BTW3153 Malaysian Income Tax Law

Answer to question 1:

Franking credit account of Xylophone Pty Ltd is prepared below taking into consideration the relevant assumption of imputation credit attached with dividend as per the instruction of the Australian Taxation Office (ATO).

Note:

Thus, the franking credit account balance as at the end of the financial year is $29,000 (cr.) as per the above franking credit account. It is important to note that the standard rate applicable for the companies in the country, i.e. 30% has been considered while calculating franking credit attached with the payment and received of franking dividends.

Workings:

Calculation of franking credit on the franked distribution to the members on August 29, 2019:

(70000 x 80%) x 30/70 = $24,000.  

Calculation of franking credit on the franked distribution received as on September 3, 2019:

(56000 x 90% ) x 30/70 = $21,600.

Franking credit in respect of cash dividend paid on September 21, 2019 is already given at $2,600.  

Answer to question 2:

Calculation of taxable income and tax payable:

Net tax payable:

Answer to question 3:

Part a:

A person is a resident of Australia for income tax purposes if he / she satisfy any one or more of the following conditions:

1. Domicile test: If the person is domiciled in Australia then irrespective of number of days he spent in Australia he will be an Australia citizen for income tax purpose.
2. Resides test: If a person has a place of abode in Australia then also he will be considered an Australian resident for income tax purpose.  
3. 183 days test: Any one present in Australia for 183 days or more in a tax year will be an Australia resident for tax purposes.    
4. Superannuation test: Any one employed by the Australian government even if posted outside the country will be an Australian resident for income tax purposes.

Since, Mellisa has stayed more than 183 days in Australia in the relevant tax year hence; she is an Australia resident for income tax purposes and shall accordingly be taxed n the country.

Any income earned by Mellisa’s business will be subjected to income tax in the country at the normal rate applicable to a resident Australia.  

Part b:

No, Mellisa’s assumption related to s6-5 of ITAA 1997 is not correct because s6-5 of the act clearly states that anything whether in cash or kind received from the client or customer of a business having a specific monetary value shall be included as income of the business under s6-5 of ITAA 1997.

Hence, the two iPhone Xs received from one of the suppliers of Mellisa’s business, Tara Inc. will be included as ordinary income under s6-5 of ITAA 1997 to compute the assessable income of Mellisa’s business for the concerned income tax year.    

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