Jordan and Cameron are a married couple.  Jordan works in IT and earns $180 000 p.a. The company he works for also pays for his family’s private medical insurance, $4 000 p.a. and provides him with a car for private use which is estimated to be worth $20 000 p.a.  He works from home and only occasionally goes in to the company office in the city. Cameron works as a marketing executive and earns $120 000 p.a.
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They have two children (both living at home) – Miranda,  aged 22, undertaking graduate studies at university as a full fee paying student and also working on a casual basis  earning $300 per week; Cate, aged 18, undertaking a HECS supported undergraduate degree full time, is not working but is financially supported by her parents.
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Jordan and Cameron have accumulated share and property portfolios and seek advice from you in respect of calculating their tax liabilities. Â They have not taken any interest in their financial affairs to date but want to take a more active role in this now.
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The couple provides the following information:
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1. Balance sheet, other income and interest expenses
Assets
Home and contents $1 000 000
Cars      $60 000
Holiday house (rental income this financial year $4000) Â Â Â $500 000
Investment property (rental income this financial year  $22 000)    $900 000
Bank account (interest earned this financial year $2 000) Â Â Â Â Â $70 000
Share portfolio (fully franked dividends of $20 000 paid this financial year) Â Â Â $530 000
Superannuation- Jordan (after-tax return of $80 000) $1 200 000
Superannuation- Cameron (after-tax return of $60 000) $ Â Â 800 000
Total assets            $  5 060 000
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Liabilities and interest expenses
Mortgage on home (interest paid this financial year, $12 000) Â Â $350 000
Mortgage on investment property (interest paid this financial year, $56 000) Â Â $700 000
Mortgage on holiday house (interest paid this financial year, $32 000) Â Â Â Â Â Â Â Â Â Â Â Â Â Â Â $390 000
Bank loan on share portfolio (interest paid this financial year $3 500) Â Â Â Â $50 000
Credit card (interest paid this financial year $1 500) Â Â Â Â Â $10 000
Total liabilities             $1 500 000
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2. Other expenditure
In addition to their interest and loan repayments, the couple incurred the following expenses during the year:
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|
Expenditure |
Cameron |
Jordan |
|
Work related expenses |
$1000 |
$2200 |
|
Travelling to and from home |
$1200 |
$1500 |
|
Child care expenses |
$0 |
$6000 |
|
Donations |
$500 |
$0 |
|
Living costs |
$18 000 |
$18 000 |
|
Expenses (not including interest) related to holiday home – Total of $15 000 |
 |
 |
|
Expenses (not including interest) related to investment property- Total  $9 000 |
 |
 |
|
Tax agents’ fees |
$700 |
$900 |
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3. Additional information
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· All of the assets are jointly owned in the names of Jordan and Cameron of except for the share portfolio which is in the name of Cameron only.
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· The share portfolio was acquired for $200 000 in 2002.
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· Cameron has a carried forward capital loss of $7000 relating to some shares she sold 3 years ago.
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· The investment property is available for rent all year and this year, due to a change in tenants, it was rented out for 10 months.
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· The holiday home was available for rent for nine (9) months of the year but was only rented out for five (5) months.
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· Jordan’s employer deducted $58 000 as PAYG tax while Cameron’s employer deducted                     $35 000 as PAYG tax.
required
1. Calculate the net tax payable/refundable for the current year for both Jordan and Cameron and justify any inclusions other than their salaries.Â
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2. As Jordan works from home, he is wondering whether he can get his younger daughter Cate, who is a full time student and not otherwise employed, to carry out some minor administrative work for him as a personal assistant for two hours a week. He would like to pay her $200/hr or $400/wk. This would reduce his taxable income and, in Cate’s hands, the income would attract very little, if any, tax.  Advise Jordan in this matter.