You client Rob has the following income and deductions for t

You client, Rob, has the following income and deductions for the financial year ended 30 June 2017: salary, $32,000; bank interest received, $150; and allowable deductions for special work clothing, $450. Rob’s employer has deducted $2600 as PAYG tax from his salary during the year.
Calculate Rob’s income tax payable or refundable.

Grid:

Calculation of Rob’s taxable income by applying the statutory formula under s 4-15 ITAA 1997 (2 Marks)

- Calculation of Rob’s tax liability per the ITRA 1986 (2 Marks)

- Calculation of the Medicare levy (2 Marks)

- Consideration to Rob’s entitlement to any tax offsets and/or tax credits (1 Marks)

- Calculation of income tax payable or refundable by applying the method in s 4-10 ITAA 1997 (3 Marks)

Solution

Taxable income = 32000 + 150 - 450 - 4000^{(Note a)} - 6300^{(Note b)}

= $ 21400.

Tax on income = 9225 * 10 % + (21400 - 9225) * 15 %

= 922.50 + 12175 * 15 %

= 922.50 + 1826.25

= $ 2748.75

Income Tax payable by Rob = Tax on total income - Tax already paid by Rob.

= 2748.75 - 2600

= $ 148.75

Conclusion :- Income tax payable by Rob = $ 148.75

(Note a) :- Personal exemption amount for Year 2017 = $ 4000.

(Note b) :- Standard deduction amount for Year 2017 = $ 6300.