In the context of Kay Lee, the owner of ‘The Fried Noodle Bar’ in Sydney, who operates as a sole trader, it is essential to accurately assess her personal tax liability for the financial year ending 30 June 2023. To determine her tax liability, we need to follow a comprehensive process that involves the identification and classification of her receipts and payments, applying relevant tax rules and regulations to each item, and calculating the final tax liability.
Sale of Food and Drinks in the Restaurant: $256,000 – This constitutes the primary revenue generated from Kay’s restaurant business and is considered assessable income.
Interest on Bank Deposits: $28,500 – Interest income is considered assessable income for tax purposes.
Exempt Income from PhD Scholarship: $2,500 – Exempt income from a PhD scholarship is not included in assessable income.
Private Health Fund Refunds: $40,000 – Private health fund refunds are generally not considered assessable income.
Inheritance from Grandmother: $35,500 – Inheritances are not typically considered assessable income.
Rent from Investment Property: $5,000 – Rental income from an investment property is part of assessable income.
from ATO for Previous Year’s Tax Return: $30,000 – Tax refunds are not considered assessable income.
Net Capital Gain from Sale of Shares: $10,000 – Capital gains are part of assessable income.
Lottery Win: $5,000 – Lottery winnings are generally considered assessable income.
Total Assessable Income: $374,000
Rent on Restaurant in Brisbane: $35,000 – Rent paid for business premises is an allowable deduction.
Body Corporate Fees on Investment Property: $1,500 – These fees are an allowable deduction.
Part-time Employee Salaries: $65,000 – Employee salaries are allowable deductions.
Superannuation Contributions for Employees: $15,000 – Superannuation contributions for employees are allowable deductions.
Interest on Borrowing for Investment Property: $25,000 – Interest on borrowing for income-producing purposes is an allowable deduction.
Insurance, Body Corporate Fees, and Land Tax for Investment Property: $5,500 – These costs related to the investment property are allowable deductions.
Fees Paid to Registered Tax Agent: $2,500 – Tax agent fees are allowable deductions.
Depreciation on New Cooking Equipment: $5,000 – Depreciation on business assets is an allowable deduction.
University Fees for Kay: $15,555 – University fees directly related to her business are allowable deductions.
Total Allowable Deductions: $165,555
Taxable Income: $374,000 – $165,555 = $208,445
| Taxable Income Range | Tax Rate |
|---|---|
| Up to $18,200 | 0% |
| $18,201 – $45,000 | 19% |
| $45,001 – $120,000 | 32.5% |
| $120,001 – $180,000 | 37% |
| Over $180,000 | 45% |
Tax Payable Calculation:
Tax on first $18,200: 0% * $18,200 = $0 Tax on next $26,800 ($45,000 – $18,200): 19% * $26,800 = $5,092 Tax on next $74,999 ($120,000 – $45,000): 32.5% * $74,999 = $24,374.68 Medicare Levy: 2% * $208,445 = $4,168.90
Total Tax Payable: $5,092 + $24,374.68 + $4,168.90 = $33,635.58
Tax Offsets:
Final Tax Liability:
Tax Payable – Tax Offsets: $33,635.58 – $25,000 = $8,635.58
In conclusion, Kay Lee’s personal tax liability for the year ended 30 June 2023 is $8,635.58. This calculation takes into account her assessable income, allowable deductions, applicable marginal tax rates, Medicare levy, and relevant tax offsets. It’s important to note that tax regulations and calculations can be complex, and seeking advice from a professional tax advisor or accountant is recommended for accurate tax planning and compliance.
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