Question

ron who is 16 and studying fulltime whilst living with his parents

2017/18 tax year he had

gross wages from partime job of 4700 (payg withhelo of 800)

gross interest received on fund given by his parent 10000 (TFN withheld 4900)

income distribution from estate of late aunt 7500

income distribution from family trust 6000(tax paid by trustee 1500)

unfranked dividend from shares 1200(brought with funds from pervious family trust distribution)

what is the net tax payable for the year

Answer 1

Calculation of Net Tax Payable of Ron in the year of 2017-18:

a) For the purpose of Div 6AA(Taxation of Minors under ITAA36), Expected assessable Income Ron has been derived.

Expected Income= Wages + Income distribution from Estate = 4700+7500 = $12,200/-

b)For the purpose of Div 6AA(Taxation of Minors under ITAA36),Eligible Assessable Income Ron has derived?

All Unearned Income = Gross Interest Received + Income distribution from family trust + Unfranked dividend

= 10,000+6000+1200

= $ 17,200

c)Net Tax Payable for year 2017-18

Step 1-

Expected assessable income of $ 12,200 on ordinary rates - Nil Tax

Eligible assessible income $ 17,200 on Div 6AA tax rates - 45% for whole of taxable income

$17,200 X 45% = $ 7,740/-

Plus Medicare Levy @ 2% on $29,400($17,200+$12,200) = $ 588/-

Total Income Tax Payable = $ 8,328 (A)

Step 2-

Less:

Low Income Tax offset - Not Available (B)

Step 3-

Less: Already Paid Tax

i) PayG withheld Tax = $ 800

ii) Tax paid by Trustee = $ 1,500

iii) TFN withheld Tax = $ 4,900

Total = $ 7,200 (C)

Net Tax Payable for the year 2017-18 = A-B-C

= 8328-0-7200

= $ 1,128

Notes:

  a)Excepted Assessable Income

Excepted assessable income is the second exemption. A child might be a prescribed person but if the child only receives excepted assessable income, then the Div 6AA tax rates still don’t apply.

b)Resident Minor –

Unearned (Division 6AA) Income The following rates apply to the income of certain minors (e.g., persons under 18 years of age on the last day of the income year who are not classed as being in a full-time occupation) that is not excepted income (e.g., employment income):

Division 6AA Income $ Tax Payable

a) $0– $416 Nil

b) $417 – $1,307    66% of the excess over $416

c) 1,308+ 45% of the entire amount

1 Medicare Levy may also be payable.

2 Resident minors are not entitled to the Low-Income Tax Offset or the Low and Middle Income Tax Offset in respect of 'unearned' income