Question

Brendan West is a New Zealand tax resident. He works full time at Mitre 10 Mega. He is also a musician and works part time at the local bar on Fridays and Saturdays. Brendan received the following gross amounts during the year ended 31 March 2019.

Ref   Description   Source   Amount $
          
1   Salary   Mitre 10 Mega   58,000
2   Bar income   Local bar   15,000
3   Interest   ANZ Bank   200
4   Garage sale receipts   Various people   1,000
5   Dividends   Fletcher Building Ltd   600
6   Tips   Various fans   400
7   Board fees   School Board of Trustees   980
8   Lotto- Powerball winnings   LOTTO New Zealand   750
9   Free Holiday voucher   Mitre 10 Mega   350
10   Loan   Kiwi Bank   14,000

Supplementary Notes - the numbers in this section refer to the items in the table above.
1.PAYE of $10,420 was deducted by Mitre 10 Mega.
2.Brendan worked part time as a musician at the local bar (as an independent contractor).
3.Brendan provided his IRD number to ANZ Bank and RWT was deducted at 30%.
4.Brendan had a garage sale to sell items that he did not need.
5.This dividend from Fletcher Building Ltd was fully imputed and an appropriate amount of RWT was deducted.
6.Brendan received cash tips from his part time work at the local bar.
7.Brendan is on the Board of Trustees of the local primary school. Withholding tax of $280 was deducted from this amount.
8.Brendan won various amounts playing Lotto during the year.
9.To recognise 20 years of service, he received a $350 gift voucher from Mitre 10 Mega
10.Brendan took a loan of $14,000 from Kiwibank to renovate his house.

Brendan made the following payments during the 2019 income year:

Fees of $750 for preparing his income tax return;
Loss of income protection insurance premiums $860;
Provisional tax $3,800
Costs of transporting musical instruments to local bar where he worked as a musician $2,600.
Interest on loan $3,200.

Required:
For the year ended 31 March 2019, calculate Brendan’s income tax liability and the terminal tax to be paid or tax refund.

Answer 1

In the given question Brendan West is doing job and also doing part time work on the weekends.

Salalry in common means any amount paid by employer to his employee in lieu of service rendered by him.Income will be taxable under the salary only when there is empployer-employee relationship.  

Computation of Income tax Liability / Refund of Brendan West for the period 01.4.18 to 31.03.19

(Amount in $)

Income from Salary :-

Salary from Mitre 10 Mega 58,000

Free Holiday Voucher 350

Toal Income from Salary (A) 58,350

Income from Other Sources :-

Bar Income (Local Bar) 15,000

Less :Expenses 2,600 12,400

Interest from ANZ Bank 200

Garage sale receipts 1000

Dividend from Fletcher Building Ltd 600

Tips received from various Fans 400

Borad Fees 980

Lotto Powerball winning 750

Total Income from Other sources (B) 16,330

Toal Income (A+B) 74,680

Income upto $14,000 taxed @10.5% 1,470

Income over $14,000 and upto $ 48,000 taxed @17.5% 5,950   

Income over $48,000 and upto $ 70,000 taxed @30% 6,600

Remaining income over $70,000 taxed @ 33% 1,544.4

Total Tax Payable 15,564.4   

PAYE deducted by employer 10,420

RWT deducted 60

Witholding Tax from School 280

Provisional Tax 3800

Total Tax Paid   14,560

Terminal Tax to be paid 1004.4