TAX TAX 1 Finance Assignment - Income Tax and Medicare Levy Analysis

This document presents a comprehensive solution to a TAX assignment, focusing on income tax and Medicare Levy calculations. It begins with calculating income tax payable for various scenarios, including resident and non-resident individuals, and Australian companies, across different income brackets. The assignment then delves into Medicare Levy and Medicare Levy Surcharge calculations, considering different income levels and family thresholds, along with the applicability of the surcharge. The solution also includes examples of income tax payable or refundable, considering salary, bank interest, and allowable deductions. Finally, it addresses the calculation of income tax, incorporating franked and unfranked dividends, and franking credits. The document provides a detailed breakdown of each calculation, offering a practical understanding of Australian tax principles.

Running head: TAX
Tax
Name of the Student:
Name of the university:
Authors Note:

1TAX
Table of Contents
Answer to Question 1......................................................................................................................2
Answer to Question 2......................................................................................................................5
Answer to Question 3......................................................................................................................9
Answer to Question 4......................................................................................................................9
Bibliography..................................................................................................................................11

2TAX
Answer to Question 1
a)
Calculation of the Income Tax Payable for resident Individual
for the year ended 30 June
Particulars Amount
Taxable Income $18,000.00
Tax on Taxable Income
for first $18200 Nil
Income Tax Payable Nil
b)
Calculation of the Income Tax Payable for nonresident Individual
for the year ended 30 June
Particulars Amount
Taxable Income $18,000.00
Tax on Taxable Income
for first $87000 (32.5%) $5,850.00
Income Tax Payable $5,850.00
c)
Calculation of the Income Tax Payable for Australian Company
for the year ended 30 June
Particulars Amount
Taxable Income $18,000.00
Tax on Taxable Income
Tax rate @30% $5,400.00

3TAX
Income Tax Payable $5,400.00
d)
Calculation of the Income Tax Payable for resident Individual
for the year ended 30 June
Particulars Amount
Taxable Income $145,000.00
Tax on Taxable Income
From $87001 to $180000 @37% $41,282.00
Income Tax Payable $41,282.00
e)
Calculation of the Income Tax Payable for nonresident Individual
for the year ended 30 June
Particulars Amount
Taxable Income $145,000.00
Tax on Taxable Income
28275+ (145000-87000)*37% $49,735.00
Income Tax Payable $49,735.00
f)
Calculation of the Income Tax Payable for Australian Company
for the year ended 30 June
Particulars Amount
Taxable Income $145,000.00
Tax on Taxable Income

4TAX
145000*30% $43,500.00
Income Tax Payable $43,500.00
g)
Calculation of the Income Tax Payable for resident Individual
for the year ended 30 June
Particulars Amount
Taxable Income $265,000.00
Tax on Taxable Income
62685+(265000-180000)*45% $100,935.00
Income Tax Payable $100,935.00
h)
Calculation of the Income Tax Payable for nonresident Individual
for the year ended 30 June
Particulars Amount
Taxable Income $265,000.00
Tax on Taxable Income
62685+(265000-180000)*45% $100,935.00
Income Tax Payable $100,935.00
i)
Calculation of the Income Tax Payable for Australian Company
for the year ended 30 June
Particulars Amount
Taxable Income $265,000.00

5TAX
Tax on Taxable Income
265000*30% $79,500.00
Income Tax Payable $79,500.00
j)
Calculation of the Income Tax Payable for Australian Company
for the year ended 30 June
Particulars Amount
Taxable Income $198,000.00
Tax on Taxable Income
265000*27.5% $54,450.00
Income Tax Payable $54,450.00
Answer to Question 2
a)
Calculation of Medicare Levy and Medicare Levy Surcharge
for the year ended 30 June 2017
Particulars Amount
Taxable Income $21,335.00
Medicare Levy @2% $426.70
Medicare Levy Surcharge @ 0% Nil
b)
Calculation of Medicare Levy and Medicare Levy Surcharge
for the year ended 30 June 2017

6TAX
Particulars Amount
Taxable Income $31,738.00
Medicare Levy @2% $634.76
Medicare Levy Surcharge @ 0% Nil
C)
Calculation of Medicare Levy and Medicare Levy Surcharge
for the year ended 30 June 2017
Particulars Amount
Taxable Income $55,000.00
Medicare Levy @2% $1,100.00
Medicare Levy Surcharge @ 0% Nil
d)
Calculation of Medicare Levy and Medicare Levy Surcharge
for the year ended 30 June 2017
Particulars Amount
Taxable Income $185,000.00
Medicare Levy @2% $3,700.00
Medicare Levy Surcharge @ 0% Nil
The Medicare levy Surcharge is only applicable to the Australian resident.
e)

7TAX
The Medicare Levy and Medicare Levy surcharge is not applicable to companies.
f)
Calculation of Medicare Levy and Medicare Levy Surcharge
for the year ended 30 June 2017
Particulars Amount
Taxable Income $123,800.00
Medicare Levy @2% $2,476.00
Medicare Levy Surcharge @ 0% Nil
The Medicare Levy Surcharge is not applicable for individual that have private health
insurance cover.
g)
Calculation of Medicare Levy and Medicare Levy Surcharge
for the year ended 30 June 2017
Particulars Amount
Taxable Income $120,000.00
Medicare Levy @2% $2,400.00
Medicare Levy Surcharge @ 1.25% $1,500.00
h)
Calculation of Medicare Levy and Medicare Levy Surcharge

8TAX
for the year ended 30 June 2017
Particulars Amount
Taxable Income $160,000
Medicare Levy @2% $3,200
Medicare Levy Surcharge @ 1.5% $1,808
The Medicare Levy Surcharge is calculated for daily rate so if there is only partial
hospital cover for the financial year then the individual have to pay MLS for remaining part of
the year.
i)
Calculation of Medicare Levy and Medicare Levy Surcharge
for the year ended 30 June 2017
Particulars Amount
Taxable income of Victor $105,000.00
Taxable income of Jackie $85,000.00
Taxable Income $190,000
Medicare Levy @2% $3,800
Medicare Levy Surcharge @ 1.5% $2,147
In case of family threshold limit is $180000.
j)
Calculation of Medicare Levy Surcharge threshold
for the year ended 30 June 2017
Particulars Amount
Family threshold $180,000.00
For dependent children after first one $4,500.00

9TAX
Minimum Medicare levy threshold limit $184,500.00
The family threshold is increased by $1500 for each dependent children above the first
child.
Answer to Question 3
Statement showing calculation of Income tax Payable or refundable
Particulars Amount Amount
Salary $32,000.00
Bank Interest $150.00
Assessable Income $32,150.00
Allowable Deduction for clothing $450.00
Taxable Income $31,700.00
Tax on Taxable Income $2,565.00
PAYG Withheld amount -$2,600.00
Income Tax payable/ (refundable) -$35.00
In this case, it is assumed that the salary provided is the gross figure. It can be seen that
the taxable income of Bob is less than $66667 so he will be allowed for low income tax offset.
However, there is no requirement to claim low income tax offset as it is provided automatically
by ATO.
Answer to Question 4
Statement showing calculation of Income tax Payable or refundable
Particulars Amount Amount
Gross Salary $68,000.00
Fully franked dividend (net) $2,000.00
Franking Credit $857.14
Franked Dividend Gross $2,857.14
Un franked Dividend $1,000.00

10TAX
Franked Dividend (60%) $900.00
Franking Credit $239.24
60% franked dividend $1,139.24
Total Taxable Income $72,996.38
Tax On taxable income $15,270.82
Medicare Levy $1,459.93
Franking credit -$1,096.38
PAYG withholding -$15,100.00
Income Tax payable/(Refundable) $534.37

11TAX
Bibliography
Coxon, H., 2016. Australian Official Publications: Guides to Official Publications. Elsevier.
Gitman, L.J., Juchau, R. and Flanagan, J., 2015. Principles of managerial finance. Pearson
Higher Education AU.
James, S., Sawyer, A. and Wallschutzky, I., 2015. Tax simplification: A review of initiatives in
Australia, New Zealand and the United Kingdom. eJournal of Tax Research, 13(1), p.280.
McIntosh, J., Trubka, R. and Newman, P., 2015. Tax Increment Financing framework for
integrated transit and urban renewal projects in car-dependent cities. Urban Policy and
Research, 33(1), pp.37-60.
Ordelheide, D., 2016. Transnational accounting. Springer.
Saad, N., 2014. Tax knowledge, tax complexity and tax compliance: Taxpayers’ view. Procedia-
Social and Behavioral Sciences, 109, pp.1069-1075.