In this question, ignore Goods and Services Tax (GST). Louise McQueen is aged 52 and she lives

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In this question, ignore Goods and Services Tax (GST). Louise McQueen is aged 52 and she lives in Brisbane. These are the facts relevant to Louise’s 2020–2021 income year ending 30 June 2021:

Employment with a professional services firm until 31 March 2021 Louise is a chartered accountant and until 31 March 2021, she is employed as a director in the tax division of a large professional services firm:

• Her gross salary from her employment totals $225,000.

• She receives a bonus for making her sales targets for the half-year ending 31 December 2020. The bonus totals $30,000.

• She receives an entertainment allowance so that she has sufficient funds available to pay for business lunches when she hosts clients of the firm at restaurants. The entertainment allowance totals $12,000.

• She receives an allowance to pay for internet connectivity at her private home. Louise and all of the other senior employees of the firm are required to be available online to work from home and over weekends. The internet connectivity allowance totals $6,000. Louise pays for the following expenses in relation to this employment:

• The cost of business lunches at restaurants when she is present and hosts clients of the firm, totalling $9,450.

• The cost of internet connectivity at her private home from 1 July 2020 to 31 March 2021, totalling $990. Louise estimates that her work-related activities account for 70% of her use of her internet connectivity from home. Partnership business from 1 April 2021 to 30 June 2021 Louise has always dreamed of owning her own jazz music club. After months of planning, Louise resigns from her job with the professional services firm, effective 31 March 2021. On 1 April 2021, she opens a jazz music club called BrisJazz, operated as a partnership business, together with her best friend Michelle Lovejoy and a talented Brisbane-based musician, Jake Melville. The partnership agreement between them stipulates:

• Louise is entitled to a monthly salary of $10,000, treated as priority drawings.

• Michelle is entitled to interest on her capital contribution of 6% per year, treated as priority drawings.

• Jake is responsible for managing the club. In return, he can perform in the club whenever he wants to.

• The partners agree to split the remainder of the profits as follows: Louise 55%; Michelle 20%; Jake 25%. These are the facts relevant to BrisJazz for the 2020–2021 income year ending 30 June 2021:

• Receipts from ticket sales for jazz concerts hosted at the club total $750,000.

• Receipts from the sale of bottled water and alcoholic drinks total $1,250,000.

• The purchase cost of bottled water and alcoholic drinks available for sale in the club totals $625,000.

• As at 30 June 2021, the value of the closing stock of bottled water is:

o Cost price: $6,250

o Market selling value: $6,000.

• As at 30 June 2021, the value of closing stock of alcoholic drinks is: o Cost price: $19,350 o Market selling value: $86,750. BrisJazz incurs the following other expenses:

• Salary paid to Louise totalling $30,000.

• Interest on capital contribution paid to Michelle totalling $38,000.

• Superannuation contributions made on Louise’s behalf into her personal superannuation fund totalling $32,000. Staff salaries totalling $375,000.

• Superannuation guarantee contributions made on behalf of staff members totalling $35,625.

• Rent for the business premises totalling $60,000.

• In May 2021, BrisJazz pays its landlord a further $2,890 after the landlord imposes this late payment fine on BrisJazz. In-stead of paying rent for the premises on the due date, BrisJazz paid the landlord seven days late, resulting in the fine being imposed as set out in the terms of the rental agreement. • The cost to lease sound system equipment totalling $106,212.

• Advertising, printing, telephone and internet costs totalling $300,000.

• The cost of a 24-month liquor licence obtained from the Brisbane City Council at a cost totalling $5,000, paid on 1 April 2021.

The licence is valid for 730 days from 1 April 2021 to 31 March 2023. All restaurants and clubs in the Brisbane City Council area are required to purchase a liquor licence for 24 months in advance before they can legally sell alcohol in accordance with council rules. Other income that Louise earns Louise also receives the following income during her 2020–2021 income year ending 30 June 2021: • Fully franked dividends from a very large ASX listed company totalling $3,680.

You are required to:

a. Calculate the net income of BrisJazz for the 2020–2021 income year ending 30 June 2021. Show all your calculations and provide reasons for your answers. Your answer should reference relevant sections and division of the Income Tax Assessment Acts and relevant case law. (13 marks)

b. Calculate Louise’s taxable income for the 2020–2021 income year ending 30 June 2021. Show all your calculations and provide reasons for your answers. Your answer should reference relevant sections and division of the Income Tax Assessment Acts and relevant case law. (9 marks)