Acc306: Australian Taxation Report: Income Tax, Medicare Levy Analysis

This report, prepared for Acc306, provides a comprehensive analysis of the Australian taxation system. It delves into the calculation of income tax for Australian residents, non-residents, and companies, considering different income levels and tax slabs. The report meticulously calculates tax payable, taking into account the Medicare levy and various scenarios, including those with and without private health insurance. It also examines specific cases, such as calculating income tax refunds and payments for individuals and couples. Furthermore, the report includes a discounted cash flow valuation for General Mills, Inc. The report utilizes working notes to illustrate the calculations and applies relevant tax rates and regulations to determine taxable income and tax liabilities. Overall, the report serves as a practical guide to understanding the complexities of Australian income tax and its impact on different entities and individuals.

Acc306

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
QUESTION 1...................................................................................................................................1
Determining the tax payable as per ignoring the Medicare levy................................................1
QUESTION 2...................................................................................................................................4
Determining the taxable income of all the tax payers by implementing the Medicare levy.......4
QUESTION 3...................................................................................................................................8
Measuring the income tax payable or refundable of Rob...........................................................8
QUESTION 4...................................................................................................................................9
Calculating the taxable income and tax payable of Rafael.........................................................9
1. Calculate free cash flow using Method 2..............................................................................10
2.................................................................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
The taxation environment in Australia is executed and operated by Australian Taxation
Office (ATO) which contains all the legislations, tax rulings, cases as well as acts. Thus, the
main source of government revenue is generated through tax collection from individual,
corporations and he exports import duties. In the present report there will be measurements based
on taxation treatment of the income generated by residents, non-resident and organisations.
There will be information which are relevant with the application of Medicare levy over such
individuals.
QUESTION 1
Determining the tax payable as per ignoring the Medicare levy
Particulars Amount Tax rate Tax payable
Australian resident 18000 Nil 0
Australian Non resident 18000 32.50% 5850
Australian Company 18000 27.50% 4950
Australian resident (i) 145000 37%+ 19822 41282
Australian Non resident (ii) 145000 37%[phone]
Australian Company 145000 41.25% 59812.5
Australian resident (iii) 265000 45%[phone]
Australian Non resident (iv) 265000 45%[phone]
Australian Company 265000 27.50% 72875
Australian company 19800 27.50% 5445
A. Australian resident:
There will be no tax legislation over the Australian resident as per the income generated
by them is below the taxable slab of 18200. So there will be not taxable rate levied over the
income and no tax will be payable (Gans, 2016).
B. Non- resident of Australia:
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There will be tax charges over the on-resident for the same income as 18000. The tax will
be levied at the rate of 32.5% which is amounted to 5850. Therefore, this individual has to make
payment of 5850 as income tax (Howard, Gordon and Jones, 2014).
C. Australian based company:
In accordance with this corporation which has the base in Australia than there has been
tax charge over the income of 18000 at the rate of 27.5%. This is the basic rate which will be
charges over the organisation who are earning under the taxable slab of below 50000. Therefore,
here firm has to pay income tax of 4650.
D. Australian resident
Here the resident has income for the year as 145000 which comes under the taxable slab
of 87001 to 180000. Thus, here the rate will be charged over the difference between his income
and to 87000 of the minimum limit as 37% with the surplus amount of 19822. Therefore, the
income tax will be payable by him as 41282 as reflected in the below listed workings:
1. Australian Resident income tax payable working note
Working Amount
Australian residents 145000
tax slab 87001-180000
145000-87000
58000
tax rate 37.00%
21460
surplus 19822
total tax payable 41282
E. Non resident in Australia:
In accordance with the taxation charged over the non resident Australian over the income
of 145000 which comes under the taxable slab of 87001-180000, has the same rate of tax as 37%
but the surplus amount is 28275. Therefore, he has to make payments for the taxes as 49735 as
shown in the below listed working (Martin, 2018).
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2. Australian non resident income tax payable working note
workings Amount
Australian Non resident 145000
tax slab 87001-180000
145000-87000
58000
tax rate 37.00%
surplus 28275
total tax payable 49735
F. Australian based Company
In accordance with this case here the income generated by firm as 1450000 which comes
under the slab of medium credit units as 50000 to 149999 with the taxable rate of 41.25%.
Therefore, here the entity has to make payment of 59812.5.
G. Australian resident:
The tax will be charge over the income generated by the resident for 265000 which come
under taxable slab of 180001 and over. Thus, the taxable rate for such income category is 45%
and the surplus amount will be charge over it as 54232 which brings the income tax payable as
92482. It can be seen in the below listed workings (Lang, 2014).
3. Australian resident income tax payable working note
Working Amount
Australian residents 265000
tax slab 180001 and over
265000-180000
85000
tax rate 45.00%
38250
surplus 54232
total tax payable 92482
3

H. Non resident Australian
In accordance with the income generated by the individual as amounted to 265000 which
come under table slab 180001 and over with the rate of 45% and the surplus amount of 62685.
Therefore, he has to make payment of 100935 as the income tax which is reflected in the below
listed workings. However, it can be seen in the below listed workings (Saad, 2014).
4. Australian non resident income tax payable working note
workings Amount
Australian Non resident 265000
tax slab 180001 and over
265000-180000
85000
tax rate 45.00%
surplus 62685
total tax payable 100935
I. Australian company
As per the income generated by the organisation such as 265000 has the taxable rate
levied over the revenue as 27.50% which will be amounted to 72875. Therefore, such treatment
are to be facilitated to as per the organisation is of Australian base (Hudson and Vespignani,
2018).
J. Australian Company:
In accordance with the taxation treatment and the revenue generated by the organisation
is for 1.3m. Thus, in accordance with taxation slab the firm who have less than 25 million of
revenue has the charge of 27.50%. Therefore, here in this case the taxes are to be paid by the
firm over the taxable income of 19800 as 5445.
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QUESTION 2
Determining the taxable income of all the tax payers by implementing the Medicare levy
There has been various measurements which are belongs to analysing the income tax
payable by various individuals which considering the Medicare Levy surcharge (Snape and De
Souza, 2016). Therefore, the analysis can be belongs to the various level of income and the tax
slab, norm and conditions facilitated by ATO. However, such measurements are listed below:
A. Australian resident:
Particulars Amount
Australian resident 21335
Tax slab 18201-37000
21335-18200 19515
Tax rate 19.00% 3707.85
taxable income 3707.85
Medicare Levy 0.00% Nil 0
Income tax 3707.85
In accordance the estimating the income tax payable by the tax payer, as per the norms
set by ATO which says that the person who is earning below the tax slab of 90000 will not have
any surcharge over his taxable income such as there will be 0% of Medicare Levy
(Gnanamanickam and et.al., 2018).
B. Australian resident eligible for a senior tax offset
Particulars Amount
Australian resident 31738
senior tax offset 3861
C. Australian resident with age 45 years
Particulars Amount
Income 55000
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Tax slab 37001-87000
55000-37000 18000
Tax rate 32.50% 5850
Surplus 3572
taxable income 9422
Medicare Levy 0.00% Nil 0
Income tax payable 9422
D. Non resident for tax purpose but has taxable income
Particulars Rates Amount
Income 185000
Tax slab 180001 and over
185000-180000 5000
Tax rate 45.00% 2250
Surplus 62685
taxable income 64935
In accordance with the legislative authority of ATO which says that if a person is non
residents in Australia then there will be no Medicare Levy Surcharge of his income (England,
2016). Therefore, as per the above measurement there is only estimation over the income tax
generated by the firm while any further adjustments belongs to Medicare levy.
E. Australian company:
Particulars Rates Amount
Income 2000000
Tax slab 150000 and over
2000000-150000
1850000
Tax rate 27.50%
Income tax payable 508750
6

F. Australian resident with private health insurance
Particulars Rates Amount
Income 123800
Tax slab 87001-180000
123800-87000 36800
Tax rate 37.00% 13616
Surplus 19822
taxable income 33438
Medicare Levy (Health insurance) 2.00% Nil
Income tax payable 33438
In accordance with the above listed measurements it can be said that, this Australian
resident has acquired a Health insurance cover form a private hospital than there is not
legislation of Medicare Levy over it (Lai and et.al., 2018).
G. Australian resident with no privet health insurance
Particulars rates Amount
Income 120000
Tax slab 87001-180000
120000-87000 33000
Tax rate 37.00% 12210
Surplus 19822
taxable income 32032
Add: Medicare Levy 1.25%
120000*1.25
% 1500
Income tax payable 33532
H. Australia resident with holding health insurance of 90 days
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Particulars Rates Amount
Income 160000
Tax slab 87001-180000
160000-87000 73000
Tax rate 37.00% 27010
Surplus 19822
taxable income 46832
Medicare Levy 1.50% 2805
Income tax payable 49637
I. Australian resident Victor and his wife with no health insurance
Particulars Rates Victor Rates Wife
Income 105000 85000
Tax slab
87001-
180000 37001-87000
105000-
87000 18000 85000-37000 48000
Tax rate 37.00% 6660 32.50% 15600
Surplus 19822 3572
taxable income 26482 19172
Medicare Levy 1.25%
105000
*1.25% 1312.5 0.00% nil 1700
Income tax payable 27794.5 20872
J. Australian couple having 4 children
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Illustration 1: Medicare Levy Surcharge Threshold slabs
(Source: Medicare levy, 2017)
QUESTION 3
Measuring the income tax payable or refundable of Rob
Particulars Rates Amount
Salary 32000
Bank Interest received 150
Total income 32150
Allowable deduction
Special work clothing -450
Total taxable income 31700
Tax slab 18201-37000
31700-18200 13500
tax rate 32.50% 4387.5
Surplus 3572
Taxable payment 7959.5
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Less: Already paid PYAG 2600
5359.5
Medicare Levy 2.00% 31700*2% 634
Total income tax payable 5993.5
QUESTION 4
Calculating the taxable income and tax payable of Rafael
Particulars Rates Amount
Salary 68000
Fully Franked dividends 2000
Unranked dividends 1000 3000
60% of frank dividend 900
franked credit 1350 1350
Taxable income 72350
Tax slab 37001-87000
72350-37000 35350
tax rate 32.50% 11488.75
Surplus 3572
Tax payable 15060.75
Less: Already paid PYAG 15100
-39.25
Add: Medicare Levy 2.00% 1447
Total income tax payable 1407.75
Chapter 4: A Discounted Cash Flow Valuation: General Mills, Inc. (10 marks)
First scenario
Year 2010 2011 2012 2013 2014
Net cash flow from operations 2107 2107 2107 2107 2107
Discounting factor @ 10% 0.911 0.830 0.756 0.688 0.627
PV of cash flows 1,919 1,748 1,592 1,450 1,321
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Terminal Value
Sum of PV of FCF for explicit forecast 8,030
WACC 9.79%
Long term growth in Revenues 0%
Present Value of terminal value 8,458
Terminal Value as % of Total Value 51%
Equity Value
Enterprise Value 16,488
Second scenario: when cash flow from operation will increase by 3%
Year 2010 2011 2012 2013 2014
Net cash flow from operations 2170 2235 2302 2371 2443
Discounting factor @ 10% 0.911 0.830 0.756 0.688 0.627
PV of cash flows 1,977 1,854 1,740 1,632 1,531
Terminal Value
Sum of PV of FCF for explicit forecast 8,734
WACC 9.79%
Long term growth in Revenues 0%
Present Value of terminal value 9,805
Terminal Value as % of Total Value 53%
Equity Value
Enterprise Value 18,539
Chapter 11: Free Cash Flow for Kimberly-Clark Corporation (10 marks)
1. Calculate free cash flow using Method 2.
Method 2
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FCFF = Cash flow from Operations – Net Investment in Long Term Assets + Interest Expense
(1-Tax Rate)
FCFF = 2429 – 842 + 142.4 (1- .37)
= 1676.71 million
2.
When net interest payment is considered as non-operating expense
Free cash flow: Cash flow from operating activities – capital expenses
= $1539.99 - ($898 - $56)
= $697.99 million
Net cash flow from operations after tax: 2429 – (2429 * 36.6%)
= $1539.99
Or
When net interest payment is considered as operating expense
FCF: ($2429 - $142.4) - ($898 - $56)
= $1449.70 - $842
= $607.70 million
Net cash flow from operations after tax: 2286.6 – (2429 * 36.6%)
= $1449.70 million
CONCLUSION
On the basis of above study it can be said that there has been various measurements
which are belongs to the income tax payable by various individuals and corporation in Australia.
However, with the consideration of all the norms, acts and laws which helps in making the
adequate income tax operations.
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