Isla runs a bicycle shop in Wellington. During the tax year ending 30 June 2021, her records
Question:
Isla runs a bicycle shop in Wellington. During the tax year ending 30 June 2021, her records indicate:
Receipts:
| 135,000 | Bicycle Sales |
| 35,000 | Spare parts and accessory sales |
| 15,000 | Compensation receipt (see note A) |
| 250,000 | Proceeds for sale of land (see note B) |
| 1,000 | Net interest received from an overseas interest-bearing term deposit (see note C) |
| 5,000 | Exempt Income |
| 6,000 | Cash dividend income (see note D) |
| 25,000 | Net salary and wages (see note E) |
Payments:
| 55,000 | Purchases of bicycles, spare parts and accessories (see note F) |
| 12,000 | Materials (see note G) |
| 39,000 | Utilities and rent for the business premises |
| 3,000 | Repairs to storage room |
| 1,000 | Donation to Oxfam (Deductible gift recipient) |
ADDITIONAL INFORMATION:
(A) - Compensation for damaged trading stock after a storage room was broken into
(B) - Isla sold some land purchased in 1984 for $85,000. In 2002 Isla spent $15,000 building new fences for 85% of the boundary after a fire damaged the existing fencing. Isla incurred $13,000 in commissions and advertising fees. Isla had carried forward capital losses of $17,000 from prior years.
(C) - Foreign tax withheld includes $100
(D) - Dividends paid include $4,000 in 100% franked dividends, $2,000 in 50% franked dividends. All dividends are paid by companies listed on the ASX
(E) - Isla also works part time at a local winery. Her employer withheld $3,500 in PAYG withholding. The $25,000 includes $1,000 in travel allowances and $300 in reimbursed phone bills, for which her employer paid
(F) - Opening stock from the prior year $44,000. Closing stock of $37,000 (cost), $42,000 (replacement value). $45,000 (market value).
(G) - Materials include glue and paints for putting together or repairing bicycles
(H) - Isla has a carry forward Division 36 past year trading tax loss of $8,000
(I) - Isla wishes to minimise her tax liability
(J) - Isla has appropriate private health insurance
REQUIRED:
Calculate Isla's taxable income for the year ended 30 June 2021. You are required to present a complete analysis, explaining the treatment of all items and/or elements in this question.
Expert Answer:
The taxable income of an individual is the total receipts less all the expenses incurred to earn tho... View the full answer
