Pat and Daphne Carrigan are a married couple in their 40s. They are Australian resident individuals for

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Question:

Pat and Daphne Carrigan are a married couple in their 40’s. They are Australian resident individuals for income tax purposes. The couple has two dependent children, Alex aged 6 and Payne aged 8. Pat and Daphne do not have private health cover. These are the facts relevant to their current income year:

Daphne is employed as a teacher at university. Her employer-issued PAYG payment, summary uploaded to her ATO profile, reflects the following:

Gross salary $20,000
PAYG withheld from her salary $380

Daphne owns shares in an ASX listed company. This company paid $3,600 into her bank account after declaring fully franked dividends. The company is liable to pay tax at the rate of 30%. Daphne’s franking credits in relation to these dividends total $1,542.86.

This table shows you the calculation of Daphne’s taxable income if the question required you to calculate her taxable income. Note that in order to meet the assessment criteria for ordinary income items, you must use section 6-5 ITAA97 and you must add the relevant characteristic that fits with the income item – we cover these in Topic 3. An answer for section 6-5 ITAA97 is incomplete if you don’t add a correct characteristic. To earn the mark for each item, all of the elements must be present in your answer. See the Topic 1 Learning guide that lists the remaining sections. This is the calculation of Daphne’s taxable income for the 2020–2021 income year:
		$	Mark
	Salary, s 6-5 ITAA97 income from employment, or regular and periodic	20,000	½
	Dividends, s 44 ITAA36	3,600	½
	Franking credits, s 207-20 ITAA97	1,543	½
	Taxable income	$25,143

Pat operates his own business called Carrigan Sports Management. This business acts as the manager for professional sports stars in several sporting codes to negotiate their contracts, and to find them sponsorship deals and paid public appearances. The business records of Carrigan Sports Management reflect the following for the income year:

Turnover, comprising of commission for services to clients, ordinary income, s 6-5 ITAA97, income from business $3,230,000
Tax deductible expenses including rent, council rates and taxes, electricity, telephone, internet charges, s 8-1 ITAA97 $1,235,000
Tax deductible salaries paid to staff, s 8-1 ITAA97 $650,000
Capital allowances, Div 328 ITAA97 (tax deductible depreciation) on office equipment and computers $145,000

During the income year, Pat remitted PAYG payments of $400,000 to the ATO in prepayment of his income tax liability arising from his business.

Pat also rented out a unit that he owns in a unit complex in St Lucia to a tenant. These are the relevant details:

Rent received, ordinary income, s 6-5 ITAA97, income from property $20,000
Tax deductible expenses for the rental property, s 8-1 ITAA97 $15,000
Tax deductible interest charged on the mortgage loan that Pat used to fund the purchase cost of the unit, s 8-1 ITAA97 $10,000

This table shows you the calculation of Pat’s taxable income if the question required you to calculate his taxable income. $ Mark
	Turnover, commission, s 6-5 ITAA97, ordinary income, income from business	$3,230,000	½
	Expenses for rent, rates, electricity, telephone, internet, s 8-1 ITAA97	($1,235,000)	½
	Salaries, s 8-1 ITAA97	($650,000)	½
	Capital allowances, Div 328 ITAA97	($145,000)	½
	Rent, s 6-5 ITAA97, ordinary income, income from property	$20,000	½
	Expenses for the rental property, s 8-1 ITAA97	($15,000)	½
	Interest, s 8-1 ITAA97	($10,000)	½
	Taxable income	$1,195,000

You are required to:

Calculate Daphne’s tax payable or refundable. Provide all your calculations, explanations, formulas and bases for calculations.
Calculate Pat’s tax payable or refundable. Provide all your calculations, explanations, formulas and bases for calculations.