Reference no: EM133553283

Case Study: A PAYG instalment payer can vary the PAYG instalments if they believe that their circumstances have changed and that they might be paying too little or too much. Consider the following scenario, the rates are examples only and do not reflect current tax rates.

The ATO has calculated the businesses rate to be 18.75% based on an income from the previous assessable period of $90,000. The instalment income for the first quarter (1 July to 30 September) was $21,000 and the second quarter (1 October to 31 December) was $15,000.

The business has paid PAYG for the first two quarters of the year based on this rate but sales have dropped dramatically and expected income for the year is anticipated to be around $60,000. They have calculated their estimated income tax to be $8,900.

Questions:

1. Calculate the new instalment rate based on these figures.
2. Calculate how much the business paid in the first two instalments.
3. Calculate the variation credit that can be claimed and explain why it can be claimed. Show the calculations.
4. The taxpayer does not have to vary the amount or claim a variation credit. why might the taxpayer choose to do so or not do so.
5. Calculate the final price, taking into account WET tax that should be charged for a wholesale wine supply with a wholesale price of $100.