Linda Wong (a Single, Resident Taxpayer Aged 39) Case Study - Law Assignment Help

Assignment Task :

Task:

Question 1

Linda Wong (a single, resident taxpayer aged 39) owns a restaurant called Chinese Dragon which disclosed the following for the 2019/20 tax year (ignore GST). Ignore small business concession. Purchase of Pizza Oven on 1 May 2020 (effective life 5 years) 16,300 using diminishing value method Purchase of wall Stove on 1 July 2019 (effective life 4 years) 5,000 with installation cost $200 using prime cost method

Calculate deductions available for Linda with section numbers.

Capital expenses are not deductible under s8-1. For Wall stove, the first element of cost is the $5,000 purchase price (ITAA97 s 40-180) and the second element is $200, ie the amount incurred in having the equipment installed ready for use (ITAA97 s 40-190).

Question 2

John receives contact receipts to act as sales analyst of XYZ Pty Ltd. His contract is for 1 year. John is paid on the basis of performing a complete analysis report which he performs using the client’s inhouse software, scanning devices and other computer systems.

Required: Applying the PSI tests, determine whether PSI rules apply to his receipts or not. Suggested solutions Yes John’s income is PSI as John is supplying solely his labour. Although he gets paid to produce a specific result of a complete analysis report, he does not provide equipment. Therefore result test fails. For student’s Information, see Result test For the PSI being tested, you must be:

• paid to produce a specific result • required to provide the equipment or tools, and

• required to have mistakes fixed at your own expense.

Question 3 Hass Pty Ltd receives contracts fees from Ham and Fats for accounting services provided by his director Harriet. Hass Pty Ltd leases a small office in the city, but Harriet performs the accounting work at the premises of Hams and Fats and merely allows his sister to work from the leased office. Required: Applying the PSI tests, determine whether PSI rules apply to the contract fees or not. Suggested solutions PSI rules apply as Business premises test fails. Although the lease premises are independent of both Harriet’s client and her home, she does not use the premises for performing the personal services work. For students’ Information, see Remaining test There are three remaining tests:

• unrelated clients test

• employment test

• business premises test. If you pass any one of these tests, the PSI rules do not apply to the PSI being tested.

Question 4 Barry, via the entity in which he is a partner Barry & Packo, derives fees for presenting and producing a radio program. Barry & Packo employ two others who work with Barry as a producer and a sound engineer. It is estimated that these employees perform work to the value of $80,000 out of a total fee of $25,000 Required: Applying the PSI tests, determine whether PSI rules apply to the fees or not. Suggested solutions No PSI rules do not apply as employment test is passed. Employees perform more than 20% of the market value of the principal work.

Question 5 Hammer Pty Ltd was found to be a PSE in receipt of PSI on behalf of Edwin. Edwin and his wife Susan are the two equal shareholders of Hammer Pty Ltd. Receipts and payments of the company for the 2018/19 tax year were as follows. Receipts Fees received $230,000 Payments Salary – Edwin $130,000 Salary – Susan (receiving phone calls) $59,000 Superannuation – Edwin $19,000 Superannuation – Susan $18,000

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