question archive Steven received the following amounts during the financial year: $ Allowance from Centrelink while unemployed 2,600 Honorarium as treasurer of a charitable organisation 500 Lump sum damages for personal injuries sustained in a car accident 6,200 A lump sum legacy under the will of a deceased relative 1,950 Unfranked dividends from Family P/L 8,000 Dividends from Australia Bank Ltd franked to 100% 6,000 Franking credits attached to this dividend $2,571 Calculate Steven's assessable income and net tax payable including Medicare levy
Steven received the following amounts during the financial year: $ Allowance from Centrelink while unemployed 2,600 Honorarium as treasurer of a charitable organisation 500 Lump sum damages for personal injuries sustained in a car accident 6,200 A lump sum legacy under the will of a deceased relative 1,950 Unfranked dividends from Family P/L 8,000 Dividends from Australia Bank Ltd franked to 100% 6,000 Franking credits attached to this dividend $2,571 Calculate Steven's assessable income and net tax payable including Medicare levy
Subject:LawPrice:9.82 Bought3
Steven received the following amounts during the financial year:
$
Allowance from Centrelink while unemployed 2,600
Honorarium as treasurer of a charitable organisation 500
Lump sum damages for personal injuries sustained in a
car accident 6,200
A lump sum legacy under the will of a deceased relative 1,950
Unfranked dividends from Family P/L 8,000
Dividends from Australia Bank Ltd franked to 100% 6,000
Franking credits attached to this dividend $2,571
Calculate Steven's assessable income and net tax payable including Medicare levy.
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Steven's assessable income will be $19,571 and $0 net tax payable due to more credit.
Step-by-step explanation
Assessable income is the taxable portion of income sourced from various sources. So, we have to evaluate Steven sources and conclude which are assessable and which ones are not.
Allowances are assessable income, so, we will have to include his allowance when calculating for assessable income. Honorarium is usually not assessable, however, if it is related to professional services and not volunteering the amount is considered assessable. Damages for personal injuries are not assessable thus, we will not include the damages lumpsum in our computation. Since there is no inheritance tax in Australia the lumpsum legacy will not be assessable to Steven. Unfranked dividend and franked dividend together with the franking credit attached will be assessable income.
Assessable income = 2500 + 500 + 8000 + 6000 + 2571
= 19571
Since there are no deductions, assessable income will be equal taxable income because
Taxable income = Assessable income - Deductions
Medicare levy = 2% of taxable income
= 2/100 x 19571
= 391.42
Tax rate = 19c for each $1 over $18,200
Tax amount = 19/100 x (19571 - 18200)
= 260.49
Gross tax = 260.49 + 391.42
= 651.91
Since the franked dividend had credit attached to it, then we will subtract the amount from the tax.
651.91 - 2571 = -1919.09
So, it will be refundable and not payable, because the credit was more than the tax.
