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TAX305 Taxation

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  • Course Code: TAX305
  • University: Charles Darwin University

    MyAssignmentHelp.com is not sponsored or endorsed by this college or university

  • Country: Australia

Questions

Mary Burns and Sally Brown are adult Australian residents. On 1 July 2003 they formed a partnership called ‘The Two B’s’ to run a sports supply business. The partnership supplies clothing and equipment to mining companies in Australia. The business is registered for GST.

The partnership accounts for the business for the year ending 30 June 2017 disclose the following financial details:

The following receipts and expenses are exclusive of GST unless otherwise stated.

Receipts

Gross trading receipts   1,900,000

Capital gain from sale of shares held in an Australian internet company   20,000

see note (ii) below

Cash dividend from BHP   10,500

 See note (iii) below

Interest income from Bank of China  11,250

 See note (iv) below

Expenses

Salary to Mary                                                   40,000

Interest on loan of funds by Mary                     10,000

Salaries paid to employees                              250,000

Rent and power                                                  60,000

Purchase of trading stock (see note (v) below) 320,000

Superannuation to staff                                      85,500

Superannuation paid on behalf of Mary             25,000

Superannuation paid on behalf of Sally              25,000

Purchase of BMW motor vehicle for Mary (see note (vi) below) 120,000

Purchase of treadmill and exercise bikes (see note (vii) below) 180,000

Interest on bank overdraft                                                          18,623

Provision for long service leave (see note (viii) below)                25,984

Provision for bad debts (see note (ix) below)                              67,000

Notes - additional information in respect of the partnership.

i. The partnership agreement stipulates that Mary and Sally share profits and losses in respect of both income and capital gains and losses on the basis of  50% to Mary  and 50% to Sally.
 
ii. The partners purchased the Australian internet company shares in January 2004 and sold them on 31 May 2017.
 
iii. The dividend was fully franked.   
 
iv. The Bank of China withheld AUD $1,250 from the gross interest
 
v. Trading stock at the beginning of the financial year was $370,000. The trading stock at the end of the year was valued as:

Market value $560,000

Cost $490,000

Replacement value $546,000

vi. The car was purchased for use by Mary as she was responsible for sales. The car was purchased on1 January 2015. It was only used 100% for work purposes.
 
vii. Various items of equipment were purchased on 1 July 2016 for $65,000 and 1 January 2017 for $115,000. The effective life for the equipment is 4 years. The figures are exclusive of GST. The items are used 100% for business purposes.
 
viii. During the year the partnership paid out long service leave to staff of $13,507.
 
ix. During the year the partnership wrote off as bad debts $36,849.

Required:

1. Calculate the net partnership income for the partnership for the year ended 30 June 2017.
 
2. Calculate the tax payable for Mary for the year ended 30 June 2017.
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