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.

(a) Explain to Yixuan the different methods that can be used to calculate provisional tax and make a recommendation with reasons as to which method she should choose to calculate her provisional tax payments for the 2020-21 income tax year.

Answer 1