Reference no: EM131369546

Taxation Law: Tax Practice Assignment

Background information and Wiley Coyote's personal financial transactions for tax purposes

Wiley Coyote is an astute businessman whose ventures have included Coyote Rocket Shoes Pty Ltd. which was very successful as were the various ancillary services that he provided such as rocket fuel, rocket repairs, shoe repairs, and osteopathy and chiropractic services through 10 clinics known collectively as the Rocket Science Pain Management Clinics.

Because he could foresee government restrictions being introduced in the future he sold the company in 2014 with the exception of the clinics which were far too lucrative for him to sell off. He owns 100% of the business and is a partner in a mobile telephone dealership called Rocketfone

Wiley continues to tinker with rocket shoes and in May 2016 he made a net capital gain of $18,000 from the sale of used rocket shoes that he had purchased 2 years ago and refurbished in his spare time.

He is a shareholder in a company and from it received a partly franked dividend of $7,000 which had $1,000 of franking credits allocated to it. He is also a beneficiary of The Coyote Trust.

Personally Wiley is entitled to the following deductions:

• $1,000 (for the cost of a seminar he attended on How to Mix Rocket Fuel Safely),
• $700 (for the decline in value of a computer he uses for work-related matters),
• $560 (for repairs to equipment he uses in the refurbishment of the second hand rocket shoes he buys),
• $540 (for fees charged by his accountant for the preparation of his tax return for the previous income year), and
• $300 (donation to a charity that is a registered as a deductible gift recipient in payment of which Wiley receives 6 tickets in a car raffle).

Wiley paid $4,000 for private health insurance for he and his wife for the whole income year. PAYG withheld on Wiley's behalf amounted to $15,500.

Part B:

The business known as Rocket Science Pain Management Clinics had the following transactions in the 2015/16 financial year.

Receipts	$
Fees from cash patients	820,000
Fees from health funds	1,075,000
Sale of burn lotions* - cash received	46,800
Workers compensation receipts**	67,000
Expenses
Staff salaries (net of PAYG withholding)	640,000
PAYG withholding forwarded to the ATO	295,000
PAYG installments	165,000
Superannuation Guarantee Levy	84,000
Entertaining special customers at sport venues	2,000
Linen (towels, bed-sheets, pillow slips)(Effective life <12 months)	11,000
Laundry expenses (external services)	6,000
Aromatherapy oils and candles***	58,000
Artworks (each piece under $1,000, purchased 1/9/15)	8,000
Rent (includes $32,000, paid up to 31 July 2016)	286,000
Other expenses (all deductible)	63,000

* Debtors as at 30/6/15 $11,000

 Debtors as at 30/6/16 $15,000

** Amounts owing by workers compensation insurance companies $13,000.

*** Stock as at 30/6/15 $ $3,000

Creditors as at 30/6/15 $1,000

Stock as at 30/6/16 $8,000

Creditors as at 30/6/16 $500

Used for family household $700

• In the year ended 30/6/15 Wiley had a tax loss of $3,800.
• Wiley accepted a bike for payment from a client. The bike had a market value of $250.

Asset	Date of purchase	Method	Original cost $	Adjustable value 30/6/15 $	Effective life
10 clinic beds	1/7/14	Prime	45,000	36,000	5
10 desktop PCs	1/7/14	Diminish.	18,000	9,000	?
1 desktop PC 80% business use	1/7/14	Prime	1,500	1,000	?
Office furniture (each piece >$1,000)	1/8/14	Prime	21,000	19,075	10
Clinic furniture (each piece >$1,000)	1/3/15	Diminish.	15,000	14,000	10
Low Value Pool				6,000

Required:

(i) Showing your workings, determine the taxable income for 2015/16 of Rocket Science Pain Management Clinics; and

(ii) Determine the closing balance of the Clinics' Low Value Pool.