Question

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

Q4.

(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

Computation of Tax and Taxable income

	$	$
Net Profit per Financial Report $		223000
Add Unfranked Dividends	40000	40000
Fully Franked Dividends (Franking credit of 42000)	98000	140000
Partly Franked Dividend(Franking credit of 8500)	38000	46500
Income distributed from Partnership(franking credits include 4800)	46000	50800
Income distributed from Umbrella Trust( franking credits of 2800)	19000	21800
		522100
Less
Deductible amount	18000	18000
Taxable Income		504100
Tax on Taxable Income (30% tax)		151230
Less 30% on (42000+8500+4800+2800)		17430
Tax Payable ( Refundable)		133800