complete the Tax calculation template

complete the Tax calculation template

INFORMATION

Calculation of Net Business Income

First, we need to calculate the Gross Profit.

Gross Profit = Sales - Cost of Goods Sold (COGS)

Sales = Cash Sales + Accounts Receivable = 890101 + 115500 =1005601

COGS = Opening Stock + Purchases - Closing Stock = 51700 + 336600 - 54000 =332300

Gross Profit = 1005601 - 332300 =673301

Next, we calculate the Net Business Income by subtracting the business expenses from the Gross Profit.

Business Expenses

• Wages = 170000
• Advertising = 15400
• Interest on Loan = 12000
• Electricity = 28600
• Employee super payment = 17000
• M/V expenses = 13200
• Annual Leave Provision = 8000
• Rent (commercial) = 67100
• Fines (council) = 10000
• Allowance for doubtful debts = 4000

Total Business Expenses = 170000 + 15400 + 12000 + 28600 + 17000 + 13200 + 8000 + 67100 + 10000 + 4000 =314300

Net Business Income = Gross Profit - Business Expenses = 673301 - 314300 =359001

Calculation of Tax Payable

To calculate the tax payable, we need to consider Howard's personal income tax rate. As a sole trader his business income is considered as his personal income.

Assuming Howard falls into the tax bracket of 37% (for income between $90,001 and $180,000), his tax payable would be:

Tax Payable = Net Business Income * Tax Rate = 359001 * 0.37 =132870.37

However, Howard has already paid $67,500 as PAYGI. Therefore, the remaining tax payable would be:

Remaining Tax Payable = Tax Payable - PAYGI = 132870.37 - 67500 =65370.37