Reference no: EM133266586
Eric works full time as a scientist and is 21 years of age. In his spare time, he develops apps for start-up companies with his brother, Oliver. Oliver and Eric started developing apps in their spare time whilst they were at university, and it has become profitable. In 2018, the brothers formed a partnership, through which they operate the business 'Pinnacle Development'. Eric is also a beneficiary of the Smith Family Trust, which was established by his late father many years ago.
Eric has come to you to prepare his tax return for the 2021/22 income tax year. He has provided you with the following information
Receipts:
- Salary from employment as a scientist: $120,000
- Fully franked dividend from ABC Pty Ltd of $2,000. ABC is a resident entity that is not a base rate entity.
- Partially franked dividend from YZT Pty Ltd of $3,000. YZT is a resident entity that is not a base rate entity. The dividend was franked to 30%.
- $14,000 from the sale of an antique watch that was left to him by his father when he died. His father acquired the watch in 1976 for $100. At the time Eric inherited the watch (in 2010) it was valued at $10,500.
- Distribution of $15,000 from the Smith Family Trust
Expenses:
- Work related travel expenses: $5,000
Partnership details (the figures do not include GST)
Eric and Oliver are equal partners in Pinnacle Development. However, according to the partnership agreement, Eric is to receive a predetermined 'salary' of $30,000 per annum for managing the business. Oliver is not entitled to any partner's salary. Eric has provided you with a summary of the profit and loss statement for the partnership for the year ended 2022.
Revenue: $120,000
Less: Expenses (all tax deductible) ($40,000)
Less: Partners salary - Eric ($30,000)
Accounting profit of the p'ship $50,000
Additional information:
- Eric is single and has private hospital cover and has claimed the private health insurance rebate through his private health insurance provider.
Required:
(a) Calculate Eric's net tax payable for the 2021/22 income tax year
(b) Advise Eric whether Pinnacle Development is required to register for GST.