Winsome Lee is a 33-year-old registered fitness instructor employed by a fitness center with a gross income from her training activities of $109,560 for the 2021-2022 financial year. To earn this Income, Winsome pays $15,250 per year for the cost of renewing work-related license/registration. She spends $990 per year on general sportswear (without the gym logo) that she wears in her role as a personal trainer. Winsome also pays an average of $395 each year for membership in a personal trainer's association through which she gets professional insurance coverage and $875 tuition fees per year for a skill-specific course on compulsory professional development and first-aid training offered by a university. To get to and from her client sessions, Winsome has a car valued at $16,500, for which she has expenses of $2,950 per year, including registration and compulsory third-party insurance. Winsome keeps a logbook of the distance she travels moving between the gyms she uses to train her different clients and has estimated that she covers 1,750 kilometers each year for this purpose. Winsome knows she will need to replace her car's tires ($850) and undertake mechanical repairs (estimated at $1,955) next year. Winsome has her two-bedroom unit, recently valued at $455,000, against which she holds a mortgage of $295,000 on which 25 years of repayments remain. Her strata fees include building insurance, so she relies on this to protect her property. Her annual mortgage repayments are $16,330, based on a variable-rate loan that she holds with one of the smaller banks. She has furniture and other personal effects valued at $68,000. Her other assets are $7,550, which she holds in a transaction account at her bank, earning her $7.55 in interest for the year; a term deposit of $15,000, earning 1.25 percent per year; and a superannuation account balance of $104,500 with Spaceship Super (a high growth focused, no insurance superannuation product offering), to which she contributes an additional $6,600 per year. Although she has a credit card with a $2,000 limit, Winsome ensures that she only uses her debit card to make payments (so that her credit card limit is available for emergencies). Winsome's other major expenses are comprised of electricity ($2,600), strata fees on her unit ($4,250), council rates ($1,150 p.a.), water ($750 p.a.), groceries and household products ($16,900 p.a.), non-work-related clothing ($2,350 p.a.), private health cover ($3,380 p.a.), medical and other health-related costs ($975 p.a.), mobile phone and Internet ($2,280 p.a., of which 40% is business related), and entertainment ($5,800 p.a.).

Looking forward (to the following 2022-2023 financial year), Winsome believes that she will be able to earn an additional $6,750 from training clients 2022-2023 financial year. Winsome will pay 39 cents of each extra dollar earned in tax and Medicare levy for any dollar of taxable Income over $120,000. Assume that her health insurance, council rates, electricity charges, and water charges will increase by an average two rate of 3.5 percent next year, and all other expenses, interest receipts, etc., excluding net taxes and levies, remain unchanged. Winsome is considering borrowing $10,300 over seven years to buy a new compact SUV valued at $23,500 drive away. Winsome has been offered a trade-in value of $13,500 on her current vehicle. She believes that, with the lower registration, insurance, servicing, and fuel costs of a new, smaller car, she will save approximately $675 a year on her vehicle operation expenses over the next seven years. Winsome has been looking at alternative banks and credit unions' finance contracts available to her. She has had the following annual interest rates and loan establishment fees quoted to her for a car loan (compounding and repayments are monthly): 7.35 percent per annum, application, and processing fee of $150; 7.65 percent per annum, application, and processing fee $125; and 7.05 percent per annum, application, and processing fee $250. As mortgage interest rates have fallen since Winsome took out her current variable-rate mortgage, she has been looking at alternative mortgage loans to refinance. To have a different mortgage size and term, Winsome wishes to borrow the $285,000 she still owes on her apartment over 20 years. Winsome has had the following interest rates and loan establishment fees quoted to her (repayments will be monthly): 2.95 percent per annum compounded monthly, application and processing fee $350; 2.57% per annum compounded monthly, application and processing fee $750; and 2.45% per annum compounded monthly, application and processing fee $1,050. As the loan-to-value ratio on her property is low, at approximately 40 percent, no mortgage insurance will be required.

Notes and assumptions

1. The current year refers to the 2021-2022 financial year. The following year refers to the 2022-2023 financial year.

2. You may assume that you are looking at Winsome's financial situation at the end of 30 June 2022 (the last day of the 2021-2022 financial year). For simplicity, you can assume that Winsome pays her tax (plus levies) on 30 June 2022 and that all payments on loans, etc., for the relevant subperiod are made by this date (in the real world, there would be timing issues with tax, etc., that complicate matters).

3. You may assume that Winsome's superannuation contributions meet requirements defined as allowable deductions to calculate taxable Income.

4. You may assume that Winsome's private health insurance has the hospital cover required to allow her to receive the private health insurance rebate. Also, the $3,380 paid for health insurance is before receipt of the private health insurance rebate, which she will claim through the tax system.

5. As her net taxable income in 2021-2022 will exceed $66,667 but be less than $90,000 (when you calculate it), Winsome will receive $0 for the low-income tax offset and $1,500 for the low and middle-income tax offset. 3

Revision questions:

1. Determine the net taxes and levies payable by Winsome for the current 2021-2022 financial year. (Note: You should be aware of what each assessable Income and allowable deductions are comprised of as per the current information at the ATO website (see Income and deductions | Australian Taxation Office (ato.gov.au).)

2. personal balance sheet and personal income and expense statement for Winsome for the current 2021-2022 financial year.

3. Use the information from 1. and 2. to estimate the net worth (solvency), liquidity, savings, and debt service ratios for Winsome. Comment on the current 2021-2022 financial year state of the financial position of Winsome.

4. Based on the information provided regarding consumer debt and debt repayments, determine the effective annual interest rates (monthly compounding) associated with Winsome's current home mortgage ($295,000).

5. Prepare forecasts of taxes and levies and the personal cash budget (projected cash flow budget/statement) for Winsome's next 2022-2023 financial year.

6. Comment on the expected state of the following 2022-2023 financial year's finances for Winsome.