Taxable Income: Tax Payable

Q&A Tax

Question :

Ted Jones (2016/17) the details of receipts and expenditure are as following: 

Receipts: 

Salary $92,000 

Car reimbursed $3,400 

Entertainment allowance $2,000

Employer paid holiday $5,000 

Expenses: 

Work-related car expenses $3,200 

Entertainment expenses$1,000 

Interest paid on bank loan (buy shares in a listed company) $750 

Donation$250 

Dental expenses (self and wife) $1,800 

Medical expenses for his disabled son $6,700 

Dependents’ details: 

Wife Mary, 41 years old, only interest income $880, full-time care Paul. 

Disabled son Paul, 20 years old, full-time students, in receipt of a disability support pension $1,450 

In Addition, Ted maintained private patient hospital insurance, no family tax benefits 2016/17, resides in Ordinary Zone B. 

Q1. Calculate his taxable income 2016/17 

Q2. calculate his tax payable (including Medicare Levy)

 

Answer :

(All legislation references are to ITAA97 unless otherwise stated)

Q1, Taxable income= assessable income- deductions

Assessable income= Salary +Car reimbursement+ Entertainment allowance =$92,000+$3,400+$2,000=$97,400

Deductions= Car expenses (s8-1; 28-25) +Interest (s 8-1) + Donations (s30-15) =$3,200+$750+$250=$4,200

So, Taxable income= $97,400-$4,200=$93,200

(under ITAA36 s 23L,the employer paid holiday is neither assessable nor exempt income; under ITAA97 s 32-5, entertainment expenses are not deductible)

 

Q2,

At 2016/17 salary rate,

Tax payable on Salary= $0(under $18,200) + ($37,000-$18,200) *19%+($87,000-$37,000) *32.5%+($93,200-$87,000) *37%=$22,116

Dependent invalid carer tax offset (DICTO) DICTO (s 61-10) = $2627-【1/4*($1,450-$282)】=$2,335

Zone rebate

Relevant rebate amount = maximum DICTO available + notional dependent rebate (one student) ==$2,335+$376=$2,711

Ordinary Zone B rebate=$57+($2,711*20%) =$599.2 

Medical expenses rebate (s 159P (4))

Medical expenses rebate= [(eligible medical expenses- medical refunds) – $2,299] *20% = ($6,700-0-$2,299) *20%=$880.20

Medicare Levy (2%* taxable income 2016/17) = 2%*$93,200= $1,864

(Avoid Medicare levy surcharge because of private health insurance)

So, Taxable payable =$22,116-$2,335-$599.20-$880.2+$1,864=$20,165.6 

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