Mary Masters – employee of Happy Housing – real estate – works from Monday to Friday each week and spends much of her work time showing potential buyers houses which Happy Housing has been engaged to sell.
Mary – resident of Australia for tax purposes – not registered (or required to be registered) for GST.
Tax year Fy1718
Explain, giving reasons, the tax implications for Maryarising from each event. If you need more facts be sure to indicate those that are needed and consider the potential tax consequences in 2017/2018 if those facts apply. Calculations must be made where appropriate.
On 30 June 2017 Mary borrowed $100,000 from the National Australia Bank for a period of 5 years at an interest rate of 8% per annum. Under the loan agreement the interest is to be paid annually in arrears with the first payment due on 30 June 2018. Mary borrowed the money with the purpose of investing one-half in shares yielding dividends and on-lending the other half to her brother at an interest rate of 3% per annum. On 30 June 2018 Mary paid to the bank $8,000 representing the interest due in the first year. In addition, In January 2018 she paid $5,000 in fees to the University of Melbourne where she commenced a degree in mathematics.