Max Colbey, 58 years of age, retired on 1 August 2014 with $500,000 accumulated in his superannuation account from which he will commence an account based income stream. The superannuation administrators have advised that his superannuation balance consists of a tax-free component of 36% with the remainder comprising a taxable (untaxed) component. In the 2015 year Max received a total of $70,000 in payments from the income stream. Max has a marginal tax of 37%. Ignoring the Medicare levy, the net tax payable by Max on the income stream will be:

Question

Quizplus · Accepted Answer

To calculate the net tax payable by Max on the income stream, we need to first determine the taxable and tax-free components of the payments he received.

Taxable component = $500,000 - (36% x $500,000) = $320,000
Tax-free component = 36% x $500,000 = $180,000

Next, we need to calculate the taxable and tax-free portions of the income stream payments Max received in the 2015 year.

Taxable portion = ($70,000 x ($320,000/$500,000)) = $44,800
Tax-free portion = ($70,000 x ($180,000/$500,000)) = $25,200

Now we can calculate the amount of tax Max will need to pay on the taxable portion of the income stream payments.

Taxable income = $44,800
Tax payable = ($18,200 + 0.37 x ($44,800 - $18,200)) = $16,576

Therefore, the net tax payable by Max on the income stream is $16,576.

Max Colbey, 58 Years of Age, Retired on 1 August