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You are required to calculate the Taxable income and tax payable for the following taxpayer for the 2019/20 year of income. Submit workings for all calculations and include relevant section numbers of the ITAA36 and/or ITAA97 and relevant cases (where applicable) to support inclusion or exclusion of items.

Michael Zack, a resident taxpayer aged 49, runs a sole trading business selling coffee machines. His business is registered for GST. He also works on a casual basis as a sales erson on weekends at Myer. He has a rental property in Gold Coast, Brisbane. Michaelis taking care of his wife Susan Zack, who has lost one of her legs2 years ago as a result of a car accident. Michael is solely taking care of Susan. They have no children. Personal Information Name: Michael Zack TFN: 300 001 000 Date of Birth: 15 July 1974 Address: 3 Dimple Street, Melbourne VIC 3358 Contact: 0456 587 987 (Work: 039578 3648) Bank account: BSB 225887 Account 378458 Michaelis not covered by a private hospital cover. Spouse: SusanZack Date of Birth: 30 July 1989 Currently receives disability pension from Centrelink $5,200for the 2019 tax year. She has no deductions to claim for the 2019 tax year. Income/Expense Information Michael and Susan have a joint term deposit account at CBA. Total interest received from the joint account was $1,500 for the 2019 financial year. Michael has paid $700 to a registered tax agent for preparing his tax return for 2018 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: Myer Pty Ltd (ABN: 11 235 365 874) Gross wages for the 1st of July 2018 to the 30th of June 2019: $9,800 (PAYG withheld: $400) He also received $800 uniform allowance and $200 reimbursement from Myer for work related items he purchased. Michael received a car from 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) $600.

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Part B: Regarding his Business During the year, Michael has had the following transactions in relation to sales, purchases, and inventory (trading stock). Michael did not choose Small Business Entity option). All transactions are GST exclusive unless states otherwise.

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 at market selling $8 600 at replacement $8 500 The closing stock values include $5,000 worth stock in transit from overseas paid for and owned but not received until the 15th of July 2020. Michael has taken home a coffee machine from the stock purchased for private use at total value of $1,200. Ledger balances were as follows (GST inclusive):

1 July 2019 30 June 2020 Account receivable $17 600 $19 800 Account payable $5 280 $5 830 Additional cash receipts included (all GST exclusive unless states otherwise): 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 Michael from injuries $900. Capital contributed by Michael to expand the business $10,000. Cash payments included: Cash Drawings by Michael $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 benefit tax $850. Lease payments on shop fittings and plant equipment $940. PAYG instalments for Michaels personal tax commitments$2,500.

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Fee for maintenance of computer systems Covering the period 1/4/2019 to 30/9/2019 $1,680. Other tax-deductible operating expenses $9,200. Decline in value (see note 1) $?. Note 1 - Other information regarding Michaels business. Michael uses plant and equipment in his business as follows. Michael wishes a maximum deduction for 2019/20 tax year. Ignore SBE concessions. Show clearly the decline in value to claim this year and closing adjustable value balance of each asset. Asset Cost ($) Purchase date

Effective life

Adjustable value (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

Laptop computer

4 000 1/8/2019 3 years 100% Printer 150 1/3/2020 2 years 100%

Part C: Regarding his Rental property Michael purchased a house as a residential investment property on the 1st of July 2019. 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 2018 (See Note 2) - 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 The previous owner provided a statement to Michael certifying that the property was constructed and completed on the 1st of January 1990 at a construction cost of $100,000. The house was in good condition except that the outside walls required complete repair. Michael 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 3) $1,300.

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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-yearmortgage 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 4) $830. Pest control costs to eliminate cockroach infestation $280. Payments to the Australian Taxation Office - additional tax on an amended assessment $400. - interest paid on late lodgement $150. - Fine for the late lodgement of 2018/2019 return $760. Other information Note 2 Michael will use the Commissioners estimate of effective life for calculation decline in value which can be found under Residential Property Operators. Note 3 The rental bond board were only able to pay part of the money owed by the tenants. A further amount of $1050 is outstanding. Michael is attempting to recover this amount by legal means. Note 4 Michael lives in Sydney. He travelled to Brisbane by aeroplane to inspect the property and meet with the real estate agents and tenants.