Sue-Ann Brown owns a bookstore in Brisbane that specialises in selling first editions and collector's items. Sue-Ann's bookstore qualifies as a small...

Sue-Ann Brown owns a bookstore in Brisbane that specialises 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 totalled $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 market value was $8,000. The State Library is a deductible gift 

recipient.

 She purchased new stock that cost her $189,000.

 The value of Sue-Ann's small business asset pool as at 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

2

 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 

years.

 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 kilometres 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 licence valid for 5 years $167

o Driver training so that she could obtain a drivers licence 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 totalled $16,000.

 Her general business expenses were as follows:

o Stationary and printing expenses $580

o Advertising fees $800

 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 

expenses:

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.