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 2016:
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RECEIPTS
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$
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Sales
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750,000
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Dividend (franked to 70%)
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9,000
|
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Proceeds from the sale of a holiday house
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352,500
|
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Proceeds from the sale of a car won in a lottery
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70,000
|
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PAYMENTS
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|
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Purchases of stock in storage or sold
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375,000
|
|
Salaries
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70,000
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|
Rental of the business premises
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50,000
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|
Legal fees
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5,000
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|
Dinner expenses
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450
|
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Preparation of 2015 income tax return
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4,000
|
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Holiday house expenses:
Rates and taxes
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800
|
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Mortgage interest
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5,000
|
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Other (see additional information)
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3,500
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Private health insurance premiums (including hospital cover)
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4,500
|
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Personal superannuation contributions to a complying fund
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10,000
|
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Vincent's PAYG instalments made during the year
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50,000
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Other business expenses (to be taken as deductible)
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150,000
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ADDITIONAL INFORMATION
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1. Debtors as at 30 June 2016
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20,000 |
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Debtors as at 30 June 2015
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17,000 |
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2. The values for trading stock on hand are as follows:
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|
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Trading stock as at: Replacement Value
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Cost
|
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30 June 2015 80,000
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70,000 |
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30 June 2016 88,000
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75,000 |
3. As at 30 June 2016 Vincent had not received a consignment of bicycles from an overseas supplier. These bicycles had been ordered pursuant to a contract entered on 21 June 2016 at a cost of $15,000 including freight and insurance of $800. No payment had been made as at 30 June 2016. In addition, this stock was still on board ship as at 30 June 2016 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.
4. A registered tax agent prepared Vincent's 2015 income tax return.
5. The legal fees were incurred in seeking advice concerning a competitor's defamatory statement about Super-Fast Cycles.
6. The dinner expenses were incurred in taking a bicycle tyre supplier out to dinner and negotiating pricing.
7. In January 2016 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 1998 at a cost of $25,000. The total mortgage interest paid from the time of purchase until 30 June 2015 was $70,000 and the total rates and taxes for the same period were $7,000. Settlement took place in June 2016 at which time agent's fees of $2,500 were deducted.
8. 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).
9. Vincent has carried forward $45,000 in capital losses into 2016.
10. A lottery ticket purchased by Vincent on 1 December 2015 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 2016.
11. Vincent made the following donations during the year:
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§
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Goodwood Bike Club
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500
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§
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The Australian Sports Foundation
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1,000
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12. Vincent has chosen not to utilise any of the small business entity concessions.
13. Vincent has already claimed the 30% private health insurance tax offset by having the premiums for his health insurance reduced.
REQUIRED
Based on the supplied information, calculate Vincent's taxable income and income tax payable or refundable (including the Medicare Levy and Temporary Budget Repair Levy, if required), for the year ended 30 June 2016. Support your answers, including calculations, with reference to relevant tax law.