In which case did the taxpayer
In which case did the taxpayer derive assessable income duringthe year ended 30 June 2020?
| a. |
Fridge World sells refrigerators. On 30 June 2020, it sells arefrigerator for $2,000. The customer enters into a lay-byarrangement by paying an initial deposit of $400. For the next fourweeks, the customer continues to make $400 payments until the final$200 instalment is paid on 2 August 2020; |
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| b. |
Learn to Dance is a dancing school. On 30 June 2020, it receivesa non-refundable upfront payment of $150 from a customer for 3dancing lessons (ie. $50 each). The three dance lessons areconducted on 6 July, 13 July and 20 July 2020; |
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| c. |
Malik received a $10,000 bonus from his employer on 12 July 2020in appreciation of his hard work for the year ended 30 June2020; |
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| d. |
Julie, a chartered accountant practicing as a sole practitioner,invoiced some clients $12,000 on 30 June 2020 for services providedup to that date. Julie received this amount in the mail on 10 July2020. |
Answer:
Answer is Option d. Service provided will betaxable in the period in which it was provided irrespective ofpayment received or not. Here, Service is provided in financialyear ending 30 June 2020 although payment is received on 10 July2020. So, it it will not be included inassessable income of year ending June 2020.
In Option a. Sale of goods in lay by agreementis treated as sales when final installment is paid. Here finalinstallment is paid on 2 August 2020. So, this will not beconsidered in assessable income of year ending June2020.
In Option b. Upfront fee is an advance paymentfor performance obligations to be satisfied in the ture and isrecognised as revenue when those future services are provided. Hereservice i.e. dance lessons is provided in July 2020. So, the nonrefundable upfront charges will be considered as Income in Yearending June 2021. The same will not be included inassessable income of year ending June 2020.
In Option c. Generally, Bonus is taxable in thefinancial year it relates to. But If bonus is not known in thefinancial year for which it was declared, the bonus would be taxedin the financial year in which it is received by the employee. So,here bonus was given in July 2020, it willnot be included in assessable income of yearending June 2020.
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