Daniel Murphy is a freelance journalist based in Brisbane and operates as a sole trader. He has an Australian Business Number, and qualifies for several concessions available to Small Business Entities as the turnover of his business is below $5 million. All amounts in this question exclude GST. Daniel provides you with the following information for the 2018-2019 income year:
Invoices sent to various news corporations for articles that Daniel wrote which were published totalled $40,000. As at 30 June 2019, $4,000 of these invoices remained unpaid.
Daniel received advertising income of $42,000 from a blog that he writes and owns the domain name to.
He made a voluntary repayment of $500 on his HELP debt loan on 30 June 2019. On 1 July 2018, Daniel’s outstanding HELP debt was $14,000 from the undergraduate degree in journalism that he completed at the University of Queensland.
Wages Daniel took for running the business totalled $30,000. Daniel purchased short-hand notebooks, pens and printer cartridges at a cost of $520. Daniel used these to write and produce articles.
Daniel owns a rental property. He received $18,000 in rent during the income year. He uses a property management company to manage the property, collect rent and attend to minor repairs. The property management company charged him $1,800 during the year. During the income year he paid landlord’s insurance that cost him $320. Daniel financed the purchase of the property through a mortgage loan. During the income year, interest repayments totalled $9,000. His Division 43 capital works tax deduction (‘tax depreciation’) for the property for the 2018-2019 income year totalled $10,000. LAWS3101 | Tutorial 4 Page | 2
He paid income continuance insurance premiums of $1,600 to insure himself for loss of income should he be unable to work temporarily due to illness during the income year.
YOU ARE REQUIRED TO: Calculate Daniel’s taxable income for the 2018-2019 income year. Show all calculations and provide reasons for your answers. Your answers should reference relevant sections of the Income Tax Assessment Acts, relevant case law, or rulings from the Australian Taxation Office.