Comprehensive Income Tax Case Study: Bruce Lee Analysis - TAX305

This case study provides a comprehensive analysis of individual taxation and accounting principles through the practical example of Bruce Lee, a lawyer in Australia. It begins by outlining the tax rates for individuals in Australia for the year 2017-2018, including Medicare levy and surcharge considerations. The study then computes Bruce Lee's taxable income, detailing his professional legal fees, dividends, salary, interest, and rental income, while also accounting for deductible expenses such as office rent, contractor payments, and employee salaries. The case study also calculates Bruce Lee's total tax liability, considering Medicare levy and surcharge, and PAYG deductions, ultimately arriving at the final tax payable amount. Finally, it explores various strategies Bruce Lee could employ to reduce his tax liability, such as increasing tax-deductible expenses, investing in specific funds and stocks, offsetting capital losses, avoiding tax penalties, seeking advice from tax professionals, and utilizing available tax deductions and exemptions. The study concludes that effective tax planning and awareness of tax deductions and exemptions are crucial for minimizing individual tax liabilities.

Individual taxation and accounting
Tax computation for individual
Individual taxation
Name of the author
University Name-

Table of Contents
INTRODUCTION......................................................................................................................1
TAX RATES FOR INDIVIDUALS FOR YEAR 2017 – 2018................................................1
TAX LIABILITY OF BRUCE LEE FOR YEAR 2017 - 2018.................................................3
WAYS TO REDUCE TAX LIABILITY...................................................................................4
CONCLUSION..........................................................................................................................6
REFERENCES...........................................................................................................................7

INTRODUCTION
With the changes in economic condition and ramified taxations policies, tax
calculation in Australia has been changing time to time. Every individual needs to assess their
tax amount on the basis of tax slab rate and taxation polices. In this report, computation of the
tax of the individual has been done on the basis of shared information and considering the tax
policies and rules. It deals with the practical scenario of the tax calculation in Australia for
individual and computation of the tax calculation of the individual have been made in tabular
form to strengthen the easy computation process.

TAX RATES FOR INDIVIDUALS FOR YEAR 2017 – 2018
The tax rate for the computation of the individual is done on the basis of slab rate given as
per the taxation rules and policies of the Australian laws and regulation. The taxation rules
and policies include Medicare levy which reflects the money levied at the rate of 2% on the
earned capital. It is designed to provide the access the health care services for the Australian
residents. It is analyzed that tax payers who are not indulged in having the private hospital
health insurance are required to mandatory to pay Medicare levy surcharge. It is considered
that the rate of Medicare levy surcharge for individual who are earning more than $ 140,001.
These individuals are required to pay Medicare levy surcharge on their earning at the rate of
1.5% (McGregor-Lowndes, and Crittall, 2017).
It is analyzed that forward tax losses of the individual of last year should be deducted from
the income which is chargeable to pay tax. In addition to this, it is further analysed that
PAYG happened to be computed on the account of individual should be reduced from the
total tax payable by the company.
Computation of the taxable income Tax charges on the Income
0 - $ 18,200 Nil
$ 18,201 - $ 37,000 19c for each $1 over $18,200
$ 37,001 - $ 87,000 $3,572 plus 32.5c for each $1 over $37,000
$ 87,001 - $ 1,80,000 $19,822 plus 37c for each $1 over $87,000
$ 1,80,001 and over $54,232 plus 45c for each $1 over $180,000

COMPUTATION OF TAXABLE INCOME FOR BRUCE LEE FOR 2017 – 2018
In this part, tax computation of the Bruce lee has been done as per the taxation rules and
policies of Australia. He is lawyer based in Australia and will be charged on his tax on the
income above the certain extent (Nayyar, and Singh, 2018).

Tax computation of Bruce lee for the taxable income
FOR THE YEAR ENDED 30TH JUNE 2018
PARTICULARS AMOUNT
($)
AMOUNT
($)
INCOMES
Professional legal fees 340000
Dividends received from an Australian resident company fully
franked
7000
Salary received from part time lecturing at the university 40000
Interest on bank deposits 5000
Rental income from an investment property 10000
Total 402000
LESS : EXPENSES
Office rent 14000
Payment to cleaning contractor 10000
Salary paid to employee secretary 50000
Purchase of new calculator 290

This table reflects the computation of the tax liabilities of Bruce Lee. The Medicare
Levy tax is also charged at the rate of 2% and same is charged. The reason of charging
Medicare tax was based on the fact that he did not take hospital insurance and he has to pay
Medicare insurance cover. He needs to surcharge for Medicare insurance cover @ 1.25% as
his income exceeds $ 140,000. The PAYG tax will also be deducted as amounted to $
6,000from his tax liabilities. This table reflects the amount of tax payable by the Bruce Lee
which needs to be paid by him to lower down his tax payment (Deb, 2018).

Bruce Lee tax Computation
FOR THE YEAR ENDED 30TH JUNE 2018
PARTICULARS AMOUNT ($) AMOUNT ($)
0 - $ 18200 0
$ 18201 - $ 37000 3572
$ 37001 - $ 87000 16250
$ 87001 - $ 180000 34410
$ 180001 and above 48155
Total 102387
Add: Medicare levy @ 2% 5740
Medicare levy surcharge @ 1.25 % 3588
Total tax computed on taxable income 111714
Less: PAYGW 6000
TAX PAYABLE 105714

WAYS TO REDUCE TAX LIABILITY
It is analyzed that in order to reduce the tax libiliteis, Bruce Lee could use tax
planning by undertaking the tax deduction and tax exemptions rules. There are several
certain legal laws and provisions which will allow tax payer to lower down his tax liabilities.
There is several deduction and exemptions are allowed which could be grasped by investing
in particular scheme and funds.
 Bruce lee cold increase his tax deductible expenses to lower down his taxable income.
 The tax expenses which are bound to incurred then he should make those expenses at the
time when he has higher taxable income so that the taxable income could be reduced.
Eventually it will also lower down the tax payment of Bruce Less. For instance, if Bruce lee
finds that in 2017 he would have to face high tax payment due to his increased income then
those taxable expenses he is about to incurred in future should be made in the present year so
that he could lower down his taxable income.
 With the changes in economic condition, Australian taxation government has allowed
individual to avail the tax benefit by investing in particular funds and stocks. This investment
will allow Bruce lee to lower down the tax payment and will make his eligible for the tax
exemption (Eze, Iorwuese, and Abba, 2016).
 This will not only secure the capital investment of company but also ensure that Bruce lee
could avail tax benefits to its optimum level.
 There is another method which could be used by Bruce lee to lower down its tax payment.
For instance, if Bruce Lee finds that some of the properties are incurring losses and if he sells
those properties in market right now then it will result to capital loss to them then the loss
which incurred on selling of these assets could be used to set off the taxable income. It will
eventually lower down the overall tax payment (Nong, Meng, and Siriwardana, 2017).
 All the tax related penalties should be avoided by Bruce Lee by undertaking the proper
taxation policies and laws. It will assist organization to mitigate the taxation issues and higher
tax payment (Sawyer, and Sadiq, 2018).
 Bruce lee also discuss with the tax agents and certified public account to lower down his tax
liabilities. If he could take proper assistance and advice from these peopol then it will assist
him to understand the possible taxation policies and rules which will result to availing the tax
benefits in best efficient manner.

 There are several tax deductible expenses which could be used by Bruce Lee for lower down
the tax payment such as payment for buying car, travel cost, membership, union fees and
buying tools and equipment, investing capital as donation, charity and other parts.
 Bruce lee could also deposit certain amount in saving deposit amount which could be used
by him to lower down the tax payment.
 Interest payment, repair and rental amount could be used by company to lower down the tax
payment (Saad, 2014).
 Filling the tax return on time also lower down the chances of penalties and other unnecessary
payments which could also reduce the tax payment.
 Bruce Lee could also use proper tax planning process by undertaking the assistance and tax
planning services from the corporation which could assist him to lower down his taxable
income in best effective manner (Chardon, Freudenberg, and Brimble, 2016).
CONCLUSION
The tax charged on the income earned by individual and paid as mandatory
responsibilities. The only way to minimize the tax liabilities of individual is to arrange and
avail the tax benefit of tax deduction and tax exemption. It is analyzed that people needs to
analysis these factors effectively which will assist in lower down the tax payment in effective
manner. Tax exemption and tax deduction should be claimed and availed by individual by
undertaking the proper tax planning in effective manner which will be useful for lower down
the tax payment in effective manner. There are several areas which could be used by Bruce
lee to lower down his tax payment such as investing in the particular funds, donation to
specified institution and buying tax free assets.

REFERENCES
Chardon, T., Freudenberg, B., and Brimble, M. 2016. Tax literacy in Australia: not knowing
your deduction from your offset. Austl. Tax F., 31, 321.
Deb, R. 2018. TAX REFORMS and GST: A SYSTEMATIC LITERATURE
REVIEW. Journal of Commerce and Accounting Research, 7(1).
Eze, N. M., Iorwuese, T. E., and Abba, W. B. 2016. The Challenges and Imperative of Tax
System Reform in Nigeria. International Journal of Economics and Finance, 8(3), 151.
McGregor-Lowndes, M., and Crittall, M. 2017. An examination of tax-deductible donations
made by individual Australian taxpayers in 2014-15. Australian Centre for Philanthropy and
Nonprofit Studies, Queensland University of Technology.
Nayyar, A., and Singh, I. 2018. A Comprehensive Analysis of Goods and Services Tax
(GST) in India. Indian Journal of Finance, 12(2), 57-71.
Nong, D., Meng, S., and Siriwardana, M. 2017. An assessment of a proposed ETS in
Australia by using the MONASH-Green model. Energy Policy, 108, 281-291.
Saad, N. 2014. Tax knowledge, tax complexity and tax compliance: Taxpayers’
view. Procedia-Social and Behavioral Sciences, 109, 1069-1075.
Sawyer, A.J. and Sadiq, K., 2018. Enhanced Tax Reporting Requirements under the BEPS
Project: Preparing the Profession.