of the house, carried out on 10 July 2019 $1,100
Construction costs of brick room to store garbage bins and gardening equipment carried out on 1 May 2020 $6,000
Garden hose and attachments $165
Travel costs to the rental property for inspections (see Note 3) $830
Pest control costs to eliminate cockroach infestation $280
Payment to a registered tax agent – preparing 2017/18 tax return $170
Payments to the Australian Taxation Office
- Additional tax on an amended assessment $400
- Fine for the late lodgement of 2017/18 tax return $760
LAW6001 Assessment 2: Individual Case Study Page 1 of 10
Other information
Note 1) Himanshu will use the Commissioners estimate of effective life for calculation decline in value which can be found under “Residential Property Operators”.
Note 2) The rental bond board was only able to pay part of the money owed by the tenants. A further amount of $650 is outstanding. Himanshu is attempting to recover this amount by legal means.
Note 3) Himanshu lives in Sydney, he went to Brisbane by airplane to inspect the property and meet with the real estate agents and tenants.
Required
Himanshu wishes to minimize his income tax for 2019/20. Calculate Himanshu’s taxable income for 2019/20. You are required to enter income and deduction details where applicable in the tax return form provided in the excel sheet.
Submit all workings of EACH income & deductions of calculations and any tax offsets available for Himanshu in a word format (written report) including relevant section numbers as per ITAA36/ITAA97. In your report, clearly advise whether Himanshu is eligible to claim a dependant tax offset (Invalid and invalid carer tax offset).

Answer rating: 100% (QA)

SOLUTION Calculation of Himanshu Patels Taxable Income for the year 201920 Part A Employment Income Gross wages 7800 Shift allowance 2000 Reimbursement for workrelated software fees 800 Total income 1... View the full answer