Question One (ADVANCE TAXATION)

Question 1-Personal Tax Johnson with three dependents works for the private sector in Madang. He earns K150,000 in salary per year and is also provided the following employment benefits in 2021 ; House rented by the employer at K3500 per week, Motor vehicle with fuel for unrestricted use Cash entertainment allowance of K300 per fortnight, Education expenses for 2 children paid direct to the school by the employee total K 15,000 per annum Johnson has given gifts and charity to approved sports institution K10,000 Gross Business Income amounted to K 120,000 and Allowable Deauctions in respect of Business income amounted to K42,000. He also received interest (net of 15% withholding tax) amounting to K4,250 Dividend Income from New Zealand (net of 20% foreign tax) K 18,000 a) Calculate taxpayer's taxable salary or wages income per year. (7 Marks) b) Calculate taxpayer's Non Salary Income and tax liability (6 Marks) c) Is it necessary to file a tax return by Johnson? If yes, why? (2 Marks) Question 2 - Export Incentives and other deductions 15 Marks Required to: (a) Calculate taxable income and tax liability ( 9 Marks) (b) Required to work out the tax treatment of the following incentive items: (6 Marks) A. Borrowing cost K 100000 spent to borrow K 1000000@10% interest repayable on 10 years' period of time. (2 Marks) B. Agriculture Industry has spent K 100000 for research and development expenditure purpose (2 Marks) C. Manufacturing industry has purchased a machinery K 500000 on 1.4 .2021 (10 years' life). Depreciation 10% under straight line method. (2 Marks) Question 3-Off setting and Carry forward of Losses \begin{tabular}{|l|l|l|} \hline Year & Result & Amount (Kina) \\ \hline 2016 & Loss & 125,000 \\ \hline 2017 & Profit & 90,000 \\ \hline 2018 & Loss & 100,000 \\ \hline 2019 & Profit & 80,000 \\ \hline \end{tabular} The business also earned exempt income K 25,000 in each of these years. Required to: Show the treatment of losses for tax purposes