Anna is a jeweller and operates her own business selling jewellery on the Gold C

Question

Anna is a jeweller and operates her own business selling jewellery on the
Gold Coast. She opened her shop to customers on 1 July 2017. Anna
employs two shop assistants. The following information relates to the
period from 1 July 2017 to 30 June 2018:
Anna borrowed $200,000 from her bank on 1 July 2017 to purchase
equipment and stock. The bank charged interest totalling $6,000
during the income year. Anna on-lent $20,000 of the loan to her
daughter at 0% interest.
Anna leased a small shop from 1 July 2017 and pays $2,000 per
month in rent.
Legal fees of $4,400 paid on 20 July 2017 for advice relating to
establishing the business.
Lockable glass display cabinets were purchased for $28,000 and
installed on 1 July 2017.
A laptop costing $2,200 was purchased on 15 July 2017 to keep
accounting and tax records for the business. Anna took this laptop
home regularly and estimated 10% of the time it was used for
checking her personal social media and email accounts.
An opening party was held in the shop for a few local celebrities,
where Anna provided champagne and canapes to her guests. This
cost $2,500 on 10 July 2017.
Jewellery was purchased from various suppliers throughout the year
at a cost of $480,000.
A security firm was paid $24,000 on 20 July 2017 to provide
overnight surveillance of the shop. The contract was paid for the
period 20 July 2017 to 19 July 2019.
To keep up to date with trends in designer jewellery, Anna attended
New York fashion week. She flew business class at a cost of $5,600,
if she had flown economy the cost would have been only $1,800. She
also paid $2,000 for accommodation and food. She stayed in New
York an extra 2 days to catch up with friends costing $600.
Salary and wages paid to the two employees totalled $65,000. Anna
paid herself $80,000 from the business bank account.
Anna accrued $6,000 in her accounts for unused annual leave for her
employees at 30 June 2018.
Required: Provide advice to Anna on the income tax consequences of the
above transactions for the year ended 30 June 2018. Include calculations
where required. Assume that Anna qualifies as a small business entity.
Support your discussion with reference to legislation, case law and taxation
rulings.

Explanation / Answer

CONSIQUENCES OF THE GIVEN TRANSACTIONS OR EVENTS ON INCOME TAX

->ANNA BORROWED $ 200000 FROM BANK ON WHICH HE PAID $6000 AS INTEREST. INTEREST AMOUNT IS DEDUCTIBLE FROM INCOME TAX.

-> ON LEASE RENT PURPOSE $ 24000 IS DEDUCTIBLE FROM GROSS INCOME.

-> LEGAL FEES OF $ 4400 IS ALSO DEDUCTIBLE .

-> DEPRECIATION ON LOCKABLE GLASS DISPLAY CABINET IS DEDUCTIBLE.

-> 90% OF LAPTOP COST IS DEDUCTIBLE AS THE REST 10% IS FOR HIS PERSONAL USE.AND PERSONAL CONSUMPTION IS NOT DUDUCTIBLE.

->OPENING PARTY EXPENSE OF $ 2500 IS NOT DEDUCTIBLE AS IT IS PERSONAL NATURE EXPENSE.

-> JEWELLERY OF $ 480000 IS DEDUCTIBLE .

-> SECURITY SURVILLANCE EXPENSE OF $ 12000 IS DEDUCTIBLE .TOTAL $ 24000 IS PAID FOR 2 YEARS THATS WHY ONLY THIS YEAR EXPENSE IS DEDUCTIBLE.

->IN THE TRAVELS ON BUSINESS PURPOSE ONLY ECONOMY CLASS FAIR IS DEDUCTIBLE FROM INCOME TAX, THAT IS $ 1800.

AS SHE STAYED 2 MORE DAYS AT NEWYORK TO CATCH UP WITH FRIENDS ,THAT COST WILL NOT DEDUCTIBLE FROM INCOME TAX AS IT IS OF PERSONAL EXPENSE.ONLY $ 1400 IS DEDUCTIBLE.

-> SALARY PAID TO EMPLOYEES IS DEDUCTIBLE BUT PAYING TO HERSELF IS NOT DEDUCTIBLE AS SHE IS THE WONER OF THE SHOP. AND THE WONER CAN'T PAY SALARY TO HERSELF.

->UNUSED ANNUAL LEAVES WILL BE GIVEN TO EMPLOYEES THATS WHY ITIS DEDUCTIBLE.

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