Julian and Jenna carry on a partnership business and for the income year ended 30 June, the partnership net income was $38,000, as returned by their accountant. However, Included in the deductions was a salary of $12,000 paid to Julian's wife (who is not a business partner). The Commissioner disallows all but $2,000 of this amount. 

Required:

a) What authority, if any, does the Commissioner have in disallowing the claim for salary?

b) What course of action, if any, is available to the partners in disputing the assessment?

c) Will Julian's wife be required to pay tax on $2,000, or $12,000, for the current Income year. Why?

d) On what basis should future salary payments be made to Julian's wife?

Answer rating: 100% (QA)

SOLUTION a The commissioner has full right to not allow the salary given to wife because salary ... View the full answer