You are working as a tax agent at Rocket Tax Pty Ltd (456 George Street Sydney NSW 2000) and one of your clients (Julie Palmer: Unit 15/69 Smail Street Ultimo NSW 2007) has come to you for assistance. Julie is a self-employed web designer and due to her heavy work load and unpredictable working hours has not had the time to sort out her tax matters. Julie spends a lot of time organising her business expenses for tax, however she has lost a few receipts and tax invoices for the last quarter of the financial year. She said that she has already lodged the tax return based on the details provided in Table 1 (she estimated income & expenses for the June quarter 2020, as listed in the table 1 below).

Table 1: estimated income & expenses

Business Income	$10000
Education expenses	$2000
Software subscription	$800
Internet expenses	$225
Telephone expenses	$240
Rent	$6000
Income tax expense (PAYG instalment)	$1200
Travel to work (city rail)	$500
Health insurance	$300
Child care	$1000
Uniform	$200
Depreciation on Computer (3 years useful life)	$567

During December 2020, Julie advises you that she found the missing bank statement and receipts, which list the business income and expenses & other payments for the period June quarter 2020. Assume all amounts were correctly reported for other periods. Julie asked you to review the following Bank statement and identify discrepancies in the income/expense claims made versus the actual income/expenses incurred.

Details of the Bank statement are as follows:

Period: 01 April 2020 to 30 June 2020

Date	Transaction details	Withdrawal	Deposit	Balance
	Opening balance (April 2020)			7,500
1/04/2020	Paid for workshop webinar – Design course	160		7,340
3/04/2020	Storage boxes for shoes	225		7,085
4/04/2020	Monthly city rail (home to work)	150		6,935
9/04/2020	Fitness first (direct debit)	99		6,836
13/04/2020	Vodafone (direct debit)	80		6,756
12/04/2020	Services Income		4,500	11,256
15/04/2020	Electricity (Energy Australia) Home	375		10,881
14/04/2020	Medi Bank Private (Health)	95		10,786
16/04/2020	Telstra Internet	75		10,711
17/04/2020	Office rent	2,000		8,711
23/04/2020	Bavarian café - cake for birthday	255		8,456
25/04/2020	Interest charges on her personal loan	125		8,331
28/04/2020	March quarter PAYG instalment tax paid			8,331
1/05/2020	Paid for workshop webinar – Design course	60		8,271
4/05/2020	Monthly city rail (home to work)	150		8,121
8/05/2020	Jobkeeper payments - Business participant		3,000	11,121
9/05/2020	Fitness first (direct debit)	99		11,022
13/05/2020	Vodafone (direct debit)	80		10,942
14/05/2020	Medi Bank Private (Health)	95		10,847
15/05/2020	Gas (Energy Australia) Home	155		10,692
16/05/2020	Telstra Internet	75		10,617
17/05/2020	Office rent	2,000		8,617
23/05/2020	Dodo Coffee	80		8,537
1/06/2020	Yearly software subscription	800		7,737
4/06/2020	Monthly city rail	150		7,587
7/06/2020	Cash Boost from the ATO		5,000	12,587
9/06/2020	Fitness first (direct debit)	99		12,488
10/06/2020	Jobkeeper payments - Business participant		4,500	16,988
13/06/2020	Vodafone (direct debit)	80		16,908
14/06/2020	Medi Bank Private (Health)	95		16,813
15/06/2020	Apple computer for 100% work purposes	1,700		15,113
16/06/2020	Telstra Internet	75		15,038
17/06/2020	Office rent	2,000		13,038
23/06/2020	HBA Learning Institute for Design course	1,200		11,838
25/06/2020	Services income		5,500	17,338
28/06/2020	Jumbo Child care	980		16,358
30/06/2020	Blouse and black pants	150		16,208
	Closing Income (Month ending June 2020)			16,208.00

Additional information:

• Julie’s business is not registered for GST as her annual income is less than $75,000.

• Julie uses her phone and internet 40% for work purposes.

• Julie pays child care fees so that she can go to work.

• Julie purchased blouse and black pants only to wear at work.

Task: You are required to:

Draft a business letter to Julie Palmer. In the letter, students must

1) Identify any discrepancies by reconciling the bank statement against the claims made by Julie Palmer (table 1 provided).

2) Recalculate the assessable income and allowable deductions with explanations. Include section numbers and/or cases in your explanations.

3) Advise any further actions required due to the discrepancies.

Answer rating: 100% (QA)

1 Reconciliation for June 2020 all figures in transaction estimated by Julie Actuals based on Bank S... View the full answer