H & R Block Basic Course Chapter 6

 

HINTS

 

·          In income tax there are a number of different incomes. You should make a list of how these different incomes are defined. It will be invaluable in the final exam. This week is a good week to start.

Basic Medicare is calculated on taxable income (less post 83 taxed element of an ETP for taxpayers 55+y), and SFSS is calculated on taxable income, but Medicare surcharge is calculated on a special income, and HELP is calculated on HELP Repayment Income. Later in the course you will strike other special incomes that you can add to the list.

·          Foreign employment income is always taxable if the period of continuous employment is 91 days or less (it can be with more than one employer). If the period of continuous employment is more than 91 days then the income is exempt provided that the income has been ordinarily liable for income tax in the foreign country. If the foreign employment income has not been liable for foreign income tax then it is assessable in Australia.

·          These rules refer to foreign employment income only. Foreign business income is always assessable.

·          If a taxpayer is under 18y on June 30 then item A1 must be filled out in ALL cases.

 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


Question 1

 

a)     24,874 x 1.5% = $373.11.

b)     30,847 – 30,001 x 20% = $169.20.

c)     50,277 x 1.5% = $754.16. There is no Medicare surcharge payable because the child is seen as a dependant for surcharge purposes (but not for basic Medicare purposes). Hence the taxpayer is subject to the 100,000 family threshold for Medicare surcharge.

d)     Nil. The taxpayer is below the 2007 senior Australian’s threshold of 24,867.

e)     58,760+45,829 = 104,589 family income. Therefore they are both subject to the surcharge.

 

 

BASIC MEDICARE

MEDICARE SURCHARGE

HIM

58,760 x 1.5% = $881.40

58,760 x 1.0% = $587.60

HER

45,829 x 1.5% = $687.44

45,829 x 1.0% = $458.29

 

Question 2

 

a)     Nil. He is below the HELP threshold of $38,149.

b)     Nil. He qualifies for a family reduction of basic Medicare, and so will not be assessed for HELP.

c)     65,289 x 7% = $4570. She will have to pay $4000, since this is the amount of the debt. She would be better off making a full voluntary payment before lodging her return: 4000/1.1 = $3636 will clear her whole debt, because she will get the 10% discount.

 

Question 3

 

 

TAXPAYER

BASIC MEDICARE

MCARE SURCHARGE

OTHER

a

Sally

Single, T.I. $16,702

 

N

365 days

 

b

Tamara

Single navy officer.

T.I. $37,500

M1 V 365 days

N

365 days

 

c

Ben

 

Married, 2 children, family income $51,360

Residency ceased December 20 2006.

M1 V 193 days

N

365 days

A2 20.12.06

Spouse details

 

Question 4

 

a)     No. Taxable professional income is below $2500.

b)     Yes. A television newsreader is seen as a performer.

c)     No. Taxable professional income is below $2500.

 

FAMILY REDUCTION OF BASIC MEDICARE

 

This is not as difficult as it looks.

 

  • If the family income is below the lower threshold neither partner pays basic Medicare.

 

  • If the family income is above the upper threshold each partner pays as if single.

 

  • If the family income is in the shading range:

 

1] Work out the Medicare by the shading calculation, and by the 1.5% calculation.

2] The difference between the two figures is the FAMILY REDUCTION AMOUNT.

3] If one partner is below the single Medicare threshold then the other partner gets all the family reduction amount.

4] If both partners are liable for Medicare then the family reduction amount is apportioned according to the partners’ taxable incomes.

5] Each partner then pays T.I. x 1.5% LESS their share of the family reduction amount.

6] If one partner doesn’t need all of their share, the excess can be transferred to the other partner.