Question

Q6. (Average Income) Ernie Wombat is a primary producer who commenced business in 2012/13. The following data relates to Ernie’s first 6 years of trading: Year Assessable Income Deductions 2012/13 $ 32,000 $ 15,000 2013/14 35,000 20,000 2014/15 31,000 39,000 2015/16 42,000 21,000 2016/17 45,000 22,000 2017/18 51,000 25,000 • All assessable income and deductions are from primary production. • The deductions do not include any amounts that may be deductible for losses of previous years. Required: a. Calculate Ernie’s taxable income for each tax year. b. Calculate Ernie’s average income for each tax year..

Answer 1

Ernie Wombat Requirement a & b Year 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 Taxable Income Average Income Notes (if any) 17000 N/A Averaging provisions not applicable 15000 N/A Provisions not applicable as taxable income of Year 1 > Year 2 -8000 7500 15000 + 0/2 21000 9333 15000 + 0 +13000/3 23000 12750 15000 + 0 + 13000 + 23000/4 26000 15400 150000 + 0 + 13000 + 23000 + 26000 / 5