Reference no: EM133420284

Case Study: During the 2021/22 income year, Jones Enterprises Pty Ltd incurred a number of losses/outgoings including: • $2 million for the purchase of trading stock • $2.5 million wages paid to employees • $40,000 advertising expense (in previous years the advertising expense has consistently only been $20,000 per year, however in 2021/22 due to adverse impacts on demand as a result of the covid pandemic, the CEO felt it necessary to increase advertising in order to retain the company's market share) • $200,000 rent paid to occupy retail premises in shopping centres • $30,000 in bad debts written off (after a major customer Walter Donovan died leaving no assets from which to recover the debt. Walter had previously purchased, on credit, a bulk order of smoked salmon, truffles and caviar from Jones Enterprises Pty Ltd for his restaurant.) Jones Enterprises Pty Ltd employs Marcus as the Senior Accountant for the business. For the 2021/22 year of income, Marcus paid $700 membership fees for his membership of the Association of Chartered Accountants, Australia & New Zealand. He also paid $500 for an annual subscription to the Australian Accounting Review (AAR) magazine in 2021/22. Marcus is required, by his employer, to wear "all black" clothingwhile working as he often meets with clients. During the 2021/22 year of income, he spent $700 on "all black" designer suits to wear to client meetings. In November 2021 he took a client out for a gourmet seafood lunch at Doyle's restaurant in Sydney Harbour to discuss a work matter. The lunch costs $350 and he paid with the company's credit card.

He is so busy working that he often has to bring work home on weekends. He completes this work in his study/office at home. Marcus lives in a rented house in Chippendale and the study/office takes up 10% of the floor area of the house. During the 2021/22 year of income, the heating, lighting and electricity costs for the study are $700. Marcusalso pays $40,000rent for the entire house for the 2021/22 year of income.

Jones Enterprises Pty Ltd also employs HenryJones' 19 year old nieces Ariel, Attina and Alana as Assistant Bookkeepers working part-time (10 hrs per week) in the Accounts Department. Henry Jones is a majority shareholder in the company. Each of his nieces is paid a generous amount of $1000 per week (the market wage for these services is only $500 per week). Jones Enterprises Pty Ltd also provides each of them with a laptop valued at $3000 to use for their work.

Questions:

• What are the tax implications for Jones Enterprise Pty Ltd?
• What are the tax implications for Henry Jones?
• What are the tax implications for Marcus?
• What are the FBT implications regarding those facts given?