Taxation Law Assignment In Relation To Legislative Provision Of Australia Assessment Answer

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Question :

TLAW 303 — TAXATION LAW — ASSIGNMENT QUESTIONS

Assessment details

Objectives

Answer the following questions with reference to the relevant legislative provisions operating in Australia concerning the calculation of income tax. Do not consider the effects of legislation potentially applicable other than that specifically identified.

Assessment Tasks

Question 1

Calculate the income tax payable, ignoring the Medicare levy, for the following taxpayers for the year ended 30 June 2019:

(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

Calculate the Medicare levy and Medicare levy surcharge payable for the year ended 30 June 2019 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.

(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.

(hl An Australian resident with a taxable income of 5150.000. holdine private health insurance
(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

Your client, Rob, has the following income and deductions for the current financial year: 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 financial 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. Marking Guide  Questions 1 & 2 have 10 parts and for the correct answer of each part, 1 mark will be allocated.


Question 3

Calculation of Rob's taxable income by applying the statutory formula under s 4-15 ITAA 1997 (2 Marks) Calculation of Rob's tax liability per the ITRA 1986 (2 Marks) Calculation of the Medicare levy (2 Marks) Consideration to Rob's entitlement to any tax offsets and/or tax credits (1 Marks) Calculation of income tax payable or refundable by applying the method in s 4-10 ITM 1997.


Question 4

- Calculation of Rafael's taxable income by applying the statutory formula under s 4-15 ITAA 1997.

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Answer :

Taxation law

Answer to question no- 1:

(A) 

The Income of $15,000 will not be taxable because till $18000 of income is exempt in Australia for a resident of Australia.

(B)  

The Income Tax will be payable by an Australian Non-Resident on the income of $15000 will be $4875, as 32.5 Cent is the income tax payable for every $1 for a Non-Resident. So the Tax will be payable $4875 for the income of $15000 for a Non-Resident Australian year (Richardson, & Lanis, 2007). 

(C) 

The Income Tax will be paid by the company on the income of $15000 will be $4500. As the Income Tax on a company is 30% of the income. So, the income of the company is $15000, the tax for this income will be $4500. 

(D) 

If an Australian individual who is Resident of Australia and has an income of $155,000 will be liable to pay $44,847. The Income Tax till $90,000 is $20,797 and the tax for next $65,000 ($155,000-$90,000) will be 37 cent for every dollar so the tax for the $65,000 will be $24,050. The Individual who is also resident of Australia will pay a sum of $44,847 as the Income Tax for the income of $155,000 year (Richardson, & Lanis, 2007).

(E) 

The Australian individual who is Non-Resident and has an income of $155,000 will pay a sum of $53,300 as the Income Tax on 30th June 2019. As the Tax for $90,000 is defined to be $29,250 and the tax for the next $65,000 ($155,000-$90,000) will be according to 37cent per dollar. So the Tax for the $65,000 will be $24,050. The Australian Individual who is Non-Resident will pay a sum of $53,300 collectively as the Income Tax on the income of $155,000. 

(F)

  The Australian Company with an income of $155,000 will pay a sum of $46,500, as the income tax for companies is 30% of the total income. So the Australian company will pay $46,500 as the income tax for the income of $155,000 year (Richardson, & Lanis, 2007).

(G) 

The Australian Individual who is a resident of Australian with an income of $255,000 will be liable to pay $87,847. As the income tax for the amount $180,000 will be $54,097 and for the rest of the amount left ($255,000-$180,000) $75,000 will be 45 cents per dollar, so the tax for this $75, 0000 will be $33,750. 

(H) 

An Australian individual who is Non-Resident with an income of $255,000 of income will be liable to pay $96,300. As the income tax for the amount $180,000 will be $62,550 stated in the Australian Income Tax and for the rest of the amount ($255,000-$180,000), $75,000 will be 45 cents per dollar that will be $33,750 year (Richardson, & Lanis, 2007).

(I) 

An Australian company with an income of $255,000 will be liable to pay $76,500. As stated in the Income Tax law, a company of Australia is liable to pay 30% of the income earned in a financial year (Richardson, & Lanis, 2007).

(J) 

An Australian company which is qualified as a "small business entity" with a profit of $100 will be liable to pay $27.5 as income tax. As stated in the Income Tax law, the business with a "small business entity" is liable to pay 27.5% of the total income earned in a financial year. 


Answer to question no- 2:

(A) 

An Australian Resident aged 25, with a taxable income of $18,000 per year is not liable to pay any Medicare Levy or Medicare levy surcharge as the income of the individual is not equal to or above $21,980. 

(B) 

An Australian Resident who is eligible for Seniors Tax Offset with a taxable income of $32,000 is not liable to pay any Medicare Levy or Medicare Levy Surcharge as the income of the Resident is not equal or above $34,758 which is set as the basic income required for Medicare levy (Smith, 2014).

(C) 

An Australian Resident aged 45 with an income of $45,000 per year is liable to pay $900. As the income of the resident is $45,000 and the income required for the Medicare Levy for an individual is $21,980, so the Medicare Levy charge will be 2% of the total income of the resident which will be ($45000*2/100) $900. Medicare Levy Surcharge will be exempt for the Australian resident as the income of the individual is not equal to or more than $90,000 per year (Cooper, Krever,  & Vann, 2012).

(D) 

A taxpayer who is not a resident and who has an income of $45,000 for Tax purposes will be exempted for Medicare levy and Medicare levy Surcharge (Brilmayer, 2010).

(E) 

An Australian company with a taxable income of $2,500,000 is not liable to pay any Medicare levy or Medicare levy Surcharge as these policies are for individuals not for the companies (Job, Stout, & Smith, 2017).

(F) 

An Australian resident aged 45, with a taxable income of $110,000 and also holding a private health insurance is liable to pay $2,200 of Medicare levy as Medicare levy is 2% of the total taxable income, whereas the resident is not liable to pay Medicare Levy Surcharge as the resident has a private health insurance. 

(G) 

An Australian resident aged 45 with an income of $110,000 per year, with no private health insurance is liable to pay $2,200 of Medical Levy as Medicare levy is the 2% of the total taxable income and also the resident will pay $1,375 of Medicare Levy Surcharge as the resident come under Tier 2 which is $105,00-$140,000 and the Medicare Levy Surcharge for this Tier is 1.25% of the Total taxable income if the resident does not have a private health insurance (McKibbin,  & Pearce, 2016).

(H) 

An Australian Resident with a taxable income of $150,000 for the year, and also holds private health insurance for 90 days of the income year will be liable to pay 2% of the total taxable income as Medicare Levy, which will be $3,000. The Medicare Levy Surcharge will be charged for the rest 9 months of the year which will be 1.5% of the taxable income, the Medicare Surcharge will be paid by the resident will be $1,687.5 as $2250 Medicare Levy Surcharge will be the total amount for the whole year for the tier 3 but the Medicare Levy Surcharge will be charged for 3/4 of the year as the resident have a private medical insurance for 90 days of the year (Lund-Andersen, 2010).

(I) 

Victor and Jackie are husband and wife with $110,000 and $75,000 taxable income respectively. They do not have any children and no private health insurance, they will be liable to pay 2% of their total income of $3,700 as their Medicare levy. They will also pay Medicare Levy Surcharge of $1,850 as both of their income fall into Tier 1 of Medical Levy Surcharge which is 1% of the total income of both Jackie as well as Victor (Lamb, Lymer, Freedman, & James, 2015).

(J) 

A family or couple with a combined taxable income equal to or $180,000 will pay the Medical Levy Surcharge. The family income threshold increases by $1,500 for each dependent child after the first (Kaplow, & Shavell, 2014).

Answer to question no- 3:    

Rob has the income from salary as $32,000 per year and income from bank interest is $150 and he also has an allowable deduction of $450 for special work clothing. Also, Rob employer has deducted $2600 of PAYG tax from his salary during the year. The net refundable rob has is $35, as the total taxable income of Rob is $31,700 using section 4-15 ITAA from which the income till $18,200 is exempted from tax as Rob has $32,000 income from salary, $150 received from bank as interest and $450 is the deductible income for Rob ($32,000+$150-$450), so the net income in which tax will be applicable is $13,500 as $18,200 is deducted from $31,700. So the tax payable is $2,565 as 19 cent is applicable for each dollar over $18,200. The Medicare levy of Rob is $634 as the total income for Rob is $31,700 and $634 is 2% of the total taxable income. The employer has paid PAYG tax from the salary of Rob, so the net tax refundable will be $35according to section 4-10 ITAA 1997 as the PAYG tax paid is $2,600 and the net tax payable by Rob is $2,565 (Dulude, 2015).

Answer to question no- 4:

Rafael is a resident taxpayer who has a gross salary of $68,000, with a PAYG tax of $15,100 and he has a fully franked dividend of $2,000 and an unfranked dividend of $1,000 and a 60% franked dividend of $900. According to section 4-15 ITAA 1997 the taxable income for Rafael will be $55,403 as the income from the salary of Rafael is $68,000 but the deductions will be from the salary $15,100  i.e. is the amount which will be deducted as the PAYG tax which is paid by the employer of Rafael on the part of his income tax and also $2,000 is the fully franked dividend but according to the formula FRANKING DIVIDEND = (DIVIDEND AMOUNT / (1-0.30))-DIVIDEND AMOUNT which will be $857, and the unranked dividend will be treated as $1000 as the tax burden for Rafael this will be added to the tax burden of Rafael, and also Rafael has 60% of the $900 as franked, so the $360 will be added as taxable income of Rafael. So, According to ITRA 1986, the net tax burden for Rafael will be $9,436 as the income tax has stated that $3,572 will be the basic amount of tax one has to pay till $37,000 then 32.5% tax will be charged exceeding the amount than $37,000 until $90,000. The Medicare Levy for Rafael will be 2% of the total income taxable income which is $55,043, so the Medicare levy will be $1,101 (approx). The Total Franking tax offset of Rafael will be $857 of franked dividend plus $540 of 60% franked dividend of $900 and also PAYG tax of $15,100. So the net tax payable by Rafael according to section 4-10 ITAA 1997 is $9436.