Assignment Question -
Jordan is an Australian resident taxpayer who graduated from UWA in December 2017 with a Bachelor of Commerce majoring in business law. He has ambitious plans for 2018 and wants to pursue his dreams of becoming a social media influencer and big time stockbroker. The following information relates to the tax year ending 30 June 2018.
1. Jordan sets about preparing a business plan for his social media activities. His business plan includes targets for new content creation, projected revenue streams from YouTube and Instagram and his expected expenses. Jordan doesn't expect to make a profit in his first year, but he hopes that eventually he will be able to use his social media activities as his only source of income. On 1 January 2018, Jordan starts an Instagram account and in a short space of time attracts over 100,000 followers. Towards the end of June 2018, Jordan is approached by Swiss Watches who gives him a $5,000 watch in return for him agreeing to post photos of their products on his Instagram account.
2. Taking inspiration from his friendly tax law lecturers at UWA, Jordan starts his own YouTube channel. The channel is an instant success and Jordan amasses 1 million subscribers when his video, the "Art of the Hard Sell", goes viral. Jordan's agreement with YouTube provides that he will be paid $7.60 per 1000 views. In the tax year ended 30 June 2018, Jordan's YouTube videos are viewed 2 million times.
3. On 2 March 2018, Jordan receives a cash prize of $10,000 for a video he submitted in a competition run by YouTube for its up and coming content creators.
4. To support himself while he establishes his online social media presence, Jordan also accepts a fulltime job at Stratton Securities, a highly regarded stockbroking firm located in the Perth central business district. Jordan starts working at Stratton Securities on 1 February 2018 on a starting salary of $65,000 per annum plus 9.5% compulsory superannuation (which is paid to his superannuation fund). Jordan earns $27,000 of salary in the period 1 February to 30 June 2018.
5. To prepare for his new job with Stratton Securities, Jordan takes out a Netflix subscription for $10.99 per month on 1 January 2018. Jordan only watches stockbroking documentaries and movies on Netflix (such as the Wolf of Wall Street and the Big Short).
6. In addition to his salary, Stratton Securities offers Jordan a $20,000 bonus for his outstanding work on the "Madden Deal". In order to reduce his tax bill, Jordan asks Stratton Securities to pay the bonus directly to his mum, Kiki Belfort. Kiki recently retired and earned no other taxable income in the tax year ended 30 June 2018. Stratton Securities deposits the $20,000 into Kiki's bank account on 30 June 2018.
7. As Jordan leaves a degustation lunch celebrating the success of the "Madden Deal", he meets a lovely lady from Greenpeace who explains all the work Greenpeace is doing to protect sea life. Touched by these stories, Jordan donates $200 to Greenpeace. Jordan receives a tax invoice indicating that Greenpeace is registered as a deductible gift recipient.
8. On 1 January 2018, Jordan purchases an iPhone X online for $1700 plus $50 delivery. During the tax year, Jordan uses the iPhone for his work at Stratton Securities and for his social media activities (he does not use it for private purposes). Jordan anticipates that he will need to upgrade his phone in January 2021 when the new iPhone XIII is released.
Advise Jordan on his income tax position and calculate his overall tax liability for the income tax year ended 30 June 2018.
Please make the following assumptions when answering this question:
- Jordan does not have a HECS-HELP Debt;
- Jordan does not have private health insurance;
- Stratton Securities have not withheld any amounts of tax under the PAYG rules; and
- The superannuation payments have no income tax consequences for Jordan and can be ignored.
You must show all explanations and workings. You must make reference to legislative provisions and case law in support of all your conclusions.