Reference no: EM132598285
Question - Sally operates a café from rented premises on the Tathra waterfront. She is registered for GST and accounts for GST on a cash basis. The café is open for lunch and dinner. She employs several casual staff to work in the café.
For the tax period ended 30 June 2019, the following transactions were reported in the journals of the business:
Income: Sales from the café - $285,000
Expenses: Food purchases for the café (fresh food for cooking meals) - $22,000
Purchases of prepared cakes/slices from the local cake shop - $37,000
Wages - $56,000
All suppliers are registered for GST and all amounts include GST where applicable. Assume valid Tax invoices have been issued.
Required - Using legislation and case law, please answer the following questions:
(a) Explain to Sally the GST implications of the above transactions.
(b) Advise Sally of her net amount for GST purposes for the tax period ended 30 June 2019.
(c) Advise Sally whether the food purchases are deductible for income tax purposes.