Reference no: EM132837001

Question - Sunil Agarwal, a resident taxpayer, purchased a townhouse in Sydney as an investment property on 1 July 2018 which he made available for lease by tenants. Details of the purchase were as follows:

Purchase Price $478,000

Stamp Duty $17,000

The vendor provided Sunil with a certified schedule indicating that the eligible construction costs of the property amounted to $140,000 (constructed in 2010). The schedule also specifies that the adjustable value of fittings was $14,500 and has a remaining useful life of 5 years.

Sunil recorded the following transactions for the 2018/19 tax year in respect of the property:

Receipts

Rent received (net of agent's commission of $2,100) $41,900

Recovery from the Rental Bond Board (tenant damage March 2019) $820

Reimbursement of water rates (usage portion only) $740

Rebate from State government for washing machine - purchased on 1 Oct 2018) $150

Payments

Mortgage repayments to ANZ Bank - principal $2,100

Mortgage repayments to ANZ Bank - interest $27,100

Loan establishment fees to ANZ Bank for a 15 year mortgage - paid upon commencement of loan 1 July 2018 $925

Council and Water Rates $3,560

Building Insurance Premiums $610

Repair of carpet - carried out on 19 July 2018 in respect of damage by previous owner $1,845

Repair of guttering - carried out on 27 March 2019 in respect of damage by tenants $830

Renovation of bathroom - completed on 1 January 2019 $8,500

Travel costs (refer to other information) $3,200

Purchase of washing machine - 1 October 2018, 5 year effective life $1,250

Purchase of ceiling fans - 19 April 2019, 10 year effective life $240

Other Information:

Sunil lives in Ballina. During the 2018/19 tax year Sunil made 4 trips to Sydney. Each trip cost a total of $800. One of the trips was taken in July 2018 finalise the purchase of the property; another trip taken during May 2018 was to view another property that Sunil was considering purchasing; the remaining 2 trips were taken during the year in order to inspect the rental property.

Sunil also received gross salary for the year of $96,480 from which $25,000 of PAYG tax was withheld.

Sunil has diarised $470 of work-related expenditure including a briefcase costing $280 and $190 of stationery; and 5 work related journals (each costing less than $10). He has not retained any receipts.

Sunil was not covered by adequate private health insurance.

REQUIRED -

a) Calculate Sunil's taxable income for the 2018/19 tax year?

b) Explain below how your calculation of eligible deductions would have been different if this for the 2015/2016 tax return.