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Ian Smith is a self-employed builder. Unless otherwise specified, all amounts below are GST exclusive figure. Ian has collected the following details relevant to the preparation of his tax return for the current income year:

a) Receipt of $220,000 (GST inclusive) in gross fees from his building activities during the year.

b) Incurrence of telephone expenses at his building office of $1,500.

c) Purchase for $1,200 on 2 February of the current year of income, of office supply for use in his business. Semester 1 Main, 2021 LEGL300 - National Page 3 of 3.

d) Acquisition on 1 January, for $80,000, of a motor vehicle for use exclusively in his building activities, also to be depreciated under the straight-line method. The straight-line depreciation rate set by the Commissioner is 12.5%.

e) Undertaking of a loan of $26,000, in order to acquire the motor vehicle, under a three-year loan agreement commencing on 1 January.

f) Borrowing expenses of $1,600 were incurred in respect of this loan agreement.

g) Payment of $2,800 in interest under the loan agreement during the year to the finance company.

h) Payment of a salary of $12,000 to his wife for her help in the business. The Commissioner believes that a salary of $8,000 would have been reasonable for the work done.

i) Incurrence of $200 in legal expenses in debt collection for his fees and $1,250 in respect of the purchase of his domestic residence.

j) Payment of $200 penalty tax because he had failed to disclose certain income in a previous tax return, a non-disclosure the Commissioner discovered and in respect of which had issued an amended assessment during the year.

k) Carry forward of a $2,000 loss from the immediately preceding year of income.

Advise Ian of the Australian income tax implications of the above transactions. Provide relevant case law, ATO rulings and section references to support your answer.

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