Reference no: EM131044039 , Length: word count:750

Alex McLeod carries on business as a sole trader in Wollongong as a rural mechanic and farm machinery spare parts retailer.  He is married and has one dependent child, a daughter aged 12 years, who attends a local school.

Details provided by the taxpayer for the 2015/16 year of income are as follows:

RECEIPTS

                                                                                                       $

*Sales of spare parts                                                                        100,000

*Charges for mechanical repair work                                                 45,000

*Interest on joint savings account                                                      2,800

*Interest on deposit with a United Kingdom      

Bank (net of 10% United Kingdom withholding tax)                               270

The joint savings account is in the names of the taxpayer and his wife.  Interest amounting to $2 800 has been earned on this account.

PAYMENTS

- Business

                                                                                              $

*Gross wages (casual employees)                                           8000

*Light and power                                                                    900

*Telephone and postage                                                          1500

*Advertising                                                                           2300

*Purchase of farm machinery spare parts                                 44000

*Purchase of new custom-made toolbox roller cabinet               18000

*Accountancy fees                                                                 7200

*Local Government rates on business property                         2700

*Insurance on business premises and contents                         2100

*Trade journals                                                                      300

*Sundry business expenses (all tax deductible)                        11500

-Personal

                                                                                                $

*School expenses for daughter                                                 1200

*Donation to Australian Red Cross Society                                  100

*Membership subscription - Wollongong Apex Club                      100

*Medical Expenses (net of Health Fund refunds)

                                                Taxpayer             $500

                                                Wife                     800

                                                Daughter              650              1 950

(McLeod has family cover in a private health fund, with hospital and ancillary cover. Premiums amounted to $2 400 for the year)

STOCK ON HAND (farm machinery spare parts)

- at 30/6/2015                    $16,000

- at 30/6/2016                    $14,000

	Original Cost	Opening adjustable value
		1/7/15
	$	$
Holden utility	24,000	12,400
Toyota land cruiser	26,000	18,000
Ford 2 tonne truck	34,000	16,000
Motor vehicle hoist (heavy vehicles) Diesel engine emission tester	70,000     30,000	21,000   25,000

On 1st October 2015, the Holden Utility motor vehicle was traded in for $10,000 on a new Holden Commodore sedan motor vehicle costing $32,000.  The new Commodore sedan has been used 40% for private purposes.

The taxpayer uses the diminishing value method of depreciation and uses the effective life determinations as specified by the Commissioner.  All assets were purchased after 10 May 2006.  The business has not elected to utilise the small business entity provisions.

Required:

(a) Determine the taxpayer's taxable income for 2015/16; and

(b) Calculate the income tax payable by the taxpayer for 2015/16 year of income.