Reference no: EM132934170

Question - Melissa Mitchell has operated a small sign making business since 2016 (Sign Writing Industry Code: 69240). She has not previously elected to be treated under the SBE provisions, however she would like to minimise her tax obligation. Melissa has provided you with the following information in regards to the 2019/2020 financial year. The figures provided exclude GST.

Receipts

Receipts from customers $950,000

Payments

Payments to creditors (trading stock) $75,000

Employee wages $250,000

Purchase of computer (1/1/2020) $6,000 *effective life 4 years

Purchase of office chair (1/4/2020) $600 *effective life 8 years

Office rent $520,000

Other deductible expenses $55,000

Other Balances 30 June 2019 30 June 2020

Trading Stock $4,500 $7,300

Debtors $31,900 $39,700

Creditors $2,900 $11,600

Office rent prepayment $0 $40,000

Depreciating Assets held

Office Furniture & Equipment

Purchased 1/7/2017 at a cost price of $45 000 (effective life 8 years)

REQUIRED -

a) Using the Excel template provided, calculate Melissa's taxable income for the 2019/20 tax year if she chooses to not apply any of the small business concessions. She has previously used the diminishing value method of depreciation.

b) Using the Excel template provided, calculate Melissa's taxable income for the 2019/20 tax year if she chooses to apply the small business concessions and make a list of the small business concessions applied.

c) Complete the Individual Tax Return 2020. Attach a copy of the tax return to an email to Melissa requesting she sign and return the form for lodgment with the ATO and explaining the impact of the SBE concessions used.