Australian Medical Levy Surcharge Calculation

This assignment focuses on the calculation of the Australian Medical Levy Surcharge. It outlines the income threshold limits for single and family taxpayers who are liable to pay the surcharge. The document also presents a detailed calculation of tax payable for the 2015/16 financial year, including assessable income, allowable deductions, and the final taxable income. Additionally, it includes relevant items for income tests like fringe benefits, superannuation contributions, and government pensions.

7106AFE Assignment, Semester 3, 2016
INTRODUCTION
Tax refers to a compulsory payment made by assesses following the principles & tax regulations of the country. In Australia, Australian Taxation
Officer (ATO) set policies, tax rules, regulations & provisions whereby all the individuals are who falls in the taxation category are liable to pay taxation as per
due dates to the regulatory bodies. ATO regulates the imposing of taxation obligations & its collections in a proper manner so as to gather money for the
governmental budget. It is the liability of every individual to pay taxes at per prevailing rates and duties and meet out their liabilities timely. If any person fails
to comply with their taxation obligations than, he or she will be penalised by the authority for the same. The aim of present project report is to apply various
laws & principles of ATO for the preparation of taxation return for the Jez Morgan. On the basis of it, it will be identified that what kind of individual receipts
are assessable or not under the taxation framework so as to construct the actual tax return of Morgan for the reporting year 2015/16. All the arguments &
discussion will be supported with the proper evidences of ATO regulations for thoroughly & accurate analysis.
Item 1 – Salary and Wages
PAYG is an abbreviation used for Pay as you Go (PAYG), explains that employers have to collect taxes on the payments made to their employees in
order to meet their taxation liabilities. Under the withholding taxation rules, any person who make payment to their workers, contractors and payment to
businesses that are not quoted under ABN Australian Business Number is have to deduct taxes at the time of payment. According to the ATO legislation for
individual’ taxation obligation, gross payment made under PAYG summary, encompasses individual’s wages, salary, commission & bonus to employees,
directors, managers & any other. The tax provisions states that all the payments made before the amounts kept as withheld will be disclosed under the taxation
return. Moreover, it also comprises non-super annuities, pension, any compensation paid and accidental or sickness pay.
With the stated scenario, Jez Morgan worked as a teacher for Brisbane Secondary College (BSC) and provided a PAYG summary by his employer for
the year 2015/16, his income from salary & wages that is required to be disclosed under the tax return is stated here as under:
Salary Assessable or Amount assessable Reasons and evidence

not?
Brisbane Secondary
College $87,590
Assessable $87590-$1020
= $86,570
Jez received a salary of $87,590 from his employer including an annual leave pay
for the unused leaves for the prior taxation year ending 30th June 2015. Therefore,
the gross payment exclusion of leaves pay has been reported as his salaried income
worth $86,570.
Annual Leave
$1,020
Assessable Whole amount will
be assessable worth
$1,020
In accordance with the ATO taxation legislation, any amount paid to the employees
in connection with the unused holidays later 17th August 1993 will be the part of
gross payments. Hence, annual leave made worth $1020 has been included.
PAYG tax withheld
– Brisbane
Secondary College
$21,948
Assessable Whole amount will
be assessable worth
$21,948
Gross payment will be disclosed before the amount of taxes withheld, therefore, tax
withheld of $21948 has been added in the total payment made by Brisbane College
to Jez Morgan.
Gross payments Total of
above
$86,570+$1,020+
$21,948
= $109538
GP includes salary, tax withheld and holiday payments.
Reportable Fringe
Benefit Amount
(RFBA):$9,000
Not
assessable
Gross payment does not include payments made by employer in line with the
RFBA. However, ATO’s tax guidelines, IT1 demonstrate that if the amount of
RFBA exceeds beyond $2000 then it will be grossed up and the amount will be
reported in the tax return.
Reportable Super Not RSC are the extra compulsory monetary payment made by an employer on the

Contribution (RSC):
$3,000
assessable behalf of employee’s salary sacrifice. In accordance with the IT2, If employer
Brisbane College contributed to super fund at employee, Jez’s request, then it will
not be taxed but here is a condition attached that the payment must not exceed the
law requirement. However, in the absence of maximum permissible contribution, it
has been assumed that RSC amount is under the limit hence, not assessable.
Total assessable income $ 109538
Item 2 – Allowances, earnings, tips, director’s fees etc.
Allowances refer to the payments that are provided by the employer to their workers to cover work-related expenditures.
Allowances,
earnings, etc.
Assessable
or not?
Amount
assessable
Reasons and evidence
Stationery
allowance $120
Not
assessable
- Under section D15 of the deductions available, it has been stated that all the allowances with
regards to the work responsibilities are deducted therefore, it will not be taxed on Jez
Morgan. Moreover, without tax receipt, deduction of $150 for the stationery is available to an
individual, hence, in the situated case, it not has been deduced as it is below $150.
Cash present from
sister $200
Not
Assessable
- This amount has not been received in the ordinary course of work, therefore, will be assessed
with full receipts. Income tax rules entail that gift must be a gift where voluntary transfer of
money or property takes place. In this, for getting deduction in terms of tax brackets
individual must satisfy the condition that he will not receive any kind of material gain from
such gifts.
Along with this, gift in terms of financial assets must have monetary value. For

instance: Financial assets such as shares come under the category of gift. The rationale
behind this, by selling such assets business entity can enjoy monetary gain or benefits. By
considering the rules and regulations of Australian it can be said that individuals can demand
for deduction when they meet the following criteria’s enumerated below:
 Gift amount is $2 or more
 Property valued at more than $5000
 Property which is purchased by individual during the period of 12 months before
making profit
 Trading stock and heritage gifts
 Cultural gifts program
Thus, by taking into account income tax rules it can be stated that Jez can demand for
$200 as deduction which he received from her sister in the form of Birthday present.
Myer gift card $50 Assessable 50 Along with this, ATO laws and legislation entails that prizes and gift card also comes under
the category of taxable income. On the basis of this aspect, Jez is liable to pay tax on gift card
which was received by him from school.
National Teaching
Award $5,000
Assessable 5000 As per the Taxation Rulling principles, IT 2145, it has been mentioned that any awards won
by the worker for the outstanding or excellence performance in his or her respective field will
be assessable. It can be evident by the case study of Kelly vs FC of T 1985, ATR 478 and
ATC 4283, it has been stated a football player employee won a cash prize for his excellent &

remarkable playing in the football match. In this, court declared that it is an incidental
payment and received as a virtue of the employment, hence, it has been considered as an
normal incident relation with his job. Further, in accordance with ATO, Jez also received
money such as $5000 as a National Teaching Award. Thus, in accordance with ATO, both
the above mentioned amounts are the part of tax liability.
Total assessable income $5050
Item 10 – Gross Interest
Interest Assessabl
e or not?
Amount
assessable
Reasons and evidence
Suncorp $219
Suncorp $211 Not
Assessable Same as below mentioned reasons.
Macquarie $1,110 Not
Assessable
According to Income Tax Act of Australia income which is earned by the individual through
the means of fixed deposit is come under the tax category. Moreover, such income is also
considered as the one which is earned by the firm from other sources. TDS is one the main
ways of automatic tax collection undertaken by Income Tax departments. In this way,

interest received from TDS is partially paid by the bank and the rest is considered for self
assessment tax paid by the individual. On the basis of laws as well as legal regulations bank
can deduct TDS from interest only when the interest amount is greater than $200 per annum.
In this case, TDS is deducted by the banking institution with the rate of 20%.
Given case situation presents that gross interest which was earned by Jez during the
period of 2015-16 from fixed or term deposit accounts for $1110. As per the laws, amount
which is higher than $200 is subject to TDS of 20%. On the basis of this aspect, Macquarie
bank charges 222 in the form of TDS and provided Jez with the amount of $888. Hence, net
income earned by Jez from interest is $888. However, such income is not includes in the tax
category or brackets.
Total interest assessable $ x Label L
TFN withheld $ y Label M

Item 11 – Dividends
Item Unfranked
Amount
assessable
Franked
Amount
assessable
Franking Credit Reasons and evidence
$10 dividend (fully
franked) per share
from the CBA
shareholding
2000 Franking credit
(Dividend/1-Corporation tax
rate)-Dividend amount
=($2000/1-0.30) - $2000
= $857.14 means $857
In accordance with the taxation policies, franked
dividend is regarded as imputed taxation credits on which
company already had paid taxes, therefore, shareholders
will not be liable to pay tax again to avoid double
taxation. It means shareholders are able to get a tax credit
on such dividend earnings known as franking credit.
Thus, in the situated case scenario, Jez Morgan will not
be liable to pay taxes on the dividend received on the
CBA holdings @ 10 each as these were fully franked and
CBA already had paid taxes thereon. Therefore,
remainder of balance will that will be assessable is
1143AUD.
BHP shares (#2)
$500 dividend
reinvestment
$500 No franking credit will be
availed.
Dividend reinvestment plan (DRIP) refers to the offer
given by the company to investors, in which, they can
invest their dividend earned back to buy more additional
shares, helps to maximize investment value. Share on

which company did not pay dividend is called unfranked
dividend, and on the same, no franking credit will be
available to assess (Dividend Reinvestment Plans. n.d.).
TOTAL $x 500
Label S
$x 2000
Label T
$x 857
Label U
Item 18 – Capital Gains
Potential CG –
CGT event
Steps Calculation/Reasoning/ Application of law
Sold inherited
shares
Step 1 In the first step capital gain or loss value is computed. Capital gain refers to the profit that is earned by an
individual on sale of asset in the market. On other hand, capital loss refers to the loss that on face on sale of
shares in the stock market. In the first step capital gain or loss value if calculated in respect to CGT events
that is earned or incurred by an individual. There is a capital gain or loss worksheet that can be used by an
individual to compute capital gain or loss on shares.
Step 2 In the second stage net capital gain or loss is calculated. Net capital gain refers to the value of capital gain
that remain after subtracting expenses from the capital gain value. Similarly, net capital loss refers to the
amount that is deducted from the loss amount. Net capital gain or loss value is computed by using CGT
summary worksheet.

Step 3 In the entity tax return form capital gain items are entered with value. In other words, it can be said that in this
stage income tax return form is filled by tax payer.
Step 4 Finally, GST schedule is completed
Step 5 GST schedule and income tax return document is send to the tax department of Australia.
Indexation
Criteria
Indexation method is used by the tax payer when asset acquired before 11.45 AM on 21st September 1999.
This method can be used only when asset is hold for more than 12 months before the CGT event. In the
indexation method relevant indexation factor is applied and then indexed cost is subtracted from the capital
proceeds amount.
Discount
method
Criteria
CGT discount method can applied when asset is hold for 12 months or more time period before CGT event.
CGT is done by subtracting cost from proceeds amount. If there is any amount of capital loss then its value is
deducted. Finally, capital gain amount is reduced from the discount percentage.

Potential CG –
CGT event
Steps Calculation/Reasoning/ Application of law
Sold dividend
reinvestment
shares
Step 1 Same as stated above under step 1.
Step 2 Same as stated above under step 2.
Step 3 Same as stated above under step 3.
Step 4 Same as stated above under step 4.
Step 5
Same as stated above under step 5.
Indexation
Criteria
Same as stated above about indexation.
Discount
method
Criteria
Same as stated above about discount criteria method.

Net capital
gain
$ x There is no capital gain because one does not earn any sort of profit on investment.
Item 21 – Rent
Rent income /
expenses
Assessable /
(deductible)
or not?
Label Amoun
tassessable /
(deductible)
Reasons and evidence
House cost
$578,000
Legal fees $900 Deductable Legal fee that is paid in respect to rented property from which earning is done id
deductible in the income tax law of Australia. As per rules if in any case it is identified
that earning is received from any rented property then in that case all expenditures that
are made in respect to that property will be deductible. Due to this reason legal
expenditures that are made by the firm are tax deductible.
Transfer duty
$15,860
Deductable Deduction will be received by Jez on transfer duty because it is associated with the
rented property from which currently mentioned entity is receiving tax.
Rental income
$18,700
Taxed Rental income is taxed as per rules of Australia income tax rules and regulations. Thus,
in compliance with law Australia tax department is entitled to charge tax on rental
income of Jez.

Rent income /
expenses
Assessable /
(deductible)
or not?
Label Amoun
tassessable /
(deductible)
Reasons and evidence
Building inspection
$350
Deductable Inspection expenditure is also directly related to the rental property from which income
is received by Jez. Due to this reason Jez is entitled to receive tax deduction on
inspection expenses.
Council rates
$1,680
Deductable Council rates refers to the payment that will be made by the Jez to the relevant council.
Because council rate is linked to the rented property mentioned person is entitled to
receive deduction in income tax.
Pest related expenditure is made by the Jez in respect to rented property. Just because
pest control is related to rented property mentioned person is entitled to receive
deduction in payment of tax.
Fee that is paid to the property manager is deductible as per Australia income tax rules
and regulations. This is because fee is paid to the property manager in respect to the
rented property. Thus, Jez is entitled to receive deduction in income tax.
Pest control $200 Deductable
Insurance $1,420 Deductable
Property manager
fees $4,460
Deductable
Interest $10,000 Deductable Interest expenses are also deductible because same are linked to the rented property.
Hence, on this ground Jez will receive deduction in income tax.
Label P (Gross rent) $ x 18700
Label Q (Interest deductions) $ x 10000
Label F (Capital works deductions) $ x 0

Label U (Other rental deductions) $ x 24870
Net rental property profit / (loss) $ x (16170)
Item D1 – Work-related Car Expenses
Travel Distance Deductible Business
kilometres
Reasons and evidence
Home to workplace to home 552 Deductible 552 Deductible because car is driven for business purpose.
Workplace to Teneriffe
campus and to home
89 Deductible 89 Same as above.
Non work-related travel 454 Non
deductible
Not deductible because car is used for personal use.
(Logbook) TOTAL BUSINESS KMS 641
Note:IF APPLICABLE, consider all eligible methods in the table below and choose the one that gives the best result.

Item Deductibl
e or not?
Amount
deductibl
e
Reasons and evidence
Work related
travel / car
expenses
Deductible 423 Business kilometres are multiplied by 66 cents and then divided by 100 to compute deduction
amount.
Work-related car expenses
deductible
$ x Claim type: Cents per kilometre

Item D2 – Work-related Travel Expenses
Expenses Deductible
or not?
Amount
deductible
Reasons and evidence (including references to relevant tax ruling/s)
Flights to Adelaide for
conference $590
Not
deductible
D2 section of ATO is highly related to the work related travel expenses. In accordance
with such aspect work related expenses which are incurred by an employer comes under
the category of deductible income. In this regard, expenses related to air travel, taxi fares,
meal, accommodation, incidental expenses comes under the category of deductions.
However, in this regard, employee needs to satisfy the condition the condition that they
are still on duty. Moreover, in the present case, school did not require that teachers attend
the session. Hence such travelling expenses are not related to the part of duty. In this, Jez
attended session with two of his colleagues but it is not considered as they were on duty.
Hence, by taking into consideration such aspect it can be said that all such expenses are
not tax deductible in accordance with ATO D2.
Accommodation at
hotel $175
Not
deductible
Meals and sustenance
$134
Not
deductible
Taxi travel to and from
the airports $244
Not
deductible
Given case presents that school has reimbursed the amount of taxi travel such as $244.
Thus, such part is not considered as an expense because school was repaid the amount of
taxi to Jez. In this way, such allowance is recognized as income or part of the salary.
Thus, such taxi expenses are the part of assessable income. Thus, Jez does not have right
to get deduction in relation to such aspect.
Work-related travel expenses $NIl

deductible
Item D3 – Work-related uniform, occupation specific or protective clothing, laundry and dry cleaning expenses
Expenses Deductible
or not?
Amount
deductible
Reasons and evidence (including references to relevant tax ruling/s)
Ties $150 No
deductions
- According to D3 of ATO, individuals can claim for deduction of money which they have
incurred for the buying and cleaning of occupation related clothes. In the present times,
with the aim to provide personnel with identify of office employees companies place
emphasis on using specific uniform. In this, individual can claim for cost of clothes which
are not used for everyday. Further, protective clothes and shoes which are used or
purchased by firm to prevent injury come under the category of deduction. However,
individual cannot claim for the cost of purchasing plain uniforms such as trousers, white
shirts, suits etc. In the cited case, Jez has incurred $150 for purchasing the tie which was
purchased specifically for teaching. However, according to ATO individual does not have
right to demand for deduction in relation to the purchasing shirt, trouser and tie. Thus,
there is no deduction is available to Jez in relation to such aspect.
Work-related uniform
etc.expenses deductible
$Nil Claim type:

Item D5 – Other Work-related Expenses
Expenses Deductible
or not?
Amount
deductible
Reasons and evidence (including references to relevant tax ruling/s)
Union fees $1,320 Deductible $1320 In accordance with the ATO principles & deduction rule D5, individual can claim for the
tax deduction for the expenditures incurred regarding buying, cleaning dress, distinct
uniform & others by giving ATO proper records and written evidences for verifying the
cost accurately, thus, it is fully deductible (Kimmorley, 2016).
Teachers Association
membership $420
Deductible $420 Attending any formal course or professional association can be claimed by taxpayer.
Referring the case, Jez has attended a annual membership of Queensland and paid $420,
hence will be deductible.
Annual subscription to
Weekend Australian $156
Deductible $156 Subscription made can be claimed and ATO provide full deduction on the same.
Home office expense Not
deductible
$6000
$1400
deductible
In accordance with PS LA 2001/6, it has been mentioned that being an assesse, Jez
cannot claim for any rent, rates, interest on loan mortgage & insurances. Therefore, in
the cited case situation, interest on mortgage loan worth $3000, council rates of $1500,
water rates of $800 & Home insurance of $700 will not be deducted. On the contrary to
this, as per D5, fixed rate of deduction @ 45 cents each hour is available to Jez. Looking
to the case, Jez has paid 15 cents per unit at a production of 3 units each hour, thus,
average electricity has been paid at a rate of $15*3 = $45 per hour, in total, he has paid
$1400, which can be claimed.

Expenses Deductible
or not?
Amount
deductible
Reasons and evidence (including references to relevant tax ruling/s)
Conference fee $750 Deductible $750 Following the provisions of deduction – 5 under ATO’s tax guidelines, full amount of
conference fees worth $750 can be claimed by Jez to get deduction.
Stationery $55 Not
deductible
- Jez has to maintain records for even small amount of stationery expenditures to provide
evidences in written to the ATO, totalling must not exceed 200AUD. However, in the
situated case, although every time, Jez made less than $10 AUD expenditures, still, as he
misplaced the records, therefore, all the amount will be taxed without any deduction.
Total deduction $ x

Item D9 – Gifts or Donations
Gifts or
donations
Deductible
or not?
Amount
deductibl
e
Reasons and evidence (including references to relevant tax ruling/s)
Wynnum Hospital
$300
Yes $300 According to D9 of ATO for getting tax deductions individual needs to satisfy the
following conditions:
 Gift or donation must be a money or property.
 Amount of contribution must be more than $2.
 In case of gift or donation parties which are related to it must satisfy the condition that
they will not receive any material gain or benefit from it.
 Along with this, individual can also claim for deduction when contribute made by him to
a registered political party.
 Further, money which is provided to an independent candidate in an election also
comes under the category of tax deduction.
However, there are some other conditions which do not allow business entities to get
deduction in taxable amount or income includes following:
 If employees make sacrifice of salary then it does comes under the category of tax

deductions.
 Besides this, individuals cannot claim for tax deduction if they receive something from
raffle tickets or dinner.
In the given case situation, Jez can demand for tax deductions in relation to the amount
which is donated by his to Wynnum hospital and political parties. According to the rules and
regulations of ATO cash donation to Wynnum hospital ($300) and amount which is given to the
political parties ($10000) come under the category of tax deduction.
Mercy Aged Care
Institute$500
No - Income tax rules also imply that prize won through the means of raffle does not come under the
tax deduction criteria.
Political donation
of $10,000
Yes $10000 Rules of ATO entail that Jez is eligible for demanding deduction in relation to the tax amount.
Moreover amount which is offered by individual to political party come under the criteria of tax
deduction.
Volunteer Work
for Liberal
Party$120
No - The given case situation presents that Jez spent 8 hours for political work and thereby sacrifices
salary worth of $120. Hence, according to income tax rules such aspect is not allowed for
deduction.
Total deduction $10300

Item D10 – Cost of Managing Tax Affairs
Managing tax
affairs
Deductible
or not?
Amount
deductible
Reasons and evidence
Invoice for cost of
preparing tax
return $220
Not
Deductible
- D10 of ATO furnishes information about the extent to which individual will enjoy tax
deductions in relation to expense incurred for managing the cost affairs. In accordance with
such aspect, fees which is paid by an individual to the income tax advisor is tax deductible in
the period when it incurs. On the basis of given case situation, Jez has used advisory services
from his uncle for filling the tax return of 2014-15. Hence, such amount was paid by Jez to tax
advisor on 25 July 2015. However, rules entail that tax adviser must be a registered agent,
lawyer or solicitor. In accordance with such aspect, individual cannot demand for tax
deduction if adviser is not registered person. In the given case, agent from Jez had taken
advisory services from his uncle who was not a registered agent. Thus, such amount does not
come under the category of tax deduction.
General Interest
Charge $146
deductible $146 Australian government has imposed penalty in front of Jez such as $146 in the form of general
interest charges due to late payment of income tax liability. D10 of income tax entails that
individual can demand for tax deduction when penalties are imposed by government due to
late payment. Further, it also entails that interest expense is deductive in the years of
incurrence. Thus, by keeping in mind all such aspects it can be said that Jez will enjoy the tax
deduction of $146 which is paid by him to the government in the year of 2015-16.

Total deduction $146

Item M1 – Medicare Levy Reduction or Exemption
Reasons and evidence
ATO entails that government charges or levies 2% from Australian residents of their taxable income in relation to Medicare aspect. In this
regard, there is a condition that such residents do not fall under the category of tax deductions. On the other side, if individuals are not the resident of
Australia then they enjoy the benefits of tax exemption. In this, Medicare levy reduction is highly based on the taxable income of an individual.
Medicare levy threshold Lower Threshold Upper Threshold
Eligibility for senior and pensioners
tax offset
$33044 $41305
Other taxpayers $20896 $26120
Item M2 – Medicare Levy Surcharge (MLS)
Reasons and evidence (including calculations)
ATO presents that; medical levy surcharge is levied on Australian taxpayers who do not have private insurance. It is highly applied on
individuals whose income level is above the specific criteria. Such surcharge is introduced by Australian government to take out individuals from
private hospital cover. Australian government has also setting down the limit of income threshold who are not liable to pay medical levy surcharge is
as follows:

Particulars Income Threshold
For Singles $90000
For Families $180000

Item IT1 to IT8 Income Tests
Reasons and evidence
IT1 Total reportable fringe benefits amounts 2016
IT2 Reportable employer superannuation contributions 2016
IT3 Tax-free government pensions or benefits 2016
IT4 Target foreign income 2016
IT5 Net financial investment loss 2016
IT6 Net rental property loss 2016
IT7 Child support you paid 2016
IT8 Number of dependent children 2016

Calculation of tax payable for 2015/16
Assessable income
Item 1– Salary and Wages $ 109538
Item 2 – Allowances, etc. $5050
Item 10—Interest $ Nil
Item 11—Dividends (inc franking cr) $ 857
Item 18 – Capital Gains $ Nil
Item 24 – Other income $
$115445
Less Allowable deductions
Item 21 – Rent $(16170)
Item D1 – Work Related Car Expenses $423
Item D2 – Work Related Travel Expenses $Nil
Item D5 – Other Work Related Expenses $4046
Item D9 – Gifts or Donations $10300
Item D10 – Cost of Managing Tax Affairs $ 146
$14915
Taxable income $100530
Basic Income Tax Liability(etc.)