Business of baking and selling cakes and dessert items

Reference no: EM133627884

Question

Delicious Delights Pty Ltd ('Delicious Delights') is an Australian resident private company and base rate entity that carries on a business of baking and selling cakes and dessert items and selling them to the public from a small shop in suburban Adelaide. The company is registered for the Goods and Services Tax (GST) and it owns the shop. It was incorporated in August 2005 with three Australian resident shareholders who each owned 33.3% of the company's sole class of shares until December 2018 when two of the shareholders sold all their shares to another Australian resident.

For the income tax year ended 30 June 2023, interim calculations revealed the taxable income of the company to be $275,000 (GST exclusive), but this amount has not considered any relevant matters in the additional information below.

Additional information for the year ended 30 June 2023 (not included above):

1. Superannuation paid on behalf of the company's employees during the 2023 financial year to compliant superannuation funds was $35,000. All employees are aged under 30 years. Superannuation is not a taxable supply.

2. The company's business suffered due to rising inflation in 2022 which increased costs and reduced demand leading to a small revenue loss in the 2022 financial year of $10,000.

3. The company paid dividends out of retained profits to the shareholders totalling $15,000 in June 2023. Dividends are not a taxable supply.

4. Due to the 2022 revenue loss, the company has not made any PAYG Instalments during the 2023 income tax year.

Reference no: EM133627884

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