Enjoy Upto 50% off on all Your Assignments ORDER NOW
Download Free Sample Order New Solution

1. Calculate Sue and Paul's annual after-tax income for the year ended 30th June 2022. Also, explain how Sue and Paul could reduce their tax liability by splitting their income. Show the effect of this strategy if they had split income for this current tax year.

Please provide a brief explanation of the concept of the splitting of income (not more than 100 words) as an effective strategy for the couple. 

Answer 1

In the present case, Sue and Paul are married and both earn remuneration from their present job. Sue works as part time teacher and earns $ 26000 while Paul earns $ 145000. Besides, their employer also pays minimum superannuation contribution. The superannuation contribution by the employer is not considered as taxable.

Besides, income show house rental income, managed funds distributions, shares dividends and interest on term deposit.

The computation of individual taxable income is as under:

Sue: 26000+12000-9000-4500=24500 (Negative Gearing)

Assuming no child deduction taken

Tax= (24500-18200)*0.19=1197+ Medicare levy (24500*2%)= 490= 1687

LITO: 700

LMITO: 675

Tax payable = 1687- 1375= 312

For 

Paul: 145000+ 6500+ 5000+ 6000= 162500

LITO: Not Available

LMITO: Not Available

Tax = 29467+(42500)*.37=$ 45192

Medicare levy = 162500*2%= $ 3250

Total Tax= 45192+ 3250=$ 48442- 1500= $46942- 29600= 17342

Total tax = 17342+312= 17654

Splitting of income refers to a strategy where in high tax paying individual transfers his personal income to low tax paying individual in order to reduce the burden of taxation. In the present case, Paul can transfer managed fund distribution, share dividend and interest to Sue.

Impact on sue Tax= 

Sue Revised income = 24500+ 17500= 42000

LITO=700-4500*.05= 475

LMITO= 675- 4500*.075= $338

Tax= (42000-18200)*.19= 4522+ medicare levy 840= 5362-1500= 3862

Paul: 145000 

LITO: Not Available

LMITO: Not Available

Tax = 29467+(25000)*.37=$ 38717

Medicare levy = 145000*2%= $ 2900

Total Tax= 38717+ 2900=$ 41617- 29600= 12017

Total tax for family = 3862+ 12017= 15879

Net difference= 17654- 15879= 1775

2. The couple is happy that they invested in the holiday home, as the property market value has shown good appreciation. Although they claimed to have done this investment to save tax, they are wondering what is a “negative gearing” tax strategy.

Please provide the couple with an explanation of gearing and negative gearing using their current context. Support your explanation with calculations. How does owning a negatively geared property save tax for this couple? Whose name should the investment property and mortgage be held to avail the maximum benefit of negative gearing?

Answer 2

The term gearing means taking of debt in the books and involves purchasing asset using debt. The said asset is generally investment asset and interest on such asset is tax deductible.

Negative gearing strategy refers to a strategy which provide immediate tax benefit while also offering the promise of long term gains in the form of capital housing growth. Thus, there are dual aspect involved where in tax benefit is available immediately and long term benefit is available in the form of appreciation of property

In the present case, the rental income from the property is 12000 and the expense which can be taken under Section 8 positive limb is 9000 and 4500 . The net loss under such transaction is $ 1500 and the couples can offset the said loss against the income which results in tax benefit to the couples.

Name in the property shall be of Paul as he is in higher tax slab and shall have the maximum tax benefit under the said category.

3. Calculate the expected return for Sue’s superannuation portfolio using the return for the year ended 2022. Explain to Sue why her superannuation portfolio balance fluctuates more than she would like it to. 

Answer 3

The expected return on Sue’s superannuation portfolio shall be (50%*4%+ 15%*1.4%+ 30%*10.8%+ 5%*3.1%)= 5.61%

There is a fluctuation in Sue superannuation portfolio as the investment is majorly inclined towards equity which makes the portfolio volatile. The proportion of shares is roughly 80% which makes the portfolio highly volatile and also 30% is international share which has very high volatility compared to domestic share. Thus, on an overall basis the portfolio has very high risk and very high volatility.

You Might Also Like:-

Reflection on change-management

Best Management Assignment Help Online

Business Management Assignment Help in Australia

Upto 50% Off*
Get A Free Quote in 5 Mins*
Applicable Time Zone is AEST [Sydney, NSW] (GMT+11)
+

Why Us


Complete Confidentiality
All Time Assistance

Get 24x7 instant assistance whenever you need.

Student Friendly Prices
Student Friendly Prices

Get affordable prices for your every assignment.

Before Time Delivery
Before Time Delivery

Assure you to deliver the assignment before the deadline

No Plag No AI
No Plag No AI

Get Plagiarism and AI content free Assignment

Expert Consultation
Expert Consultation

Get direct communication with experts immediately.

Get
500 Words Free
on your assignment today

ezgif

It's Time To Find The Right Expert to Prepare Your Assignment!

Do not let assignment submission deadlines stress you out. Explore our professional assignment writing services with competitive rates today!

Secure Your Assignment!

Online Assignment Expert - Whatsapp Get 50% + 20% EXTRAAADiscount on WhatsApp

refresh