Question

Australian Taxation

Combination Q1:

Miss Russell QC (Queen’s Council) is a lawyer by day and a university lecturer by night. She receives salary from the law firm of $100,000 and salary from the University of $50,000. She is single and has private health insurance from 1 January 2019 to 30 June 2019.

During the year Miss Russell had to travel to see clients. She acquired the car on 1 October 2018 for $60,000. The acquisition cost was funded entirely by a loan at an interest rate of 15%. She has determined that the depreciation deduction on the car would be $2,300 for the year. In addition, Miss Russell incurred the following expenses during the year:

 Registration and insurance $2,000

 Repairs and maintenance $1,000

 Oil and fuel costs $1,500

For the period 1 October 2018 to 30 June 2019, Miss Russell estimates the car travelled a total of 15,000 km, 12,000 of which were for business purposes.

She kept a logbook of all of her travels. Miss Russell also has mobile phone that she uses only for business purposes.

The cost of the phone is $300 per month and she pays this herself. Miss Russell also received $10,000 dividends on the 28 June 2019. These were partially franked to 80%.

Calculate Miss Russell’s net tax payable as at 30 June 2019.

Answer 1

Solution:

Calculation assumed as per Australian Tax rates since not mentioned location of the person.

Taxable income for Miss Russell 2018-19

Particulars	Amount $	Amount $
Income from Salary (consolidated)		1,50,000
Less: Health Insurance Rebate @25.059%	37,589
Exemption of expenses for Car (Note 1)	10,875
Telephone Expenses (300 X 12) for business purpose	3,600	52,064
Net Income from Salary		97,937
Add: Income from Dividends	10,000
Less: Franked Portion	8,000	2,000
Net Taxable Income		99,937

Income Tax @ 37% =$36,977

Working Note 1:

Exemption of Car expenses which are used for business purpose.

Particulars	Amount $
Depreciation on car for 9 months	1725
Interest on car loan @15% for 9 months	6750
Registration and Insurance	2000
Repairs and Maintenance	1000
Oil and fuel Expenses	1500
Total Expenses of Car for the year	12975
Eligible for exemption 12000/15000 km	10380

Considered as exempted since 12000 Km out of 15000 KM are used for meeting clients on duty purpose.