Calculation of Income Tax Payable and Levies in Australia

TAXATION
Taxation Law Application
Student’s Name
Institutional Affiliation

TAXATION
2
Question 1;
Australian Tax Office calculation of income tax payable depends with tax residency of the
individual or company in question hence different tax rates apply on residency and non-
residency status of the taxpayer. Ignoring medical levy and medical levy surcharge the below are
the calculation illustration of the income tax payable using tax bracket 2017-2018;
(a) An Australian tax resident earning taxable income of $15000 is ideally exempted from
paying any tax on this mainly because the Australian Tax Office on individual income rates
classifies $15000 as to be between brackets $0-$18200 whose fee payable is nil.
Tax payable = NIL
(b) Australian Tax Office on company tax rates applies the ruling done on Draft Taxation Rule
TR 2017/D7 whereby it defines that income with a base threshold of less than $2million applies
company tax rate of 27.5% on its income as tax payable hence;
Tax payable=$ 15000 * 0.275 = $4125
(c) A tax resident earning $155000 falls under tax bracket $87,001 – $180,000 whose tax is
$19822 plus 37cents for each $1 over $87000, therefore
=Over amount= 155000 – 87000 = $68000 tax payable on this = 68000 * 0.37 = 25160 hence
Total Tax Payable = $19822 + $25160 = $44982
(d) A company with $ 155000 income still forms part of the base rate 27.5% mainly because
the turnover income is still below the threshold of $2milliom for small companies and
$10million for large companies thus;
Taxable Income = $ 155000 * 27.5%= $42625

TAXATION
3
(e) A resident earning $255000 is taxed under bracket $180001 and over hence applying 54232
as tax with addition of 45cents on any amount above 180000
Over 180000 = 255000 – 180000 = 75000, hence=75000 * 0.45=$33750
Total Tax Payable = 54232 + 33750 =$87982
(f) A non-resident with a taxable income of $ 255000 applies bracket $180001 and over hence
paying tax of $62685 plus 45cents on every dollar above $180000.
Over=255000 – 180000 = $75000 hence =75000*0.45=$33750 therefore,
Total Tax Payable= 33750 + 62685= $96435
(g) Australian Tax Office on working holiday makers classifies all working holiday visa
income as income earned by a foreign resident citizen for tax purpose. This therefore calculates
tax payable similarly to that of (f) hence; bracket is $180001 and over thus
Over=255000 – 180000 = $75000 hence =75000*0.45=$33750, Saez, Slemrod & Giertz
(2012.Pg.40,) therefore,
=Total Tax Payable = 33750 + 62685= $96435
Question 2;
(a) An Australian resident earning taxable income of $18000 is exempted from contributing
both medical the envy and medical levy surcharge primarily because his salary is below the
90000 thresholds for MLS and below the taxable income threshold for medical levy hence zero
medical levy and medical levy surcharge for this individual earning $18000.
(b) Since the $32000 payable amount is still below the minimum threshold of 34758 for
medical levy Baicker & Levy (2012.Pg.1774) and below 90000 for medical levy surcharge both
levies are therefore deemed to be at zero value.