Tax Calculation and Refund Example

This assignment presents two scenarios demonstrating Australian income tax calculation. The first scenario involves an individual receiving salary and PAYG tax deductions, highlighting the process of determining taxable income, applying tax brackets, and calculating the final tax liability or refund. The second scenario focuses on a taxpayer with both salary and dividend income, illustrating the impact of franking credits on tax calculations. Both examples provide detailed breakdowns of each step involved in the tax calculation process.

Assessment of Taxation of Law

TABLE OF CONTENTS
Question 1..................................................................................................................................3
Question 2..................................................................................................................................4
Rob’s Taxable Income in accordance with Sec 4-15 of ITAA 1997.....................................4
Question 3..................................................................................................................................5
References..................................................................................................................................7

Question 1
Calculation of Medicare Levy and Medicare levy surcharge payable for the year ended on
30th June 2016:
(a) As lower threshold income limit for the year ending on 30th June 2016 is $21335 for
Medicare levy and for Medicare levy surcharge it is $90000 ; no Medicare levy and
Medicare levy surcharge would be payable in the present case.
(b) In case the individual is liable for senior tax offset no Medicare levy is payable to the
extent of $33738 income, thus in present scenario no Medicare levy will be paid. As
the income is below the lower threshold of Medicare levy surcharge; no Medicare
levy surcharge will be paid as well (Sammut, 2017).
(c) In present case, as the assets are having income above higher threshold limit i.e.
$42172, Medicare levy payable will be as follows
$42172*2%
=$ 843.44
(d) No Medicare levy is chargeable in case the taxpayer is not resident for tax purposes as
the same is exempt from Medicare levy.
(e) No Medicare levy and Medicare levy surcharge are levied on a company.
(f) As the income is above the upper specified threshold for medical levy; the payable
amount relating to Medicare levy will be ($110000*2%) $2200. The same would be
eligible for exemption relating to Medicare Levy Surcharge as he has held private
hospital cover for the whole year.
(g) Medicare liability will be same as above, i.e. $2200. The medical levy surcharge will
be payable @ of 1.25 %as the income comes is Tier 2, i.e. ($105001-140000). Thus
Medicare levy surcharge will be (110000*1.25%) $1375. $1375 but he will be not
eligible for the rebate.
(h) Medicare levy will be paid @2% i.e. $150000 *2% =$3000. Further, Medicare levy
surcharge will be payable for 365-90 days, i.e. the period for which no private health
insurance has been held.
(i) As the income is above basic threshold limit of family taxable limit for Medicare
levy, i.e. $45001: thus the payable Medicare levy will be payable on total income, i.e.
($110000+$75000) @2% (Johnson, 2017). It will be equal to $3700. Medicare levy
surcharge will be paid @1% as the total income of $185000 comes under the

threshold of 1% i.e. $180000-$210000. Thus, Medicare levy surcharge payable will
be $1850.
(j) The family minimum Medicare Levy Surcharge threshold limit for the year ended on
30th June 2016 is $180000.
Question 2
Rob’s Taxable Income in accordance with Sec 4-15 of ITAA 1997
Particular Amount
Salary $32000
Bank Interest Received $150
Total $32150
Deductions
Expenses relating to special work clothing $450
Exempt Income (Bank interest is assumed to be relating to saving
bank account. Thus the same is exempt under sect 80 TTA)
$150
Total Assessable Income $600
Taxable Income $31550
Personal Allowance $10600
Net Taxable Income $20950
Note: Assumption has been made that salary of $32000 is before reducing the amount as
PAYG tax.
(i) Calculation of tax Liability as per ITRA 1986
Tax on income other than amount received as gift
Tax Payable
0-18200 0 0
20950-18200 Nil + 19% of excess over $ 2750 522.5
Total Tax 522.5
(ii) Calculation of Medicare Levy

In present case taxable income is more than the lower threshold limit for levying Medicare
levy, i.e. $21335. Thus the Medicare payable will be ($31550*2%) $631.00
(iii) Tax offset or tax credit:
Rob will be qualified for tax offset of $2600, i.e. the amount which has been deducted by
the employer as PAYG tax from his salary.
(iv) Calculation of Income tax payable or refundable:
Particular Amount of $
Income Tax 522.5
Medicare Levy 631.00
Total tax liability 1135.5
Tax offset 2600
Tax Refund 1464.5
Question 3
Particular Amount
Salary $68000
Dividend (note 1) $3900
Total $71900
Deductions 0.00
Taxable Income $71900
Personal Allowance (Note: In present case as the income is less than
122,000 ; thus personal allowance will be provided)
$10600
Net Taxable Income $61300
Calculation of Tax:
Tax (Income excluding dividend income) Amount of $
First 18200 0
18201-37000 3572.00
57400-37000 *32.5% 6630

Total 10202
Tax on dividend income 3900*10% 390
Medicare Levy (71900*2%) 1438
Total 12030
Tax Credit (2000/130*30 + (900/130*30*50%) -565.34
Net Tax Payable 11464.66
Note: 1
Dividend Income Amount in $
Fully franked dividend income (inclusive of franking credit) 2000
Unfranked Dividend Income 1000
Dividend franked to the extent of 60% (inclusive of franking credit) 900
Total 3900
Tax Credit (2000/130*30 + (900/130*30*50%) 461.5 +103.84
565.34
Note: An assumption has been made that 30% tax has been deducted by the company on
franked dividend and the amount of dividend includes credit amount.

References
Books and journals
Johnson, C. (2017). Government had to reassure Australians about Medicare. Australian
Medicine, 29(10), 17.
Sammut, J. (2017). The real medicare levy. Policy: A Journal of Public Policy and
Ideas, 33(2), 8.