Q7.5.5.

(Tax calculation under averaging)

Rikki Teabridge had the following income during the 2017/18 tax year:

Net Business Income from Primary Production $35,000

Gross Wages from part-time job at local supermarket $20,000

Rikki's average income was $20,000.

Rikki had no other assessable income or deductions.

PAYG tax of $2,000 was withheld from Rikki's wages.

Rikki is covered by adequate private health insurance.

Required:

Complete the following statement showing Rikki's tax payable for the 2017/18 tax year including any averaging adjustment.

Notes/Workings (if any)

Tax on Average Income

Rikki's average income is $20,000

Tax on $20,000

$342

Comparison of Tax Rate

342/20,000 x 100/1

1.71%

Gross Averaging Amount

Tax on $55,000 @ ordinary rates

$3,572 + (($55,000 - $37,000) x 32.5%)

$9,422

Tax on $55,000@ comparison rates 1.71%

$941

$8,481

Averaging Component

Because taxable basic non-ppy is > than $10,000, then only taxable PPY comprises the averaging component

$35,000

Averaging Adjustment Tax Offset

$8,481 x $55,000 / $55,000

$8,481

Tax Payable Calculation

Tax on $55,000

$9,422

Less Averaging Tax Offset

$8,481

Less Low Income Tax Offset

$445 - (($55,000 - $37,000) x 1.5%)

$175

Add Medicare Levy

$55,000 x 2%

$1,100

Less PAYG Withheld

$2,000

= Tax Payable

-$134

Can you please review this and confirm that averaging tax offset amount is correct