Question

Lewis is a professional graphic artist with his own business in Sydney. He conducts his activities as a sole trader. He employs a receptionist by the name of Mary and an assistant named Jennifer, who is his mother. He received fees from many private clients during the year. Some clients paid in cash after the consultation and some paid later after receiving a bill in the mail. Lewis received the following amounts of cash during the year ended 30 June 2019:

• Total fees paid by clients immediately after a consultation                                 $300,000
• Total fees paid by clients later after receiving a bill                                              $80,000

As at 30 June 2018, Lewis had billed clients for $15,000 which were unpaid. As at 30 June 2019, he had clients with unpaid bills of $20,000.

During the year ended 30 June 2019, Lewis had the following expenses:

• Non-capital graphic design equipment (such as printer toner, paper etc)                             $16,000
• Computer acquired on 1 July 2018 used 80% for business                                                  $15,000
• Rental of the building for his business                                                                                    $60,000
• Tuition fees for his wife’s five-week course on watercolour painting                                     $20,000
• Travelling expenses to make visits to clients’ offices                                                            $25,000
• Speeding fine while travelling to see a client when he was running late                                      $900
• Graphic design conference in Berlin, Germany on the latest developments in graphic design $15,000

• Salary to Mary (his receptionist)                                                                                            $75,000
• Salary to Jennifer (his assistant)                                                                                          $105,000

A typical assistant doing Jennifer’s work would normally be paid a salary of $80,000.

During the year ended 30 June 2019 Lewis received the following amounts from his investments:

• Dividends franked to 50% paid by Watpac Limited                                                              $70,000
• Interest paid by a local Bank                                                                                                $23,000
• Proceeds from the sale of Dim Limited shares he purchased for $150,000 in 1984         $285,000

Lewis wants to use the diminishing value method of depreciation and all depreciable assets have an effective life of 4 years.

Required:

What is Lewis’s assessable income for the year ended 30 June 2019?

Answer 1

Calculation of assessable value of Lewis for the year ended 30 june 2019:

1. Lewis is a professional and so only that income will be accountable that is related to that work.

2. for example proceeds from the sale of investments will be treated as capital gains so that will not accountable in this income. and will come under Income from Capital gains head.

3. like computer that is not fully used by business so that's Depreciation will be claim only for 80%.

statement showing Assessable income of Lewis:

Computation of Professional Income

Particulars	Amount $
Total fees paid by Clients immediately after consultation	300,000
Total fees paid by Clients after bill	80,000
outstanding bills for year 2018(treated as that are received)	15,000
Total Income	395,000
Expenses will be less from Total Income: Expenses: Rental Building    60000 travelling expenses 25000 speeding fine          900 graphic design conference 15000 salary to Mary 75000 salary to jennifer                                                  105000 Depreciation : non capital graphic design equipment 16000/4 =       4000 Computer 15000/4 = 3750*80%= 3000	287,900
net Income from Profession	107,100

Computation of other Incomes:

Particulars	Amount $
Dividend Received	70,000
Interest By Bank	23,000
Total of other incomes	93,000

Computation of Capital gain:

Particulars	Amount $
sale of Shares less Cost of Shares in 1984	285000 150000
net income for Computation	135,000

Total Assessable Income:

Income from Profession                         107,100

Income from other Incomes       93,000

Income from capital gains                     135,000

total assessable income                          335,100