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Bruce Lee is a Lawyer with his own legal practice and registered for GST His receipts and payments (not including GST) for the year ended 30 June 2018 are as follows:

Individual Taxation And Accounting

Notes

(1)The part-time military income is exempt.
(2)Bruce has a carry forward past year tax loss of $12,000.
(3)Bruce does not have private hospital insurance.

Required


Bruce would like to minimise his tax liability for the year. Calculate Bruce’s tax liability for the year ended 30 June 2018.

Income details of Bruce Lee

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.

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

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

Cost of meals and entertainment for himself and clients

1400

Train fares for travel to and from work

1200

Rates on family home

2200

Electricity for family home

900

Tax agents fees for preparing tax returns for 2016 / 2017

1000

Interest paid on loan to acquire investment property

15000

Rates paid on property

2000

cost of painting the investment property immediately after purchasing it

5000

Total

102990

Profit before tax

299010

Less: previous year tax losses

12000

Taxable Profits

287010


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

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.

Cite This Work

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My Assignment Help. (2019). Bruce Lee's Tax Essay For 2018 In Australia.. Retrieved from https://myassignmenthelp.com/free-samples/tax305-individual-taxation-and-accounting.

"Bruce Lee's Tax Essay For 2018 In Australia.." My Assignment Help, 2019, https://myassignmenthelp.com/free-samples/tax305-individual-taxation-and-accounting.

My Assignment Help (2019) Bruce Lee's Tax Essay For 2018 In Australia. [Online]. Available from: https://myassignmenthelp.com/free-samples/tax305-individual-taxation-and-accounting
[Accessed 15 July 2024].

My Assignment Help. 'Bruce Lee's Tax Essay For 2018 In Australia.' (My Assignment Help, 2019) <https://myassignmenthelp.com/free-samples/tax305-individual-taxation-and-accounting> accessed 15 July 2024.

My Assignment Help. Bruce Lee's Tax Essay For 2018 In Australia. [Internet]. My Assignment Help. 2019 [cited 15 July 2024]. Available from: https://myassignmenthelp.com/free-samples/tax305-individual-taxation-and-accounting.

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