Question

Part A: Provisional Tax and Interest

Yixuan Wu runs a business and her residual income tax (RIT) for the 2019-20 income year (31 March balance date) was $30,000. She filed for her 2019-20 income year return on 1 July 2020. Business has not been great since April this year due to the lock downs and Yixuan is expecting to make much lower profit for this income year and hence expects to pay much less tax for the 2020-21 income year. She seeks your advice on her provisional tax payments for the 2020-21 income tax year ending 31 March 2021. She has previously used the standard uplift method to calculate her provisional tax payments.

(b) Calculate Yixuan’s provisional tax payments for the 2020-21 income year if she applies the standard uplift method?

Answer 1

Answer a).

Tax Rate:

Taxable income	Tax on this income
$18,201 – $37,000	19c for each $1 over $18,200
$37,001 – $90,000	$3,572 plus 32.5c for each $1 over $37,000
$90,001 – $180,000	$20,797 plus 37c for each $1 over $90,000
$180,001 and over	$54,097 plus 45c for each $1 over $180,000

Taxable Income = $30,000

Tax Liability

Upto $18200	NIL
Remaining $11800 (11,800*19c/100)	$2,242

Total Liability = $2,242

Answer b). Yixuan’s provisional tax payments for the 2020-21 income year if she applies the standard uplift method, a taxpayer calculates their provisional tax using the previous year's income tax liability multiplied by 105 percent

$2,242*105% = $2354.1