Tax_Issues

Eric Waterhouse is a lawyer in sole practice who operates in the Adelaide metropolitan area. Eric employs 3 lawyers and one secretary/receptionist. He has provided you with the following details for his 2011 tax return. For the year ended 30 June 2011, Eric received cash from clients for legal work totalling $875,000. Outstanding debtors of his legal practice at 30 June 2011 were $90,000 and were $85,000 at 30 June 2010. Eric also tutored in employment law at university for which he received $5,000 in the 2011 year. He also performed $500 worth of exam marking in June 2011 for which he received payment in July 2011. In order to help the environment, and receive some extra cash, Eric installed solar panels on the roof of his house. These were installed on 15 December 2010 at a cost of $11,000. Eric did not receive any government assistance in the form of grants or subsidies for this purchase. In March and June 2011, Eric received cheques totalling $50 and $100 respectively from the electricity company for electricity generated from his solar panels that was put back into the electricity grid. Eric owns shares in a two public companies. One company paid Eric a $700 dividend in April 2011 that was franked to 50% while the other paid Eric a $1,000 dividend that was unfranked in June 2011. One of Eric’s clients was so happy with the legal work that Eric performed for her that in December 2010 she paid Eric a $500 ‘bonus’ in addition to the fee that Eric charged her. She told Eric that he should buy himself a nice Christmas gift with the money. Eric loves greyhound racing and often places large bets and approaches his gambling in an organised manner. He keeps extensive records of race meetings and the form of greyhounds on his computer. He purchased a half share in a greyhound which achieved some success on the racetrack. During the 2011 year he won $30,000 and lost $12,000 on all bets he made. His share of prize winnings amounted to $10,000 for the year. The greyhound cost Eric $15,000 in maintenance and training fees for the year. In April 2011 Eric moved his law practice to new leased office premises. These premises were a little larger and in a more convenient location than his old premises, but the main reason for his moving was a lease incentive of $35,000 that he was offered to lease the premises. The lessor company was keen to have its new building fully occupied as soon as possible and therefore offered these payments to induce tenants into the premises. The $35,000 was payable in two instalments, the first being $20,000 payable upon Eric’s signing of the lease in April 2011 and the second due after 6 months of occupancy. In August 2010 Eric received a lump sum compensation payment from his insurance company in respect of an injury he suffered at the legal practice where he fell off a ladder and broke his wrist while retrieving client files stored in the roof. The total compensation was $30,000, comprising $20,000 for lost income and $10,000 for medical expenses.