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TAX RATES 2016/2017

Resident Individuals

Taxable income $	Tax payable
0-18200	NIL
18201 — 37000	19% of excess over 18200
37001- 87000	3572 + 32.5% of excess over 37000
87001- 180000	19822 + 37% of excess over 87000
180001+	54232 + 47% of excess over 180000

Note: (a) This does not include the 2% Medicare Levy or Medicare Levy Surcharge. (b) Include 2% temporary budget repair levy.

Company tax rate is 30%, but it is 27.5% for small business entities.

FBT

• Type 1 benefit gross-up factor: 2.1463
• Type 2 benefit gross-up factor: 1.9608

ABC Pty Ltd. is a small Australia insurance company operating in Adelaide. It is an Australian resident private company for tax purpose. The accounting profit and loss statement for the year ended 30 June 2018 is as follows:

Income	$	$
Fees		1,000,000
Less operation expenses
Accounting fees	15,000
Advertising	12,000
Accounting Depreciation (note1)	15,000
Fringe benefits tax paid	15,000
Gifts (note 2)	10,000
Light, power and heating	30,000
Provision for long service leave (note 3)	20,000
Provision for doubtful debts (note 4)	10,000
Provision for unreported claims (note 5)	8,000
Rent	50,000
Repairs (note 6)	20,000
Stationary	5,000
Wages	400,000
		(610,000)
Net profit		390,000

Additional Information
1) The Tax Depreciation schedule based on Division 40 ITAA 1997 shows depreciation for the year as $20,000

2) The Gift were as follows:
Royal Melbourne Hospital $5,000
Melbourne Football Club $5,000

3) The long service leave paid in cash during the year was $10,000

4) The bad debts written off during the year were $15,000.

5) The provision for unreported claims was based on an estimate of accidents that had occurred before the end of the financial year but had not yet been reported to the company. The company anticipated making the payments of $8,000 during the months of July and August 2018 in respect of these claims.

6) The repairs of $20,000 consisted of painting the company premises for $5,000 and replacing the old rotting wooden office window frames with new steel window frames for $15,000. The cost of replacing the old wooden office window frames with new wooden window frames would have been $16,000. The new steel window frames had the advantage of not being subject to rotting.

7) On the 30 June 2018, the ABC Pty Ltd also received a dividend of $100,000 (franked to 80%) from Halo Pty Ltd is not a small business entity for tax purposes.

8) The accounting net profit of $ 390,000 included $60,000 of net exempt income.

9) The company has an unabsorbed income loss of $80,000 from the 2016 income year. The company satisfies the continuity of ownership and continuity of business tests.

Required
Calculate the company's tax liability for the year ended 30 June 2018.
Figures can be rounded to the nearest dollar.
You should briefly explain your treatment of every item in this question
If you fail to explain your inclusion or exclusion of any item, you will lose marks.
Use the following format in answering this question:

Item	Explanation	Amount
Bad debts	Normal risk in carrying on a business - deduction (s25-35 and s8-1, ITAA97)	$ XXX