Question

During the 2017/18 tax year, Selina Matterson (a single resident taxpayer, aged 41) has the following receipts:

• Net salary (after $18,000 PAYG tax withheld) $55,000
• Fully franked dividend from PPP Ltd $9,800 (with franking credit $4,200)
• Unfranked dividend from QQQ Ltd $900
• Net interest received $954 (after $846 no TFN tax withheld)
• Selina had no deductions
• She was covered by private hospital insurance

Required:

Calculate Selina’s taxable income for the 2017/18 tax year.

Calculate Selina’s net tax payable/refundable (including Medicare Levy) for the 2017/18 tax year.

important Notes : 1) We should only include the Gross interest (rather than net interest) in part a

2) Dividends and franking credit

Show your working step by step

Answer 1

Sol :
Computation of Taxable Income for the year 2017/18

Particulars	Amount
Gross Salary ($55000+$18000)	$73000
Fully Franked Dividend ($9800+$4200) ( Note 1)	$14000
Unfranked Dividend ( Note 2 )	$1285
Gross Interest ($954+$846)	$1800
Less : Adequate Health Insurance ( Note 3 )	($750)
Taxable Income	$89335

Note 1 : Franked dividend eliminate double taxation by giving franking credit , for the amount of tax the business paid on the dividend.The taxable income of Selina incudes Franking Credit but end up paying tax on dividend portion.So, selena is liable to pay tax on only fully franked dividend of $9800 (Only dividend portion)

Note 2 :In case of unfranked dividend selena is liable to pay tax on both dividend + franking portion.

Franking Portion = (Dividend / (1- Company tax rate ) ) - Dividend

= (900 / (1-0.30)) - 900

= 1285 - 900

= $385

Taxable Value = Dividend + Franking Credit = $900+$385 = $1285

Note 3 : Note : The adeqaute health insurance for individuals is $750 or Less.

Computation of Tax Payable

Resident tax rates for 2017-18

Taxable income	Tax on this income
0 – $18,200	Nil
$18,201 – $37,000	19c for each $1 over $18,200
$37,001 – $87,000	$3,572 plus 32.5c for each $1 over $37,000
$87,001 – $180,000	$19,822 plus 37c for each $1 over $87,000
$180,001 and over	$54,232 plus 45c for each $1 over $180,000

Tax Payable on Taxable Income-(Franking Credit on Fully Franked Dividend ) = $89335-$4200 =$85135

    = (0-18200)*0% + (37000-18200)*19% + (85135-37000)*32.5%

= 0 + $3572 + $15644 = $19216

Tax Payable = $19216

Less : PAYG tax =$18000

Less : TFN tax = $846

Net Tax Payable = $370

Medicare levy

Medicare levy of 2% of taxable income.

Taxable Income = $89335

Medicare levy = $89335*2% = 1786.7

Medicare levy surcharge

Income for surcharge purposes^ ($)	Surcharge rate (%)
90,000 or less	0.00
90,001 – 105,000	1.00
105,001 – 140,000	1.25
More than 140,000	1.50

Since the taxable is less than threshold limit of $ 90000 so no surcharge.