Question

) John is a sole trader working in his small business as a carpenter. His brother...

) John is a sole trader working in his small business as a carpenter. His brother Paul is mentally disabled, who lives with John and is receiving disability support pension. Required: Work out John’s invalid tax offset for his brother Paul who is an invalid under the following three scenarios: Scenario 1 - John has \$120,000 taxable income in the 2018-2019 financial year from his small business. Paul has \$4,000 as an adjusted taxable income. Scenario 2 - John has adjusted taxable income of \$63,000. Paul has adjusted taxable income of \$900. Scenario 3 - John has an adjusted taxable income of \$41,000. Paul was severely sick this year and had zero adjusted taxable income.

For 2018-19 the Maximum offset available for each dependent is \$2,717

The tax offset is reduced by \$1 for every \$4 that your dependant’s Adjusted Taxable Income (ATI) for the period you are claiming the offset exceeds \$282.

Calculation of John's Invalid tax offset:

Senario -1

Jhon taxable income = \$120,000

Paul Adjusted Taxable Income = \$4,000

Invalid Tax offset is not available to Jhon since his taxable income is more than \$100,000

Senario-2

Jhon Adjusted Taxable Income = \$63,000

Paul Adjusted Taxable Inome = \$900

Maximum Tax offset = \$2,717

Paul Income in Excess of \$282 = \$618

To be reduced from offset = 618/4 = \$154

Invalid Tax offset = \$2,717-\$154

= \$2,563

Senaro -3

Jhon Adjusted Taxable Income = \$41,000

Paul Adjusted Taxable Income = \$0

Since Paul Adjusted Taxable income is \$0, the eligible offset is maximum.

Invalid Tax offset  = \$2,717

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