QUESTION
Mr Smith is a 28 year old individual resident of Australia (Melbourne) for taxation purposes. He was employed as an accountant for the full 2012 financial year with the exception of 2 months spent in the United States on a working holiday and a period of 4 weeks on his return unemployed. The following information relates to the year ended 30 June 2012:
Receipts
Gross Salary as per group certificate (note 1) $65,524
Fully Franked dividends received 3,800
Unfranked dividends received 1,350
US Gross Salary (note 2) 8,240
Gross rent received 5,200
Centrelink Unemployment benefit (NewStart Allowance) 1,950
Gift from his grandmother 5,000
Payments
Expenses relating to the rental property (all deductible) 7,500
Purchase (02/02/12) of a computer used %60 for business
with an effective life of 4 years 1,850
Purchase (01/01/12) of a briefcase used 100% for business
with an effective life of 4 years 280
Personal contribution to a complying superannuation fund 2,500
Airfares to the US 2,000
Other deductible expenditure relating to Australian income 1,000
Other information
- At 30 June 2012 Mr Smith had an accumulated HELP (HECS) debt of $7,500
- Mr Smith is single with no dependants and did not have any private hospital cover.
Notes
1. The group certificate also showed $21,000 PAYG deducted, a Reportable Fringe Benefit amount of $2,500 and a Reportable Employer Superannuation Contribution amount of $3,300.
2. The US salary was received from employment during his 2 month stay in Las Vegas as a casino card dealer. US tax deducted (in Australian Equivalent dollars) was $995.
Required
Calculate the taxpayer’s taxable income and net tax payable/refundable for the year ended 30 June 2012. Show all workings. Referencing to the Income Tax Assessment acts is not required.
SOLUTION
| Statement of Taxable Income |
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| Mr. Smith |
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| Tax Year -2012 |
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| Resident Status- Resident |
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| Salary Income |
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$65,524 |
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| US Gross Salary |
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$8,240 |
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| Reportable Fringe Benefit |
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$0 |
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( Not required to be reported since below threshold limit) |
| Fully Franked Dividends |
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$0 |
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| Unfranked Dividends |
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$1,350 |
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| Rental Income |
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-$2,300 |
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| Total Receipts |
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$72,814 |
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| Deductions |
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| Depreciation |
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| Computer |
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$106 |
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| Briefcase |
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$280 |
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| Airfare |
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$2,000 |
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| Other Deductions |
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$1,000 |
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| Total Decuctions |
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$3,386 |
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| Taxable Income |
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$69,428 |
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| Statement of Tax |
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| Adjusted Taxable Income |
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$69,428 |
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| Tax thereon |
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$14,378.36 |
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| Medical Levy |
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$1,041 |
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| Total Tax Liability |
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$15,420 |
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| Tax Withheld |
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$21,995 |
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| HECS Benefit |
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$1,636 |
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| Refund due |
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$6,575 |
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| workings |
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| Rental Income |
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| Rent Received |
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$5,200 |
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| Deductibel Expenses |
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$7,500 |
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| Net Rental Income |
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-$2,300 |
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| Franked dividends are the dividends which have already been taxed in the hand of the company |
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| declaring it and therefore are not taxable as income for the shareholder |
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| Depreciation |
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| Briefcase: An asset below the cost of $300 can be fully claimed as depreciated in the year of purchase |
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| and therefore full cost of the briefcase has been claimed as depreciation |
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| Computer |
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| Cost |
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$1,850 |
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| Effective life |
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4 |
years |
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| percentage used for business |
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60% |
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| No. of days used |
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140 |
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| No. of days in the year |
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366 |
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| Depreciation |
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$106.15 |
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| Medical levy is 1.5% of the adjsutable total income |
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| Reportable fringe benefits must be more than $ 3737 to take into account for calculation |
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| Statement of Taxable Income |
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| Mr. Smith |
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| Tax Year -2012 |
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| Resident Status- Resident |
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| Salary Income |
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$65,524 |
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| US Gross Salary |
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$8,240 |
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| Reportable Fringe Benefit |
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$0 |
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( Not required to be reported since below threshold limit) |
| Fully Franked Dividends |
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$0 |
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| Unfranked Dividends |
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$1,350 |
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| Rental Income |
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-$2,300 |
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| Total Receipts |
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$72,814 |
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| Deductions |
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| Depreciation |
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| Computer |
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$106 |
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| Briefcase |
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$280 |
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| Airfare |
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$2,000 |
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| Other Deductions |
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$1,000 |
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| Total Decuctions |
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$3,386 |
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| Taxable Income |
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$69,428 |
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| Statement of Tax |
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| Adjusted Taxable Income |
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$69,428 |
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| Tax thereon |
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$14,378.36 |
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| Medical Levy |
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$1,041 |
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| Total Tax Liability |
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$15,420 |
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| Tax Withheld |
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$21,995 |
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| HECS Benefit |
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$1,636 |
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| Refund due |
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$6,575 |
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| workings |
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| Rental Income |
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| Rent Received |
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$5,200 |
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| Deductibel Expenses |
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$7,500 |
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| Net Rental Income |
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-$2,300 |
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| Franked dividends are the dividends which have already been taxed in the hand of the company |
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| declaring it and therefore are not taxable as income for the shareholder |
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| Depreciation |
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| Briefcase: An asset below the cost of $300 can be fully claimed as depreciated in the year of purchase |
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| and therefore full cost of the briefcase has been claimed as depreciation |
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| Computer |
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| Cost |
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$1,850 |
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| Effective life |
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4 |
years |
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| percentage used for business |
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60% |
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| No. of days used |
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140 |
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| No. of days in the year |
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366 |
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| Depreciation |
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$106.15 |
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| Medical levy is 1.5% of the adjsutable total income |
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| Reportable fringe benefits must be more than $ 3737 to take into account for calculation |
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