Question

Australian Taxation Question.

Companies Q1:

Antipodes Pty Ltd earns Australian sourced non-dividend income of $300,000 and American sourced nondividend income of AUD$400,000 for the current income year. During the current year, Antipodes has paid a PAYG income tax instalment of $40,000 relating to the previous year and PAYG income tax instalments of $115,000 in respect of the current year. Antipodes wants to distribute the maximum possible dividend to its shareholders before making the next PAYG tax instalment. It has 600,000 $1 shares of paid-up capital. It has three shareholders Angus, who holds 1,000 shares and has no other income; Barry, who has 10,000 shares and other income of $20,000; and Jane, who holds the remaining shares. Assume that the American-sourced income is assessable in Australia and that US tax was AUD$120,000.

Required: Calculate the total tax payable by Antipodes for the current year, and its franking account balance, and the tax payable by Angus and Barry. Ignore any rebates or offsets other than those generated directly by the dividends. Assume a corporate tax rate of 30%.

Answer 1

Calculation of Total taxable income of Antipodes

Australian sourced non-dividend income    $ 300,000

American sourced nondividend income $ 400,000

Total income $ 700,000

Tax @ 30% $ 210,000

Less: PAYG for Current year $ 115,000

Tax payable $ 95,000   

Balance In Franking Account will be US tax on American-sourced income assessable in Australia i.e  AUD$120,000.

As per Tax Laws Qualified dividends are tax-free for individuals in the 10% and 12% tax brackets. Both Angus and Barry has non dividend income less than these tax brackets, so there dividend income is tax free.

Tax Payable By Angus: Angus has no other income, so there is no tax liability in his hands

Tax Payable By Barry: Other Income of Barry is $ 20,000 taxable @ 12%

so, tax payable = $ 2,400