Samuel is the owner and operator of a flower shop

Samuel is the owner and operator of a flower shop in Melbourne. During the 2020 tax year, Samuel recorded cash sales of $50,000 and sales on credit (Accounts Receivable) of $80,000. He also incurred allowable deductions of $10,000.

Additional information:

1. On the 25 of June 2020, Samuel supplied flower decorations for a wedding. The invoice was for $5,000 and payment was received in full on 5 July 2020.
2. On the 29 of June 2020, Samuel hired a casual employee to help with flower deliveries. Samuel paid the employee $200 on 5 July 2020.
3. On 30 June 2020, Samuel asked a local painter for a quote to paint the outside of his shop. The painter gave him an estimate of $3,000, but agreed to stop by and look at the shop on the 5th of July 2020.

Required: Remember to refer to sections in the Tax Acts and/ or case law!

(a) Calculate (and explain) Samuel’s assessable income for the 2020 tax year using the Cash Basis Method. (1 marks)

(b) Calculate (and explain) Samuel’s assessable income for the 2020 tax year using the Accrual Basis Method. (2 marks)

(c) Refer to bulletpoints (2) and (3) and calculate Samuel’s allowable deductions for the 2020 tax year. You must explain your calculations and refer to case law