Question 6 Individual Tax Liability (12 marks)

Brendan Marley is a New Zealand tax resident. He works full time at Mitre 10 Mega. He is also a musician and works part-time at the local bar on Fridays and Saturdays. Brendan received the following gross amounts during the income year ended 31 March 2020.

Ref	Description	Source	Amount $
1	Salary	Mitre 10 Mega	58,000
2	Bar income	Local bar	15,000
3	Interest	ANZ Bank	200
4	Garage sale receipt	Various people	1,000
5	Dividends	Mercury Energy Ltd	600
6	Tips	Various fans	400
7	Board fees	School Board Trustees	980
8	Lotto-Powerball winnings	LOTTO New Zealand	750
9	Free Holiday voucher	Mitre 10 Mega	350
10	Loan	Kiwi Bank	14,000

Supplementary Notes - the numbers in this section refer to the items in the table above.

1. PAYE of $10,420 was deducted by Mitre 10 Mega.

2. Brendan worked part time as a musician at the local bar (as an independent contractor).

3. Brendan provided his IRD number to ANZ Bank and RWT was deducted at 30%.

4. Brendan had a garage sale to sell items that he did not need.

5. This dividend from Mercury Energy Ltd was fully imputed and an appropriate amount of RWT was deducted.

6. Brendan received cash tips from his part time work at the local bar.

7. Brendan is on the Board of Trustees of the local primary school. Withholding tax of $280 was deducted from this amount.

8. Brendan won various amounts playing Lotto during the year.

9. To recognise 20 years of service, he received a $500 gift voucher from Mitre 10 Mega

10. Brendan took a loan of $14,000 from BNZ to renovate his house.

Brendan made the following payments during the income year ended 31 March 2020:

Fees of $750 to you for preparing his income tax return.

Income protection insurance premiums $860.

Provisional tax $3,800.

Cost of transporting musical instruments to local bar where he works as a musician $2,600.

Required:

(a) For the year ended 31 March 2020, calculate Brendans income tax liability and the terminal tax to be paid or tax refund. Show all workings in the form of an IR3 return. (10 marks)