Question 5

You must answer both A and B

Juice Pty Ltd is a resident company. It has two resident shareholders. One, Peter owns one A class share in the company and is on a marginal tax rate of 45%.

Assume the after-tax distributable profit of Juice Pty Ltd is calculated as follows:

Profit (including income) $200,000

Income $100,000

Tax @ 30% $ 30,000

Franking credits $ 30,000

After-tax income $ 70,000

After-tax profit $170,000

Required A: (10 marks)

Disregarding the Medicare levy, calculate the after-tax effects for Peter if he receives as a distribution a dividend of $85,000 franked to 50%

In your response give reasons and refer to sections of legislation and cases, where relevant.

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