Calculating Teresa Green’s 2021-22 Income Tax Return

Introduction

Preparing an accurate income tax return is crucial for individuals like Ms. Teresa Green to ensure compliance with tax regulations and minimize their tax liability. In this essay, we will calculate Ms. Teresa Green’s net tax payable for the 2021-22 tax year, taking into account her income, deductions, offsets, and Medicare Levy. We will also assume that no tax was deducted from her salary.

Income Assessment

Teresa’s income is composed of her gross salary and fully franked dividends. Her gross salary amounts to $85,000, and she received fully franked dividends totaling $3,600. To calculate her taxable income, we need to add these two sources of income:

Taxable Income = Gross Salary + Fully Franked Dividends Taxable Income = $85,000 + $3,600 Taxable Income = $88,600

Deductions

Teresa is eligible for various deductions to reduce her taxable income. These deductions include her professional membership fee, stationery expenses, and a portion of her telephone expenses.

Professional Membership Fee: Teresa paid $800 for her professional membership, which is fully deductible as a work-related expense.

Stationery Expenses: All of Teresa’s stationery expenses, which amount to $50, are considered 100% work-related and thus deductible.

Telephone Expenses: Teresa’s total telephone expenses are $500, with 50% of this cost being work-related. Therefore, she can claim 50% of her telephone expenses as a deduction.

Total Deductions = Professional Membership Fee + Stationery Expenses + (50% of Telephone Expenses) Total Deductions = $800 + $50 + (0.50 * $500) Total Deductions = $1,150

Adjusted Taxable Income

To calculate Teresa’s adjusted taxable income, we subtract the total deductions from her original taxable income:

Adjusted Taxable Income = Taxable Income – Total Deductions Adjusted Taxable Income = $88,600 – $1,150 Adjusted Taxable Income = $87,450

Tax Calculation

Teresa’s net tax payable is calculated based on her adjusted taxable income and the applicable tax rates. For the 2021-22 tax year, the Australian tax rates are as follows:

Up to $18,200: Tax rate of 0%

$18,201 to $45,000: Tax rate of 19%

$45,001 to $120,000: Tax rate of 32.5%

$120,001 to $180,000: Tax rate of 37%

Over $180,001: Tax rate of 45%

Let’s break down the calculation:

The first $18,200 is not taxable, so there is no tax on this portion of Teresa’s income.

The next $26,799 ($45,000 – $18,201) is taxed at a rate of 19%, resulting in $5,091.81 in tax.

The remaining $42,451 ($87,450 – $45,000) is taxed at a rate of 32.5%, resulting in $13,798.88 in tax.

Total Tax Payable = Tax on $26,799 + Tax on $42,451 Total Tax Payable = $5,091.81 + $13,798.88 Total Tax Payable = $18,890.69

Medicare Levy

Teresa did not hold private hospital cover, so she is subject to the full Medicare Levy. The Medicare Levy for the 2021-22 tax year is 2% of her taxable income.

Medicare Levy = 2% of Adjusted Taxable Income Medicare Levy = 2% of $87,450 Medicare Levy = $1,749

Net Tax Payable

To calculate Teresa’s net tax payable, we need to add the total tax payable and the Medicare Levy:

Net Tax Payable = Total Tax Payable + Medicare Levy Net Tax Payable = $18,890.69 + $1,749 Net Tax Payable = $20,639.69

Conclusion

In conclusion, Ms. Teresa Green’s net tax payable for the 2021-22 tax year, considering her gross salary, fully franked dividends, deductions, Medicare Levy, and assuming no tax was deducted from her salary, is $20,639.69. It’s important for individuals like Teresa to accurately calculate their tax liability to ensure compliance with tax regulations and make informed financial decisions. Seeking professional advice or using tax software can be helpful in this process.