Question

) 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.

Answer 1

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