Sue-Ann Brown owns a bookstore in Brisbane that specializes in selling first editions and collector’s items. Sue-Ann’s bookstore qualifies as a small business entity for Income Tax purposes.
Sue-Ann runs the bookstore from her home. The business occupies the ground floor, which is 50% of the floor space of the property. You may ignore GST in answering this question. During Sue-Ann’s 2018-2019 income year, the following transactions took place:
The value of her closing trading stock as at 30 June 2018 was $280,000.
The value of her closing trading stock as at 30 June 2019 is:
o Cost price $273,000
o Market selling value $295,000
o Replacement value $300,000
Sales revenue for the year totaled $238,500.
On 1 June 2019, she gifted a first edition book to the State Library of Queensland for their Anzac collection. The cost price of the book was $3,500, its replacement value was $3,800 and the market value was $8,000. The State Library is a deductible gift recipient.
She purchased a new stock that cost her $189,000.
The value of Sue-Ann’s small business asset pool as of 1 July 2018 was $28,000.
On 1 October 2018, Sue-Ann purchased a computer for $1,200. She used it from that date to surf the Internet to find stock for the bookstore (60% of the time) and to keep in contact with her friends on Facebook (40% of the time). The effective useful life of the asset is 3 years.
Tutorial 6 | Question
On 1 February 2019, Sue-Ann purchased a printer for $250. She used the printer
exclusively in her bookstore from that date. The effective useful life of the asset is 3
On 1 March 2019, Sue-Ann purchased a car that costs her $35,000. She only uses the
car for business purposes. During the income year, she used a logbook, recording her
business kilometers as 4,580. She elects not to use Div 28. She also incurred the
following running expenses related to the car:
o Fuel $510
o Registration $320
o Driver’s license valid for 5 years $167
o Driver training so that she could obtain a drivers license since
she had never learned how to drive $1450
Sue-Ann employed casual staff to help her man the bookstore over weekends. The
wages that she paid them totaled $16,000.
Her general business expenses were as follows:
o Stationary and printing expenses $580
On 1 June 2019, Sue-Ann paid $2,500 for insurance premiums to cover her stock
against fire and theft for the period 1 July 2019 to 30 June 2020. The payment that she
made was $2,500.
Sue-Ann’s Brisbane City Council statements for her property revealed the following
o Council rates for the year $1,500
o Water charges $1,000
o Sewage and refuse removal $300
Sue-Ann had not yet paid off her home loan and she incurred interest of $35,000.
Her electricity provider charged her $2,000 for electricity during the income year.
Assume Sue-Ann is registered for GST. Also, assume that all amounts in the question include GST when applicable. Assume Sue-Ann only purchases her stock items from GST registered enterprises. On that basis:
Calculate Sue-Ann’s taxable income for the 2018-2019 income year. Show all calculations and provide clear explanations for your answers. Your answer should reference relevant sections of the Income Tax Assessment Acts, relevant case law or rulings from the Australian Taxation Office.
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