Calculate the income tax payable, ignoring the Medicare levy, for the following taxpayers for the year ended 30 June 2018:
(a) An Australian individual who is a resident with a taxable income of $15,000.
(b) ) An Australian individual who is a non-resident with a taxable income of $15,000.
(c) ) An Australian company with a taxable income of $15,000.
(d) ) An Australian individual who is a resident with a taxable income of $155,000.
(e) ) An Australian individual who is a non-resident with a taxable income of $155,000.
(f) An Australian company with a taxable income of $155,000.
(g) ) An Australian individual who is a resident with a taxable income of $255,000.
(h) ) An Australian individual who is a non-resident with a taxable income of $255,000.
(i) An Australian company with a taxable income of $255,000.
(j) An Australian company qualified as a “small business entity” with a taxable income of $100.
Question 2 10 Marks
Calculate the Medicare levy and Medicare levy surcharge payable for the year ended 30
June 2018 for the following taxpayers:
(a) An Australian resident, aged 25 years, with a taxable income of $18,000.
(b) An Australian resident, eligible for a Seniors tax offset, with a taxable income of $32,000.
(c) An Australian resident, aged 45 years, with a taxable income of $45,000.
(d) A taxpayer who is not a resident for tax purposes, with a taxable income of $45,000.
2
(e) ) An Australian company with a taxable income of $2,500,000.
(f) An Australian resident, aged 45 years, with a taxable income of $110,000, holding private health insurance.
(g) An Australian resident, aged 45 years, with a taxable income of $110,000, and no private health insurance.
(h) An Australian resident with a taxable income of $150,000, holding private health insurance for 90 days of the income year.
(i) Victor and his wife are Australian residents. Victor has a taxable income of $110,000 and his wife Jackie a taxable income of $75,000. They have no children and no private health insurance.
(j) An Australian couple have four children and no private hospital health insurance. What would be the family’s minimum Medicare levy surcharge threshold?
Question 3
You client, Rob, has the following income and deductions for the financial year ended 30 June 2018: salary, $32,000; bank interest received, $150; and allowable deductions for special work clothing, $450. Rob’s employer has deducted $2600 as PAYG tax from his salary during the year. Calculate Rob’s income tax payable or refundable.
Question 4
During the current income year Rafael, a resident taxpayer, has a gross salary of $68,000 (PAYG tax withheld $15,100), a fully franked dividend of $2,000, an unfranked dividend of $1,000, and a 60% franked dividend of $900. There are no deductions. Calculate Rafael’s taxable income and tax payable.
Answer:
Question 1,uses the below tax brackets for individual tax residents and non-resident while the company and small business unit that has the turnover of below or equal to the 10m base and 2m base both use tax rate percentage of 27.5%
Australian residence citizen uses bracket Abbott (2018.Pg.14);
Taxable Income Tax on this income
0-$182000 Nil
$18201-$37000 19c for each $1 over $18200
$37001-$87000 $3572 plus 32.5c for each $1 over $37000
$87001-$180000 $19,822 plus 37c for each $1 over $87000
$180000 and over $54,232 plus 45c for each $1 over $180000
While non-resident or rather foreign citizen, on the other hand, use the below tax bracket for the in
dividual citizen
Taxable income Tax on this income
0-$87000 32.5c for each $1
$87001-180000 $28275 plus 37c for each $1 over $87000
$180001 and over $62,685 plus 45c for each $1 over 180000
Q1 (a) A taxpayer in Australia who earns $15000 hence his income lies in bracket thus not subjected to any tax he, therefore, pays nil tax.
Taxable Income Tax on this income
0-$182000 Nil
Q1 (b) for non-resident who earns the same amount $15000 his income ranges in the income bracket of between zero and 87000 Australian dollars of foreign bracket;
Hence the tax payable in this case=32.5*15000/100=$4875
Q1(c)Company tax rate is applicable at 27.5% and 30% depending with turnover base i.e. turnover less than 10m Australian Dollars is subjected to 27.5% while those above 10m Australian Dollars is subjected to 30%,thus, in this case, it is far below 10m base tier rate hence= 15000 * 27.5/100 = $4125.
Q1 (d) Australian individual who is a resident and earns $155000 uses the bracket range of between AUD 87001 and AUD 18000 Australian.
Therefore the tax payable=155000 - 87000 = 68000 this the cover of 87000,
Hence = 68000 * 37/100 = 25160 what is taxed in excess therefore tax payable= 25160 + 19822 = 44982
Q1 (e) A non-resident earning 155000 uses range bracket of between 87001 and 180000,
Hence = 155000 – 87000 = 68000 excess, thus tax in excess= 68000 * 37/100 = 25160, tax payable = 25160 + 28775 = 53935
Q1 (f) A company with income of 155000 is likewise within the base rate of less than 10m = 155000* 27.5/100 = 42625 is what is tax payable.
Q1 (g) A resident with income of 255000 applies bracket range of over 180000; thus 255000 is more than 180000 with = 255000 – 180000 = 75000 hence = 75000 * 45/100 = 33700 hence tax payable;
= 33700 + 54232= $87982.
Q1 (h) Non-resident = 255000 uses the bracket range of 180000 and over,
Hence =255,000+ (-180000) =75000
= 75000 * 0.45 = 33750, tax payable total = 33750+62685= $96435
Q1 (i) for a company with income less than 10m dollars i.e. 255000 is subjected to 27.5% = 255000* 27.5/100= $70125
Q1 (j) the small business unit has far below the threshold of 2m dollars hence is eligible to pay = $100* 27.5/100 = $27.5 dollars.
Question 2 expects us to calculate medical levy and medical levy surcharge at 2% medical levy and surcharge at tier range available Productivity Commission (2009.Pg 10.)
Q2(a)Any resident individual earning income that is below 21655 dollars like in our case 18000 is exempted from both subjections to medical levy and medical surcharge levy hence in this case no medical levy or surcharge is payable.
Q2(b)Likewise a senior tax man earning 32000 is exempted or pays zero because his income is below 34244 minimum thresholds for medical levy similarly to a zero surcharge payment since he is less amount below 90000 base tier threshold. Hence zero medical levy and surcharge too.
Q2(c)40 years is assumed to be the age of a senior staff hence his income of 45000 is above the exemption threshold hence pays a medical levy of = 2% * 45000 = $900 but pays zero medical levy surcharge since it is below the 90000 thresholds.
Q2 (d) the regulation exempts all foreign taxpayers from being subjected to either medical levy or surcharge on condition that they do not have dependents thus, in this case, assuming there is no dependent the medical levy and surcharge is nil or zero.
Q2(e)Company pays zero medical levies and surcharge since they are not eligible to enjoy any medical cover since they do not get ill.
Q2(f)Anyone holding a private health care insurance is not eligible to pay medical levy surcharge like in this case, however, he will pay the medical levy of 2% * 110000 = $2200 because of his income his above the senior staff threshold
Q2(g)In this case medical levy of 2%* 110000 = 2200 is going to be paid while as he pays medical levy surcharge of 1.25% since his income lies in bracket 105001 - 1400000 hence medical levy surcharge=
= 1.25% * 110000 = $1375
Q2(h)There is apportionment of the months that this tax man held the private health insurance hence 3 months is the duration held therefore the 9months medical levy surcharge is applicable but exemption for 3 months, hence medical levy surcharge=1.5% * 150000* 9/12= $1687.5 while for medical levy = 2%* 150000 = 3000
Q2(i)Victor is married therefore they are eligible for medical levy and surcharge as well but only up to the point of having their income combined thus, = 110000 + 75000 = 185000, therefore from it is calculated for medical levy as; = 185000 * 2% = $3700 while for Medical Levy Surcharge it is calculated as = 185000* 1% =$1850, however, each one may opt to go his own way hence for Victor the calculation for medical levy is = 110000 * 2% = $2200 and for medical levy surcharge is = 1.25% * 110000 = $1375 while for wife it will be 2% * 75000 = 1500 for medical levy and nil medical levy surcharge since it is less than base tier $90000.
Q2 (j) the base tier of $ 180000 with MLS percentage charge of 1% should be calculated on the base plus additions have done then from it addition value of = (4-1) *1500 is to be calculated for a plus after the first child is born therefore the minimum=$180000+4500=$184500
Question 3,
Rob’s
Statement of Tax Payable
For Year End 30th June 2018
Salary $32000.00
Bank interest (gross) = 150 * 100 / 45 = 150.00
Total Income 32150.00
The less allowable expense of (450.00)
Total Taxable Income 31700.00
We are supposed to tax Rob's income of 31700 using bracket range 18201 to 37000. The over the amount of above 18200 is what should be subjected to the 19 cents tax base. Therefore = 31700 – 18200 = 13500 is the over portion.
Tax payable = 13500 *19 / 100 = 2565
However, their items that need to set off this tax burden so as to avoid double taxation one of it is Pay As You Go of 2600 as well as the tax portion of interest. Assuming Rob has not provided the TFN number and the bank withholds 45% hence this need to be factored in as Burns (2017.Pg.300);
If = 55% = 150
= 45% ? This therefore is = 45 * 150 / 55 = 122.72 this is the amount withheld by ATO hence the need to factor it.
Medical Levy for this will be 2% of 31700 = 634
Thus the final tax payable is calculated as;
Tax Payable 2565
Less PAYG (to avoid double taxation) (2600)
Less tax on interest withheld (to avoid double taxation) (122.72)
Add medical levy of 634
Total Tax Payable 476.28
Rob does not qualify for medical levy surcharge because his taxable income is below the threshold base of 90000 Australian Dollars. Likewise, the interest done to Rob is assumed to be from the bank.
Question 4;
Raphael is an Australian Tax resident hence the income tax bracket is applicable together with the medical levy. The medical levy will be =68000*2%=1360
Using this bracket tax payable=$37001-$87000 - $3572 plus 32.5c for each $1 over $37000
=68000-37000=31000*32.5/100=10075
=10075+3572= 13647
Likewise, income dividend declaration is too expected to be accounted for by summing up the franked dividend, unfranked dividend and imputation credit Ferris (2018.Pg.400.)
Franked Dividend = 2000 + 900 = 2900
Unfranked = 1000 + 600 = 1600
Imputation Frank Credit = 2900 * 30 / 70 = 1242.85
Dividend declared= 2900 + 1600 + 1242.85=5742.84, we need to calculate tax on this dividend hence;
=5742.84*30%=1722.85 thus we need to calculate taxed owed by deducting imputation credit from the tax on dividend declared.
Tax owed=1722.85-1242.85=480
Tax Payable=Gross tax from bracket + Tax value on dividend declared + medical levy PAYG
Total Tax Payable = 13647+480+1360-15100=$387
References;
Abbott, M., 2018. Markets and the State: Microeconomic Policy in Australia. Routledge.
Burns, S.K. and Ziliak, J.P., 2017. Identifying the elasticity of taxable income. The Economic Journal, 127(600), pp.297-329.
Ferris, E.E.S., 2018. Dividend taxes and stock volatility. International Tax and Public Finance, 25(2), pp.377-403.
Productivity Commission, 2009. Public and private hospitals. Productivity Commission, Government of Australia Research Reports.
