Important Notice: this question has been updated for the current tax law, resulting in some aspects being removed. For partnership questions, we recommend reviewing the Partnership topic in class activities and Knowledge check questions for relevant revision opportunities. Tom and Mary are Australian residents in partnership as retailers of computer parts.

The partnership records for the current income year ending 30 June disclose:

Receipts:
$200,000	Gross receipts from trading
20,000	Bad debts recovered
20,000	Net Exempt Income
10,000	Not Assessable Not Exempt Income
40,000	Net capital gain (after discounting) from the sale of shares acquired in 2008
10,000	Dividend 50% franked (The company paying the Dividend pays tax at 30%)
Payments:
$100,000	Purchases of trading stock
50,000	Partners salary Mary
20,000	Partners salary - Tom
2,000	Interest on cash advance made to the partnership by Peter who is not a partner
10,000	Travelling expenses in respect of Tom travelling from home to work
50,000	Salaries and rent paid
1,000	Legal expenses in recovering bad debts
5,000	Borrowing expenses on a loan used to acquire an income earning building. The loan is for 6 years and began on 1 July of the current income year.
3,000	Painting business premises in June of the current income year.

Other details:

1. Tom and Mary share the residual profits and losses equally.
2. Trading stock on hand 1 July of the current income year $60,000
3. Trading stock on hand 30 June of the current income year:
   • using the LIFO method: $50,000(at market selling value), $45,000(at replacement cost), $40,000 (at cost price).
   • using the FIFO method: $100,000(at market selling value), $80,000(at replacement cost), $70,000 (at cost price). The partners wish to minimise their tax liability.
4. On 10 January of the current income year, Tom was robbed at gunpoint of the partners trading receipts of $20,000 while on the way to the bank.
5. During the current income year Tom received a net salary of $20,000 as a part-time lecturer at Monash University, after PAYG of $5,000 tax was deducted from his salary by the university.
6. Tom has an unabsorbed $5,000 capital loss from the sale of shares from the 2015/2016 income year. He also has an unabsorbed $2,000 capital loss from the sale of a painting from the 2014/2015 income year.
7. Tom has a carry forward Division 36 loss from a previous income year of $15,000
8. During the tax year Tom made a gift of $1,000 to his the Collingwood Football Club and a gift of $1,000 to the Red Cross.
9. Tom is not a member of a Private Health Fund and does not have private hospital insurance.

REQUIRED:

Calculate Toms Assessable Income from the partnership and then calculate his taxable income and Net Tax Payable for the current income year ending 30 June. Figures can be rounded to the nearest dollar.

Disregard the unincorporated small business tax offset as well as GST.

You should briefly explain your treatment of items in this question

Item Explanation

$4,000 Conference expense Deductible s. 8-1, revenue expense incurred in the production of assessable income. Finn v FCT