4. The profit of my sole-proprietorship business was assessed at $460,000. My wife received a monthly rent of $10,000 from a property under mortgage. She paid mortgage interest of $56,000 during the year. How is Personal Assessment applied to a married couple?
(Note: The following calculation is based on the tax rates for the year of assessment 2014/15.)
|
Tax payable under Personal Assessment |
$ |
|
|
Your business profits |
460,000 |
|
|
Your wife's property income: |
$ |
|
|
Net assessable value ($10,000 x 12 x 80%) |
96,000 |
|
|
Less: Mortgage interest |
(56,000) |
40,000 |
|
Chargeable income |
500,000 |
|
|
Less: Married person's allowance |
(240,000) |
|
|
Net chargeable income |
260,000 |
|
|
Tax thereon (at progressive rate) |
32,200 |
|
|
Less: 75% tax reduction (capped at $20,000) (Note) |
20,000 |
|
|
Tax payable |
12,200 |
|
|
Your share of tax payable |
|
|
($12,200 x 460,000 / 500,000) |
11,224 |
|
Your wife's share of tax payable |
|
|
($12,200 x 40,000 / 500,000) |
976 |
You and your wife will each receive notice of assessment and a demand for payment.
Separate taxation for husband and wife is not applicable under Personal Assessment. The total income of an individual, as appropriately reduced, will be aggregated with that of his/her spouse to arrive at the joint total income of the couple for assessment purposes. Normally, the tax payable on the Joint Assessment is proportionally allocated to the husband and the wife on the basis of their respective reduced total income, and a notice of assessment will be issued to each of them.
(Note) For 2014/15, 75% of the final tax payable under profits tax, salaries tax and tax under personal assessment would be waived, subject to a ceiling of $20,000 per case.
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