LAW6001 Taxation Law - Individual Case Study Assessment 2

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Assessment 2: Case Study

Eric Zhang, a resident taxpayer aged 59, runs a sole trading business selling imported food items. His business is registered for GST. He also works on a casual basis as an import/export agent for Blue Marlin Pty Ltd (ABN: 89 125 678 968). He has a rental property in Lakemba, Sydney. Eric is taking care of his wife Linda Wang, who has lost the eye sight in her left eye 9 months ago, on the 1st of October 2018 as a result of a car accident. Eric is solely taking care of Linda.

Part A: Regarding his employment
Employer: Blue Marlin Pty Ltd (ABN: 11 235 365 874)
Gross wages for the 1st of July 2018 to the 30th of June 2019: $7,800 (PAYG withheld: $200)
He also received $2,000 shift allowance and $800 reimbursement for work related software fees from his employer.
Eric received a car from employer as a fringe benefit (showing as reportable in his PAYG summary, valued $60,000 not exempt from FBT)
Work related allowable deductions to claim (telephone & stationery) $300

Part B: Regarding his Business
During the year, Eric has had the following transactions in relation to sales, purchases, and inventory (trading stock. Eric did not choose the Small Business Entity option.

The closing stock values include $5,000 worth stock in transit from overseas paid for and owned but not received until the 15th of July 2019.

Eric has taken home some food items from the stock purchased for consumption by his family at total value of $2,500.

Part C: Regarding his Rental property
Eric purchased a house as a residential investment property on the 1st of July 2018. Purchase price of the property was $300,000 comprised of the following payments. All amounts include GST where applicable.

  • Land and buildings                                                       $276,800
  • Depreciable assets adjustable value on the 1st of July 2018 (See Note 1)
- Carpets $5,000
- Hot water system electric $1,200
- Ceiling fans $1,600
- Barbecue (fixed) $1,400
- Window blinds internal $8,000
- Window curtains $6,000

The previous owner provided a statement to Eric certifying that the property was constructed and completed on the 1st ofJanuary 1990 at a construction cost of $100,000. The house was in good condition except that the outside walls required complete repair.

Eric recorded the following receipts and payments for the 2018/19 tax year in respect of the rental property:

Eric wishes to minimise his income tax for 2018/19. Calculate Eric’s taxable income for 2018/19. You  are required to enter income and deduction details where applicable in the tax return form provided in the excel sheet.

Submit all workings of EACH income & deductions of calculations and any tax offsets available for Eric in a word format (written report) including relevant section numbers as per ITAA36/ITAA97.

In your report, clearly advise whether Eric is eligible to claim a dependant tax offset (invalid and invalid carer tax offset).

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