Vincent Lorenzo is the sole proprietor of the shop ‘Super-Fast Cycles’, a bicycle sales and repair business. He is 52 years old. The following details relate to Vincent for the year ended 30 June 2015:
RECEIPTS $
Sales 750,000
Dividend (franked to 70%) 9,000
Proceeds from the sale of a holiday house 352,500
Proceeds from the sale of a car won in a lottery 70,000
PAYMENTS
Purchases of stock in storage or sold 375,000
Salaries 70,000
Rental of the business premises 50,000
Legal fees 5,000
Dinner expenses 450
Preparation of 2014 income tax return 4,000
Holiday house expenses:
Rates and taxes 800
Mortgage interest 5,000
Other (see additional information) 3,500
Private health insurance premiums (including hospital cover) 4,500
Personal superannuation contributions to a complying fund 10,000
Vincent’s PAYG instalments made during the year 50,000
Other business expenses (to be taken as deductible) 150,000
ADDITIONAL INFORMATION
- Debtors as at 30 June 2015 20,000
Debtors as at 30 June 2014 17,000
- The values for trading stock on hand for 2014 and 2015 are as follows:
Trading stock as at: Replacement Value Cost
30 June 2014 80,000 70,000
30 June 2015 88,000 75,000
- As at 30 June 2015 Vincent had not received a consignment of bicycles
from an overseas supplier. These bicycles had been ordered pursuant to
a contract entered into on 21 June 2015 at a cost of $15,000 including
freight and insurance of $800. No payment had been made as at 30 June
- In addition, this stock was still on board ship as at 30 June 2015
although Vincent had accepted bills of lading in respect of half the
shipment. The replacement value and the cost price for this stock are the
same.
- A registered tax agent prepared Vincent’s 2014 income tax return.
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- The legal fees were incurred in seeking advice concerning a competitor’s
defamatory statement about Super-Fast Cycles.
- The dinner expenses were incurred in taking a bicycle tyre supplier out to
dinner and negotiating pricing.
- In January 2015 Vincent signed a contract to sell his holiday house. He
had acquired the holiday house in September 1995 for $180,000 and a
room was added in March 1996 at a cost of $25,000. The total mortgage
interest paid from the time of purchase until 30 June 2014 was $70,000
and the total rates and taxes for the same period were $7,000.
Settlement took place in June 2015 at which time agent’s fees of $2,500
were deducted.
- The ‘other’ holiday house expenses relate to the repainting of the inside
and outside of the holiday house ($3,000) and resealing the gutters
($500).
- Vincent has carried forward $45,000 in capital losses into 2015.
- A lottery ticket acquired by Vincent on 1 December 2014 at a cost of $2
resulted in him winning a Mini S Cooper Special Edition valued at
$55,000. Due to the rarity of the car, a keen enthusiast offered Vincent
$70,000. Vincent accepted that offer on 1 June 2015.
- Vincent made the following donations during the year:
- Goodwood Bike Club 500
- The Australian Sports Foundation 1,000
- Vincent has chosen not to utilise any of the small business concessions.
- Vincent has already claimed the 30% private health insurance tax offset
by having the premiums for his health insurance reduced
REQUIRED
On the basis of the supplied information, calculate Vincent’s taxable income and
income tax payable or refundable (including the Medicare Levy), for the year
ended 30 June 2015. Support your answers, including calculations, with
reference to relevant tax law
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