Question

The following question is based on the material in Chapter 4 of the textbook “Advanced Income Tax Law”:

Q

(Companies – Reconciliation of Taxable Income – Investment income)

Structured Pty. Ltd., a small business entity, has prepared the following income statement for 2017/18:

Income $

Unfranked Dividends 40,000   

Fully Franked Dividends (related franking credit of $42,000)                                                                          98,000

Partly Franked Dividends (related franking credit $8,500)                                                                               38,000

Income distributed from partnership with Silent Pty. Ltd. (includes franking credits of $4,800) 46,000

Income distributed from Umbrella Trust (includes franking credits of $2,800) 19,000

241,000

Expenses

Deductible expenditure 18,000

Net Profit 223,000

Required:

Prepare a statement (format provided below) reconciling net profit with taxable income and calculate the tax payable (refundable) for the 2017/18 tax year.

	$	$
Net Profit per Financial Report =
Add (if any): (show details)
Less (if any): (show details)
= Taxable Income
Tax on Taxable Income is: (show calculation details)
Less (if any): (show details)
= Tax Payable (Refundable)

Answer 1

Ans. Net profit with taxable income for the 2017/18 tax year.

	$	$
Net Profit per Financial Report =		223,000
Add (if any): (show details)
Less (if any): (show details)
Partnership franking credit	4,800
Grossed franking credit	2,800	7,600
= Taxable Income		215,400
Tax on Taxable Income is: (show calculation details)
215,400*21%		45,234
Less (if any): (show details)
Fully Franked Dividends	42,000
Partly Franked Dividends	8,500	50,500
= Tax Payable (Refundable)		(5,266)

Note:- Federal income tax 21% will be taxed for small business entity for the year ended 2018.