Question

Assignment Task Three

Penny Farthing is 40 years old and an Australian resident for tax purposes. Following the death of her spouse in 2019 she has remained single and assumed sole care of their two children Kim (aged 11) and Kerry (aged 3). The children receive no income. On October 31, 2019 Penny resigned from her job as a nurse at Newcastle’s John Hunter Hospital and moved her family to commence new employment at the Alice Springs Base hospital in the Northern Territory. Her employment at Alice Springs base hospital commenced on 15 November, 2019 - the date she settled with her family in rented accommodation in the town of Alice Springs. Penny is leasing the home she owns in Newcastle through a real estate agent.

Details of Penny’s receipts and payments for the year ended 30 June 2020 are as follows (all amounts are inclusive of GST where applicable):

Receipts

Gross Salary (John Hunter Hospital) note 1                                                           $25,240

Gross Salary (Alice Springs Hospital) note 2                                                          $76,180

Fully Franked Dividend received (ASX listed company)                                 $4,200

Net Bank Interest received from USA bank note 3                                                    900

Gross Rental Income                                                                                            $10,400

Payments

Airfares and removal costs to Alice Springs                                                      $3,400

Annual subscription Australian Nurses Association                                            $700

Purchase laptop computer note 4                                                                                          $2,200

Purchase Brief Case note 4                                                                                           270

Other expenses (all deductible s8-1)                                                                $1,230

Expenses relating to the rental property (all deductible)                              $17,100

Other information:

1. Penny does not have private hospital cover.
2. At 30 June 2020 Penny had a HELP/ (HECs) debt of $19,000 relating to her nursing degree that she completed in 2016 at the University of NSW.
3. Penny also received $7,000 as her share of her Grandmother’s deceased estate.    

Notes:

1. Penny’s payment summary from the John Hunter Hospital Newcastle also showed the following details:

PAYG Deducted                                                                        $4,400

Reportable Fringe Benefits                                                     $4,100

Reportable Employer Superannuation Contributions          $2,750

2. Penny’s payment summary from the Alice Springs Base Hospital also showed the following details:

PAYG Deducted                                                                        $29,000

Reportable Employer Superannuation Contributions          $3,250

3.     Penny received $1,000 (AUD) gross interest in respect of a deposit she holds with a US Bank. Under US tax legislation, the Bank was required to withhold $100 tax from the interest forwarding Penny the balance of $900.
4.     The laptop was purchased new on 15 March 2020. It has an effective life of 3 years and is used 90% for her employment and 10% privately.

       The briefcase was purchased new on 1 September 2019. It has an effective life of 2 years and is used 100% for her employment.

Required

Calculate Penny’s minimum taxable income and her net tax payable/refundable for the year ended 30 June 2020.

Answer 1

Sol :

Computation of Taxable Income

Particulars    Amount

Gross Salary  (John Hunter Hospital) $25,240

Less:Reportable Fringe Benefits -$4,100

Less:Reportable Employer Superannuation Contributions -$2,750

Gross Salary   (Alice Springs Hospital) $76,180

Less : Reportable Employer Superannuation Contributions -$3,250

Fully Franked Dividend received (Note -1 ) (1000+428.57) $1,428.57

Bank Interest received from USA bank (Gross) $1,000

Gross Rental Income $10,400

Less ;Airfares and removal costs to Alice Springs -$3,400

Less : Annual subscription Australian Nurses Association -$700

Less ; Depreciation on Laptop -$275

Less : Depreciation on Breif case -$112.5

Less : Other Expenses -$1,230

Less : Expenses related to house property -$17,100

Received deaceased estate (Tax Free) $0

Taxable Income $81,331.07

Less : PAYG John Hunter Hospital Newcastle $4,400

Less : PAYG Alice Springs Base Hospital $29,000

Less : Interest $100

Franking Credit $428.57

Children Credit (1000*2) $2,000

Net Taxable Income $45,402.50

Note :

Note : 1 Franking credit = (Dividend Amount ÷ (1 - Company Tax rate)) - Dividend Amount  

= (1000/(1-0.30))-1000

= 428.57

The shareholder submits the dividend income plus the franking credit as income but will end up being taxed only on the dividend portion.

Note : 2

Depreciation on Laptop for 1 year

$2,200*90%*1/3= $660

Depreciation upto June 2020 =$660*5/12 =$275 from (15 MAR-JUNE2020)

Note : 3

Depreciation on Breifcase for 1 year

$270*100%*1/2 = $270

Depreciation in 2020 = $270*10/12 =$112.50

Computation of Tax Liability

Tax Slab for Individuals

Income thresholds	Rate	Tax payable on this income
$0 – $18,200	0%	Nil
$18,201 – $37,000	19%	19c for each $1 over $18,200
$37,001 – $90,000	32.5%	$3,572 plus 32.5% of amounts over $37,000
$90,001 – $180,000	37%	$20,797 plus 37% of amounts over $90,000
$180,001 and over	45%	$54,096 plus 45% of amounts over $180,000

Tax Liability = $18,200*0+($37,000-$18,000)*19% + ($45,402.50-$37,000)*32.5%

= $0 + $3,610 + $2,730.813

= $6,340