Explaining the income tax treatment

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Question - Manic Pty Ltd ("Manic") is an Australian resident company that leases and sells scaffolding and charges service fees to customers in Australia and New Zealand. Annual turnover for Manic for the last 5 years has ranged between $4 million and $5.5 million. Manic is in the process of finalising its income tax return for the year ended 30 June 2018 and you have been asked to review the following notes to the profit and loss:

An amount of $80,000, received in the form of service fees, was not included in accounting profit in the year ended 30 June 2018 as it was believed the client still had a right to demand a refund from Manic should the service not be provided.

Explaining the income tax treatment with respect to the above item including references to sections, cases and income tax rulings where relevant.

Reference no: EM131960137

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