Reference no: EM132598285

Question - Sally operates a café from rented premises on the Tathra waterfront. She is registered for GST and accounts for GST on a cash basis. The café is open for lunch and dinner. She employs several casual staff to work in the café.

For the tax period ended 30 June 2019, the following transactions were reported in the journals of the business:

Income: Sales from the café - $285,000

Expenses: Food purchases for the café (fresh food for cooking meals) - $22,000

Purchases of prepared cakes/slices from the local cake shop - $37,000

Wages - $56,000

All suppliers are registered for GST and all amounts include GST where applicable. Assume valid Tax invoices have been issued.

Required - Using legislation and case law, please answer the following questions:

(a) Explain to Sally the GST implications of the above transactions.

(b) Advise Sally of her net amount for GST purposes for the tax period ended 30 June 2019.

(c) Advise Sally whether the food purchases are deductible for income tax purposes.