Question

a) Is income earned from illegal means (e.g. drug-dealing, insider trading or theft) assessable income? 3 marks

b) Calculate the assessable income of a resident taxpayer in the current year if

they were to be in receipt of $500 bank interest from their savings account, $10,000 won at the Crown Casino, $2,000 rent earned from a boarder sharing a house. Give reasons, considerations and quote reference to sections of the ITAA in your answer. 3 marks

c) Would a $500 allowance paid to an employee by an employer be assessable income to the employee. Explain your answer. 3 marks

d) Calculate the Medicare payable for a resident individual with a taxable income of $20,000, $24,900 and $100,000 3 marks

e) Calculate the gross tax payable for the taxable income of $25,000, $40,000 and $95,000. (Note Gross tax payable is the amount of tax due before Medicare levy and tax offsets) 3 marks

REQUIRED:

Answer each question above giving consideration to the allocated marked.

Total 15 marks

Answer 1

a) Income earned from any source, even if illegal is assessable as money coming from any source is taxable and must be reported to the respective countries revenue authority.

b) .

• Bank Interest earned (a) = $500
• Crown casino winnings (b) = $10000
• Boarder sharing rent earned (c) = $2000
• Total assessable income = a + b + c = $12500

Reference from ITAA will depend on country of Jurisdiction but are broadly same in most countries. For ex Australis's ITAA 1997, section 6.5 talks about assessable income and states

"If you are an Australian resident, your assessable income includes the * ordinary income you * derived directly or indirectly from all sources, whether in or out of Australia, during the income year."

c) Allowance to employee is assessable income at the hands of employee and increases the gross salary of employee. So &500 received by employee from the employer will be assessable.

d) Taxable income less than $21,335 is fully exempt under Medicare Levy of Australia for ordinary residents and surcharge of 2% is levied on taxable income above $21,335 for ordinary resident.

So,

• Person earning $20000 will have nil medicare payable.
• Person earning $24900 will have $498 (2% of %24900) medicare payable.
• Person earning $100000 will have &2000 (2% of 100000) medicare payable.