Question

She receives $300,000 per annum in salary from the TopCo. In addition to her salary, Sally received an annual performance bonus of $100,000 on 15 June 2022 as she had met certain billing targets. Sally's investment portfolio comprises of the following: Asset Acquisition Date Acquisition Price Notes Bateman’s Bay property 24 June 2018 $600,000 Property is a house on a block of land near the beach (5ha). Shares in Wesfarmers 3 March 2015 $50,000 Shares pay dividends Sally loves cooking (particularly French cuisine) and dreamed of having her own catering business or restaurant down the South Coast. She loves watching TV shows like MasterCook. She bought all of the latest appliances for her home kitchen. Her friends invited her to their parties because they knew Sally would make fantastic canapes to have with drinks. Sally was busy most weekends cooking for the parties she would attend in the evenings. Sometimes her friends would offer to pay for the ingredients she used in making the party food. She charged prices for her food that only covered the cost of the ingredients. She paid for everything using cash and threw the receipts into the kitchen drawer. The owner of a stylish café in Manuka, Rita, contacted Sally after eating her food at a party in Red Hill. Sally agreed to supply prepared food (cakes and cooked meals) for Rita’s cafe. In early July 2020 Sally placed cards on the sales counter in Rita’s café with her photo and contact details. Rita’s sales in the café increased and Sally’s phone rang off the hook. People were keen to buy Sally’s prepared food and eat it in their home. Sally employed an accountant to keep her books of account and develop plans to grow the revenue from her cooking. The accountant told her to set up a website so people could read about Sally and her food. Sally was very busy and employed two apprentice chefs to help her with cooking the food. Very soon Sally was supplying her food to cafés and restaurants around Canberra and also sold her food online through her website. In the 2021 income year, Sally earned $80,000 from the catering activity, and $125,000 in the 2022 income year. 5 After many years of watching MasterCook Sally was invited on to the show as a competitor. After a gruelling few weeks of competition with the other cooks Sally was crowned 2021 MasterCook of the year (in Dec 2021). Her prize was a complete new kitchen worth $50,000 to be installed by the best kitchen design company in Australia. The prize was non-transferrable. Sally wanted to move her catering activity to somewhere bigger so that she could increase the range of prepared food she sells. She decided to renovate the house that she owned near the beach in Bateman’s Bay. She bought the property back in 2018 as a friend told her that the Bateman’s Bay area, being a holiday destination close to Canberra, was becoming popular and the land would increase in value in the next 10 years.

Answer 1

Sally's taxable income for the 2022 income year includes her salary of $300,000, the annual performance bonus of $100,000, and the earnings from her catering activity, which amounts to $125,000. The total taxable income is $525,000.

Step-by-step explanation:

In calculating Sally's taxable income, we consider her salary, bonus, and income from her catering business. Sally's salary from TopCo is $300,000, and she received a performance bonus of $100,000. Additionally, her catering business generated $125,000 in income during the 2022 income year. Therefore, the total taxable income is the sum of these amounts:

`\[ \text{Total Taxable Income} = \text{Salary} + \text{Bonus} + \text{Catering Income} \]`

`\[ \text{Total Taxable Income} = $300,000 + $100,000 + $125,000 = $525,000 \]`

This total amount forms the basis for Sally's income tax calculation. It's essential for Sally to report all sources of income, including her salary, bonus, and earnings from her entrepreneurial venture. This ensures accurate tax assessment and compliance with tax regulations.

In summary, Sally's taxable income for the 2022 income year is $525,000, considering her salary, bonus, and income from her successful catering business. This comprehensive approach to income reporting aligns with tax regulations and reflects Sally's diversified income streams.