Calculation of Total Assessable Income, Taxable Income, Tax Liability, Student loan (HECS), Medicare Levy, and Medicare Levy Surcharge

TAXATION THEORY,
PRACTICE & LAW

Question: 1
Calculation of Total Assessable Income, Taxable Income, Tax Liability, Student loan
(HECS), Medicare Levy, and Medicare Levy Surcharge
Particulars Amount
Taxable salary 90000
Super Annuation Guarantee Charge 0
Passive income from investment 10000
Total assessable income 100000
Less: Deductions 0
Taxable income 100000
Income Tax Payable 22967
Medicare levy @ 2% 2000
Medicare levy surcharge @ 1.5% 1500
Working Note: 1
Calculation of income tax payable
Up to 18200 = NIL
18201 – 45000 = 5092 (45000 – 18200 = 26800 * 19%)
45000 – 10000 = 17875 (100000 – 45000 = 55000 * 32.5%)
Total income tax payable = 22967.
In the above illustration, it has been seen that the total assessable income comes out to be 100000
which comprises of both salary received by the individual resident of Australia (Susanne) and
income earned from investment made in the share for the same year of which assessments are
being done (Murphy, 2019). The total assessable income and taxable income both are equal in
the above case of Susanne as there is no deduction available to her that can make difference
between assessable and taxable income because student loan taken for her previous studies are
not an allowable deductions under the regime of Australian Taxation Office. Income tax payable
has been calculated by applying different rates applicable on an individual residents of Australia
accordingly to the slabs provided by ATO (Wu, 2020). In the given tax there are two different
has been applied to arrive at a value of tax liability that is, 19% and 32.5% for income up to
45000 and 100000 respectively. In order to generate funds for Australian health system, there is
an additional tax levy known as Medicare levy @ 2% applied on each tax return filed during the
year on the taxable income of the taxpayer and Medicare levy surcharge @1.5% has been
applied on taxable income of those taxpayers who are not covered by any of the private health
insurance.