ACCT3002 - Issues Concerning Allowable Deductions - Taxation Law Assignment Help

Assignment Task

This part of the assignment will mainly deal with issues concerning allowable deductions, but you should be aware that there may be some income issues from topics
that were not completed prior to assignment part 1. It comprises 27% of the assessment for this course. While the word limit is 1,500 words, please write what is necessary to address the task that you are requested to do, however you are requested to not excessively exceed that limit. In other words, strive to be concise and confine yourself to discussion that directly addresses the tax issues raised. In completing this task, please follow the instructions in this document. If you have any questions about these instructions, including concerns about word limits, please ask.

Question 1
Assignment Part 2 is the continuation of Assignment Part 1, involving the tax affairs of Hektor Aroma. In Assignment Part 1, you were required to calculate assessable income based on the information provided. For this second part, you should assume that his assessable income is $136,400 and take that as the starting point to deal with the following additional information (which is relevant for the year ending 30 June 2021, the ‘current income year’, unless otherwise stated) to determine Hektor’s taxable
income and tax payable including Medicare levy for the year ending 30 June 2021.
1. In the current income year, Hektor purchased the following items for the amounts specified for making coffee for sale in his business:
Coffee beans $20,000
Water $15,000
Milk $9,500
He also purchased $3,000 in cakes and biscuits from his mum to sell either with the coffee or separately. In addition to these, Hektor was invoiced $500 for coffee beans
on 20 June 2021. He did not pay that until 10 July 2021. Milk is a perishable item, even when refrigerated, so Hektor does not store significant quantities of it. Similarly, with the cakes and biscuits which are baked in small quantities every weekend and are generally sold out during the week. While water has a longer shelf-life, it simply is not practical to store large quantities of it. It is much easier to purchase a week’s worth of milk and water at a time, store it in a refrigerator at his home and bring in the quantities he needs each day in an esky. While Hektor may not get the best price for milk and water, he believes that purchasing it this way saves him money in the long run due to less wastage. Hektor estimates that the amounts of these items that he had in storage at the end of the current and previous
financial year would have cost him $75.
While Hektor has a room set aside for roasting beans using his own methods and equipment, he does not have a bean storage facility due to the prohibitive cost of
building an airtight and temperature-controlled environment and maintaining it. Once he has roasted the beans, he takes them to a special storage facility operated by a
consortium of bean roasters who each pay a membership fee to operate the facility and store their beans there. Each roaster’s beans are kept separate and Hektor can
collect his beans at any time in the quantities that he needs. Hektor estimates that at the end of the current income year, he had beans costing $200 at home currently
undergoing the roasting process while he had beans costing $3,000 in storage. At the end of the previous income year, he had beans costing him $100 at home being roasted and beans costing him $1,000 in storage.
2. Having attended business school, Hektor knows that branding is very important for building a successful business in the long-term. Part of building this brand involves
wearing Espresso Love polo shirts while serving customers and while travelling to and from the cart during his working days.

3. One day, Hektor noticed that the coffee grinder was not working as efficiently as it used to. The coffee was grinding too coarsely which did not allow the flavour to be
extracted from his carefully roasted beans. He had the grinder blades sharpened at a cost of $25.
4. Other business expenses incurred for the current income year amounted to $30,000. This amount is to be treated as deductible for the purpose of the assignment.

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