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Australian Income Tax Law And Practice

QUESTION 1

1. The taxable income is determined under s4-15 wherein all deductions are subtracted from the total assessable income. In the context of given case scenario, Michael's tax liability amounts to $122,000 (=$130,000-$8,000). This is only applicable for Michael as his wife is unemployed. The tax payable can be further bifurcated and presented as under:

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Taxable Income

Tax on this income

$0 to $18,200

No tax payable

$18,201 to $37,000

$18800*19% = $3,572

$37,001 to $87,000

$50,000*32.5% = $16,250

$87,001 to $122,000

$35,000*37% = $12,950

Total Tax Payable by Michael

$32,772 (=$3,572+$16,250+$12,950)

2. Mary's Decor is a home decorators business operated by Mary with a total turnover of $350,000 for the current financial year. It is assumed that Mary is a Cash Taxpayer. Since the total turnover value includes a component of Credit Sales worth $60,000, their revenue would only be taken into consideration for tax purpose when such debts are actually realised by Mary from Accounts Receivables. The same applies for Interest payments realised worth $3,000 from the total of $8,000. Hence, the net turnover relevant for tax liability computation is $290,000 and Interest Payments received on overdue of customers is $3,000. Also, there are tax Thus, the total tax liability of Mary amounts to $65000 (=$290,000+$8,000-$3,000-$230,000). Hence, the total tax payable by Mary on their total tax liability can be bifurcated and presented

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