Herbie Case Study - The Purposes of the ITAA 1997 - Report Writing - Law Assignment Help

Assignment Task:

Assessment facts and question:

Background facts:

• Herbie has come to you to assist in the preparation of his 2019 income tax return.

• Herbie is a sole trader who runs a business driving antique VW beetles as wedding vehicles. Prior to 2019 he has not owned these vehicles, but he paid contractors to drive their own vehicles.

• He has kept accurate records throughout the financial year, and has come to you for tax advice only. You do not have to verify the below figures.

• He does not have any items currently being depreciated.

• All amounts are GST exclusive.

• During the 2019 year he purchased the following assets, all of which are used 100% in his business:

1. $33,000 red VW Beetle purchased on the 1st of October 2018.

2. $28,000 blue VW Beetle purchased on the 15th of February 2019.

3. $29,000 yellow VW Beetle purchased on the 6th of June 2019.

• His income and expenses were as follows: 2018 2019 Revenue Beetle hire 1,100,014 11,660,152 Expenses Contractors 560,384 5,940,065 Fuel 21,084 223,486 PAYGI paid for 2019 tax year (this amount is to be adjusted in steps 4 & 5 below) 5,000 Marketing 385,638 4,087,765 Rent 50,000 530,000 Repairs and Maintenance 34,500 365,700 New vehicles (this amount is to be adjusted in steps 4 & 5 below) - 90,000 Sundry expenses 2,755 29,202 Total expenses 1,054,360 11,266,218 Net accounting profit 45,654 393,933 *The 2018 information has only been provided for comparative purposes. He has not asked for advice in relation to the 2018 year.

 Required:

• Prepare a letter of advice for the 2019 income year using the provided example as a guide.

• Your letter of advice should discuss the following in a professional manner:

1. Whether Herbie is a small business entity for the purposes of the ITAA 1997, and why.

2. If he is a small business entity, discuss in detail what concessions are available to him.

3. Detail whether he is able to immediately write off each of the new Beetles recently purchased.

4. If he cannot immediately write them off, how would he calculate depreciation? If there are several depreciation options, please detail them in the appendices and discuss the most appropriate method within the letter.

5. Showing full workings, calculate his taxable income and advise him of the amount of tax payable after considering Medicare levy and all available offsets. You may include the detailed taxable income calculations in the appendices, and summarise this information in the letter. 

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