To work out the Tax Payable on Taxable Income when there is Exempt Foreign Income;
First add the Taxable Income and Exempt Foreign Income together. Example below:
Taxable income: 103400
Exempt Foreign income: 15600
Total: 119000
2. Work out what they would have paid were this all Australian income:
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$5092 plus 32.5 cents for each $1 over $45,000 (119000 - 45000 = 74000 x .325 = 24050 + 5092) = 29142
3. Work out the marginal rate by using the value 29142 divided by the total income 119000 = 0.244890
4. Use the taxable income 103400 x marginal rate 0.244890 = 25321.63
The Tax Payable on Taxable Income is 25321.63
Normally this is where the calculation stops however, if there are some deductions which also need to be apportioned between the taxable and exempt income, further calculation must be made;
5. Example: There is a value at item D9-Donations of 200. This must be divided between exempt and taxable income.
6. Find the percentage of exempt deductions by taking the exempt income over the full income value: 15600 / 103400 = 0.15
7. You will then need to add back this portion of deductions to the taxable income: 200 x 0.15 = 30
8. 30 + 25321 taxable income = 25351.
9. Times this by the marginal rate 0.244890 = 6208.20