Calculate kays personal tax liability for the year

Reference no: EM133512344

QUESTION 1

Your client, Kay Leeowns a restaurant in Sydney. She operates as a sole trader. The business is known as ‘The Fried Noodle Bar' and Kay has an ABN and is also registered for GST. The following figures are as at the end of the financial year, 30 June 2023 and do not include GST. (Do not make any adjustments for GST)

Receipts
256,000 Sale of food and drinksin the restaurant
5,000 Interest on Bank deposits.
28,500 Exempt income from a PhD scholarship from CQU
2,500 Private Health fund refunds
40,000 Inheritance from her grandmother
35,500 Rent from investment property
5,000 Refund from the ATO for the last year's tax return
30,000 Net capital gain from the sale of shares held for 5 years.
10,000 Lottery win- Kay was just very lucky.

Payments
35,000 Rent on herrestaurant in Brisbane
1,500 Body Corporate fees on income producing property.
65,000 Part-time employee salaries
15,000 Superannuation contribution for employees
25,000 Interest on borrowing to purchase the income producing property.
5,500 Insurance, body corporate fees and land tax for the investment property
2,500 Fees paid to a registered Tax Agent
25,000 New cooking equipment with an estimated life of 10 years
5,000 Travel to and from work to home
2,500 Rates on her principal residence
2,000 Doctors fees for Kay and her family
1,265 University fees for Kay
15,555 Personal Superannuation contribution for Kay

(a) Kay Lee is accounting for her taxation liability as a Small Business Entity (SBE)
(b) On 1 July 2022 the opening depreciation pool balance for the SBE pool was $25,000. During the year Kay purchased 1 new depreciating assets used 100% for business purposes in the restaurant kitchen. This is recorded in the payment's information listed above. The depreciation deduction has not been included in the above figures.
(c) Kay has a carry forward tax loss from an earlier income year of $25,000. This was due to the impact of COVID 19 on herbusiness.
(d) Kay and her family are members of a private health fund and have private hospital insurance.
(e) Kay has paid $25,000 in PAYG Instalments during the financial year ending 30 June 2023.
(f) The investment apartment was purchased new on 1 July 2022 for a total cost of $550,000 and is part of a hotel complex in Sydney. The real estate agent advised Kay that the construction cost of the apartment was $355,000 and this was confirmed by the builder.

REQUIRED
Calculate Kay's personal tax liability for the year ended 30 June 2023. You should explain your treatment of each item in this question. Figures must be rounded to the nearest dollar and do not include cents in your calculations.

Your answer should be in the correct format of Assessable Income less Allowable Deductions. This gives you Taxable Income and you multiply this by the different marginal tax rates plus Medicare levy. This gives you tax payable less any tax offsets. The terms ‘Payments' and ‘Receipts' are not part of the Tax Formula and are not appropriate for taxation accounting.

QUESTION 2.

Peter is planning to marry Ann on 12 September 2023. To make sure there were enough funds to pay for the wedding and the honeymoon, Peter sold the following assets:

(a) A holiday house. The house was purchased on 3 January 1989 for $350,000 and sold for $650,000. The contract for sale was signed on 5 May 2023 and settlement is to take place on 5 July 2023. The stamp duty and legal fees at the time of acquisition were $20,000. The advertising and estate agent's fees at the time of disposal were $8,000. On 13 June 2010, Peter spent $15,000 adding a second bathroom to the house. Peter rented the house out for 6 months, from 10 October 2018 to 10 April 2020. During this period, he derived rent of $10,000. At all other times he kept it for private use by his family. During the period that he owned the house he had paid a total of $75,000 in interest, rates and insurance. He had claimed $15,000 of the $75,000 as a tax deduction for the year ended 30 June 2008.
The CPI numbers are:
March 1989 51.7
September 1999 68.1

(b) Vacant Land. Peter sold vacant residential land originally purchased on 16 June 1984 for $100,000. He initially intended to build a house on the land but lacked the finance to do so. The land was sold for $500,000. The contract of sale was entered into on 28 May 2023 and settlement is to take place on 30 August 2023,

(d) Peter used a horse for his personal use and for recreational purposes. Peter had bought the horse on 1 May 2014 for $6,000. The horse died and on 26 March2023, he received $16,000 under the insurance policy,

(e) Peter bought BHP Ltd shares on 2 June 2022 for $45,000. He sold those shares on 2 May 2023 for $90,000,

(f) Peter also bought a 2-bedroom unit in Brisbane for $385,000 on 3 March 2012. The apartment was his main residence. In 2019 he was posted to Darwin with his employment for 5 years and during that time he rented an apartment. The Brisbane property was rented out for 5 years. He returned to Canberra in 2022 and lived in his apartment. On 3 March 2023 Peter signed a contract to sell the property. He entered into a contract for the sale of the property on 15 April 2023 for the sum of $555,000. Settlement is due to take place on 1 August 2023.

(g) He sold a vintage Morris motor car for $68,000 that he had purchased in 1996 for $25,000. The car was made one of only 50 made in 1927.

Peter has capital losses he is carrying forward from previous years of $19,000 from the sale of an antique and $10,000 from the sale of some shares. Peter received a gross salary of $164,000 from his employment as an auditor and he has deductions of $750 for his CPA membership and $5,000 for his professional indemnity insurance. He is self employed and works under his ABN. He also paid $15,000 as a personal superannuation contribution. He paid a total of $25,000 as PAYG Instalments during the financial year.

REQUIRED

Calculate the net capital gain or capital loss for Peter for the year ended 30 June 2023 and his tax payable.

Resident tax rates 2022-23
Taxable income	Tax on this income
0 - $18,200	Nil
$18,201 - $45,000	19 cents for each $1 over $18,200
$45,001 - $120,000	$5,092 plus 32.5 cents for each $1 over $45,000
$120,001 - $180,000	$29,467 plus 37 cents for each $1 over $120,000
$180,001 and over	$51,667 plus 45 cents for each $1 over $180,000

The above rates do not include the Medicare levy of 2%.

Reference no: EM133512344

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