QUESTION 1 You have been consulted by Marie who is an Australian resident adult individual taxpayer entity and a real estate agent employed by Adelaide property firm Supreme Properties. Her employment duties involve selling homes on behalf of clients, including conducting open inspections of those homes. Marie moved to Adelaide from Sydney, New South Wales, at the beginning of July 2022 after the breakdown of her marriage. She has custody of their two children, Harry aged 4 years and Larry aged 2 years, who Marie places in child care during some week days and on weekends while she works. During the income year ended 30 June 2023, Marie received and derived the following: (1) Wages totalling $100,000 and commissions of $20,000 that Marie received from her employer Supreme Properties. The commissions were received by Marie on 15 June 2023 and were calculated as a percentage of the total value of properties sold by her during the year, and were paid as an incentive to employees of the firm to sell more properties. An Income Statement received by her from Supreme Properties shows that Pay As You Go tax totalling $35,000 has been withheld from the wages and commissions. (2) The benefit of the use of a car provided to Marie by Supreme Properties in recognition that it is necessary for her to travel in carrying out her employment duties. She was allowed to use the car for private purposes as well. (3) Dividends of $2,800 paid to Marie in respect of shares owned by her in the Macquarie Bank Ltd, an Australian resident company. A Dividend Statement received by Marie shows a franking credit of $1,200 on the dividends. (4) Sale proceeds of $82,000 from the sale on 1 June 2023 of her Macquarie Bank Ltd shares. Marie acquired the shares on 1 July 2022 at a total cost of $42,000 that she borrowed from the Bank. Marie acquired the shares after having received a “tip” that they would be a good investment in the short term, which were likely to increase in value. (5) Net sale proceeds of $900,000 from the sale in August 2022 of her home in an outer Sydney suburb. She bought the home in January 2019 at a total cost of $950,000 and it was used solely as a residence for her family during the period of her ownership. (6) Maintenance payments totalling $10,000 received periodically by Marie from her former husband, Neville, for the benefit of their 2 children. During the 2023 income year, Marie paid and incurred the following outgoings: (1) Travelling costs of $2,000 paid at the beginning of July 2022 for Marie and her children to come to Adelaide from Sydney so that she could start her employment with Supreme Properties. Marie tells you that she had secured her employment with the firm at the end of May 2022 with an agreed commencement date of 7 July 2022. (2) A total of $3,000 spent on conventional clothing that Marie wore solely to present a “professional image” to clients of Supreme Properties in the hope of achieving more sales of properties. (3) Parking fines totalling $500 imposed under the Local Government Act 1999 (SA) for Marie exceeding the parking time limit in streets near properties being sold by her while she was engaged in open inspections of the properties as part of her work. (4) The amount of $500 paid for a one year subscription to the weekly specialist real estate magazine “Real Properties”. Marie subscribes to this magazine so that she can keep abreast of developments in the real estate market. The magazine contains information on real estate property values and selling techniques that are directly related and specifically relevant to, and used by Marie in, her work. (5) Interest expenses totalling $8,000 on the money that Marie borrowed to buy the Macquarie Bank Ltd shares, from which she also expected to receive dividends. (6) Costs totalling $5,000 in having her children cared for while Marie was at work. (7) $4,150 on private health insurance that provides private hospital cover for Marie and her children. This amount already takes into account the 26.56% private health insurance tax offset by way of a $1,500 reduction in the $5,650 premium. On the basis of the above information, you are required to outline for Marie: 1 Assessable income for the 2023 income year. 2 Her deductions for that income year. 3 Taxable income for that year. 4 Any tax offsets allowable for that year. 5 Whether it would make a difference to your answer in 1 if, instead of Marie receiving the commissions of $20,000 from Supreme Properties in mid June, she directed that her entitlement to receive the already earned commissions be salary sacrificed and paid by her employer into her superannuation, and Supreme Properties did this before 30 June You should include brief reasons in your answers.
QUESTION 1
You have been consulted by Marie who is an Australian resident adult individual taxpayer entity and a real estate agent employed by Adelaide property firm Supreme Properties. Her employment duties involve selling homes on behalf of clients, including conducting open inspections of those homes.
Marie moved to Adelaide from Sydney, New South Wales, at the beginning of July 2022 after the breakdown of her marriage. She has custody of their two children, Harry aged 4 years and Larry aged 2 years, who Marie places in child care during some week days and on weekends while she works.
During the income year ended 30 June 2023, Marie received and derived the following:
(1) Wages totalling $100,000 and commissions of $20,000 that Marie received from her employer Supreme Properties. The commissions were received by Marie on 15 June 2023 and were calculated as a percentage of the total value of properties sold by her during the year, and were paid as an incentive to employees of the firm to sell more properties. An Income Statement received by her from Supreme Properties shows that Pay As You Go tax totalling $35,000 has been withheld from the wages and commissions.
(2) The benefit of the use of a car provided to Marie by Supreme Properties in recognition that it is necessary for her to travel in carrying out her employment duties. She was allowed to use the car for private purposes as well.
(3) Dividends of $2,800 paid to Marie in respect of shares owned by her in the Macquarie Bank Ltd, an Australian resident company. A Dividend Statement received by Marie shows a franking credit of $1,200 on the dividends.
(4) Sale proceeds of $82,000 from the sale on 1 June 2023 of her Macquarie Bank Ltd shares. Marie acquired the shares on 1 July 2022 at a total cost of $42,000 that she borrowed from the Bank. Marie acquired the shares after having received a “tip” that they would be a good investment in the short term, which were likely to increase in value.
(5) Net sale proceeds of $900,000 from the sale in August 2022 of her home in an outer Sydney suburb. She bought the home in January 2019 at a total cost of $950,000 and it was used solely as a residence for her family during the period of her ownership.
(6) Maintenance payments totalling $10,000 received periodically by Marie from her former husband, Neville, for the benefit of their 2 children. During the 2023 income year, Marie paid and incurred the following outgoings:
(1) Travelling costs of $2,000 paid at the beginning of July 2022 for Marie and her children to come to Adelaide from Sydney so that she could start her employment with Supreme Properties. Marie tells you that she had secured her employment with the firm at the end of May 2022 with an agreed commencement date of 7 July 2022.
(2) A total of $3,000 spent on conventional clothing that Marie wore solely to present a “professional image” to clients of Supreme Properties in the hope of achieving more sales of properties.
(3) Parking fines totalling $500 imposed under the Local Government Act 1999 (SA) for Marie exceeding the parking time limit in streets near properties being sold by her while she was engaged in open inspections of the properties as part of her work.
(4) The amount of $500 paid for a one year subscription to the weekly specialist real estate magazine “Real Properties”. Marie subscribes to this magazine so that she can keep abreast of developments in the real estate market. The magazine contains information on real estate property values and selling techniques that are directly related and specifically relevant to, and used by Marie in, her work.
(5) Interest expenses totalling $8,000 on the money that Marie borrowed to buy the Macquarie Bank Ltd shares, from which she also expected to receive dividends.
(6) Costs totalling $5,000 in having her children cared for while Marie was at work.
(7) $4,150 on private health insurance that provides private hospital cover for Marie and her children. This amount already takes into account the 26.56% private health insurance tax offset by way of a $1,500 reduction in the $5,650 premium.
On the basis of the above information, you are required to outline for Marie:
1 Assessable income for the 2023 income year.
2 Her deductions for that income year.
3 Taxable income for that year.
4 Any tax offsets allowable for that year.
5 Whether it would make a difference to your answer in 1 if, instead of Marie receiving the commissions of $20,000 from Supreme Properties in mid June, she directed that her entitlement to receive the already earned commissions be salary sacrificed and paid by her employer into her superannuation, and Supreme Properties did this before 30 June
You should include brief reasons in your answers.
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