Dexter Mason is a 48-year-old resident of Australia for income tax purposes. Dexter is married to Rita
Question:
Dexter Mason is a 48-year-old resident of Australia for income tax purposes. Dexter is married to Rita (44-years-old) and they have two dependent children together Cody (19 years old) and Harrison (4 years old). Rita’s Adjusted Taxable Income for the 2021 financial year was $19,900. Cody is in receipt of a government Disability Support Pension and has Adjusted Taxable Income of $14,800. Harrison earned no income during the year.
Dexter has been employed by a private company that provides engineering services to the Australian Defence Force. He and his family had been based in Newcastle until his transfer to the company’s operations in Darwin, Australia on 1 December 2020 where they remain.
Details relating to Dexter’s income and expenses for the year ended 30 June 2021 are as follows:
Receipts
Gross Salary as per payment summary (note 1) 105,524
Franked dividends received from an ASX listed company 5,800
Unfranked dividends received from an ASX listed company 350
Gross rental income received 22,500
Net Interest received from a New Zealand bank (note 2) 800
Payments
Deductible expenses and interest on the rental property (note 3) 26,500
05/01/21 - Purchase of a laptop computer used 60% for
employment purposes which has an effective life of 2 years 2,850
05/01/21 - Purchase of a calculator used 100% for employment
purposes which has an effective life of 4 years 95
03/07/20 – Purchase of a new oven for the rental property
which has an effective life of 12 years 1,225
Removal and relocation costs to Darwin 2,800
Other deductible expenditure relating to Australian income 1,000
Other information:
At 30 June 2021 Dexter had an accumulated HELP (HECS) debt of $7,500.
Dexter did not have any private hospital cover for himself or his family.
Dexter contributed $5,000 to a complying superannuation fund on Rita’s behalf (as a spouse contribution) on 25 June 2021.
Notes:
- The payment summary also showed $26,000 PAYG deducted, a Reportable Fringe Benefit amount of $5,500 and a Reportable Employer Superannuation Contribution amount of $5,200.
- Amount shown in Australian dollar equivalent (AUD). $200 AUD withholding tax was deducted by the NZ institution from the gross $1,000 AUD interest earned.
- Assume all amounts shown are deductible. Dexter acquired the rental property on 15 May 2020 for $450,000. The building was brand new and $285,000 directly related to the building cost. On that day he also paid a total of $1,500 borrowing costs in relation to a 25-year mortgage used solely to purchase the property. The property was first rented on 1 July 2020 and was tenanted for the full 2021 tax year. Apart from the new oven there are no other depreciable assets related to the rental property.
- Dexter also used his privately owned 2,000cc BMW motor vehicle for business purposes. Dexter purchased the vehicle in May 2020 at a cost of $25,000. Assume Dexter can meet all substantiation requirements. Dexter estimates he travelled 8,000 km for business purposes during the 2021 year.
Required
Calculate Dexter’s taxable income and net tax payable/refundable for the year ended 30 June 2021. Adopt any elections that will minimize his tax payable. Show all workings. Section referencing of the ITAA 1936 and ITAA 1997 is not required, however a list of other references used to answer the question should be included.
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones