H & R Block Basic Course
Chapter 5
HINTS ·
Item D7 is for deductions against interest
and dividend income only.
Deductions against trust income go at item 12. ·
The UPP is simply the money which the
taxpayer has contributed towards their pension or annuity. When the pension
becomes payable as an income stream then that money must be tax free – it’s
like putting money into the bank and then withdrawing it. That’s why the
UPP is a deduction, the annual deductible amount being calculated according
to life expectancy or the term of the annuity. ·
Trauma insurance pays a tax-free lump sum
in the case of permanent injury, and the premiums are not deductible
because the payout is tax-free. Sickness and accident insurance replaces
the taxpayer’s normal income stream. The payments are taxable, and
therefore the premiums are deductible. ·
PRIOR YEAR LOSSES 1] In the year incurred –
cannot be created or increased by donations or super contributions. 2] In the year applied – must
be applied to exempt income first.
NOTE: There has
been a correction to Chapter 4 question 1.
Question 1
(1680+180) x 6000/24000 = 465 at item D7. Note that the
borrowing expense relating to the shares is $45. If borrowing expenses exceed
$100 they must be claimed over five years, or over the term of the loan if it
is less than five years.
Question 2
Question 3
1.
Before lodging his return he must notify the super fund
that he will make a claim, and how much he intends
claiming. Once he has received confirmation from the fund he can lodge his tax
return. This allows the fund to keep track of his undeducted
contributions (which will go towards his UPP) versus his deducted
contributions.
2.
He can claim 5000 + 75% (excess) = 5000 + (2800 x 75%) = $7100.
3.
$42,385 is the maximum deduction allowed for a taxpayer
aged 35-49y. The maximum contribution to give rise to this deduction is
$54,847.
5000
+ (49,847 x 75%) = $42,385.
Question 4
Sickness
and accident insurance policies where the payments will commence once Workcover payments are no longer made are available.
The
carry-forward loss must first be applied to exempt income. 4759 – 639 = 4120.
Applying
the c/f loss: 37,238 – 4120 = $33,128 taxable income
in 2007.