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1.Income of Mr Marc for the year ending on 30th June 2016:
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(Amount in $) |
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Salary (6-5 ITAA97): |
48000 |
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Annual leave compensation received (6-5 ITAA97): |
2500 |
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Travel allowance (6-5 ITAA97): |
1000 |
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Worker compensation (Note 1): |
5000 |
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Interest Income (under subsection 6-5 (4)): |
1000 |
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Amount received as get well gesture: |
500 |
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Assessable Income: |
58000 |
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Year 2015-16 ( Amount in $) |
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Calculation of income tax payable by Mr Marc |
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Particular |
Income |
Dividend |
Capital Gain |
Tax already paid |
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Gross salary |
48000 |
|
11500 |
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Annual leave compensation |
2500 |
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Travel allowance |
1000 |
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Worker Compensation |
5000 |
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Interest income on term deposit |
1000 |
|
150 |
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Amount received as get well gesture |
500 |
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Total Income |
58000.00 |
0 |
11650 |
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Deductions (note 2) |
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500 |
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Adjusted Income |
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57500 |
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Personal allowance |
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10600 |
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(Note: In present case as the income is below than 100,000 ; thus personal allowance will be provided) |
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Taxable Income |
46900 |
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Tax (working note 3 ) |
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7213 |
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Already Paid (note 4) |
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Refund |
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4437 |
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Working Notes |
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Amount in $ |
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Note -1 |
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Worker Compensation |
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In accordance with the case law (FCT v Dixon (1952) 86 CLR 540; replacement principle will be applied at amount received as worker compensation will be taxable, and rest amount will be exempted (Barkoczy, 2016). |
5000 |
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Note -2 |
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Deduction |
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Amount paid for firefighting gear |
500 |
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Note – 3
Calculation of Tax
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0-16227 |
0 |
0 |
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16227-37000 |
19% |
3946.87 |
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37001-46900 |
32.5% |
3217.00 |
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Total Tax |
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7164.00 |
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FBT |
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$ 500 (1-49%) |
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980 |
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Tax = 980 *49 % |
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49 |
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Total tax |
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7213 |
Note-4
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Tax already deducted |
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Tax deducted by employer |
11500 |
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Tax deducted by bank |
150 |
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Total |
11650 |
By considering the provided case study, there are three events two are redundancy package and Payment in lieu of annual leave provided by the employer and last one is Rent free benefit received in the lease. In accordance with the Australian Taxation office, in the case where genuine redundancy at the time of termination then same will be taxable but at concessional rates. Same is supported in taxation ruling of TR 2009/2 (Redundancy payments, 2016). Same provisions are applied in case if payment is received in against of lieu of annual leave. This provision is covered under Section 15-25 of Taxation Administration Act 1953 (TAA). However, in the case of rent free lease for 6 months is not taxable the covered period is covered under concession lease terms. Further, the landlord is not in a position to get a deduction as rent is not payable by the tenant consequently it will not be considered income Jane Nobles.
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Particulars |
Amount |
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Payment related to genuine redundancy |
$529 (WN 1) |
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Payment in lieu of annual leave |
$5600 |
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Rent free benefit |
- |
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Total taxable income |
$6129 |
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Tax rate (inclusive of 2% medical levy) |
17%(WN 2) |
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Tax to be paid |
$1042 |
Working note 1
Redundancy benefit is not taxable up to a certain extent. By considering provisions of 2016/17 exempt amount is $9,936 along with $4,969 to be multiplied by years served by an employee.
Exempt amount
=$9936 + $4969*15
=$84471
Taxable amount:
=$85000-$84471
=$529
Working note 2
ETP will be concessional taxed at a maximum of 32% in case age of the individual is below 55) and 17% will be applied if age is 55 or higher. This rate is inclusive of 2% medical levy up to the income of $195000. On higher income, tax to be paid at the rate of 47% (Australian tax legislation, 2002).
Australian tax legislation 2002. (2002) (1st ed.). Pyrmont, N.S.W.
Barkoczy, S. (2016), Core Tax Legislation & Study Guide, 19th edn, Oxford University Press.
Cheng, H., & Yang, C. (2013). Some Taxation Theorems in the Hotelling Model. Australian Economic Papers, 52(3-4), 143-158. https://dx.doi.org/10.1111/1467-8454.12013
LAFFER, K. (2008). TAXATION REFORM IN AUSTRALIA. Economic Record, 18(2), 168-179. https://dx.doi.org/10.1111/j.1475-4932.1942.tb02666.x
Redundancy payments. (2017). Ato.gov.au. Retrieved 28 March 2017, from https://www.ato.gov.au/Individuals/Working/Working-as-an-employee/Leaving-your-job/Redundancy-payments/
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