For the 2023-24 income year, Queenie has assessable income of $56,000 and deductions of $17,000 from her employment. Queenie also has $2,000 of interest income (assessable income). Further, Queenie also has a higher education loan programme (HELP) debt of $7,400 at 30 June 2024, but she does not have private patient hospital health insurance. Queenie also advises that she is entitled to a tax offset of $3,800 for the 2023-24 income year. Queenie also has an unused tax loss of $3,600 from the 2022-23 income year. Queenie’s taxable income for the 2023-24 income year is:

Question

BlackTom AI · Accepted Answer

First, let’s list the figures provided and separate the concepts that affect taxable income from those that affect tax payable.

- Assessable income: $56,000 from employment + $2,000 interest = $58,000.
- Deductions from employment: $17,000. These are subtracted to arrive at net employment income for taxable income purposes.
- HELP debt: This is a loan repayment obligation and affects tax payable through the HECS-HELP repayment schedule, but does not reduce or modify the taxable income base.”
- Higher education loan programme (HELP) debt does not reduce taxable income; it increases the amount of tax payable via loan repayments, not the taxable income itself.
- Unused tax loss from 2022-23: $3,600. Tax losses can be carried forward and offset against current-year taxable income, reducing it.
- Tax offset of $3,800: This reduces the tax payable, not the taxable income.

Now compute the taxable income step by step.

1) Start with total assessable income: $58,000.
2) Subtract employment deductions: $58,000 − $17,000 = $41,000.
3) Apply the carried-forward tax loss: $41,000 − $3,600 = $37,400.

What about the $3,800 tax offset? It reduces tax payable, not taxable income, so it does not change the taxable income figure.

Option-by-option check:
- a. $37,200: This would imply subtracting an extra $400 somewhere, perhaps misapplying the loss or deductions—there’s no basis for an extra $400 reduction given the data.
- b. $41,000: This is the amount after subtracting employment deductions but before applying the prior-year tax loss; it ignores the $3,600 loss carried forward.
- c. $37,400: This matches the correct order of operations: include all income, subtract deductions, then apply the carried-forward tax loss.
- d. $33,600: This would require subtracting $7,400 (the HELP debt) as a deduction or loss, which is not how taxable income is adjusted; HELP repayments affect tax payable, not the taxable income base.

In summary, the correct taxable income for 2023-24 is $37,400 because you first compute $58,000 of income, subtract $17,000 of deductions to get $41,000, and then apply the $3,600 unused tax loss from 2022-23, yielding $37,400. The tax offset of $3,800 lowers tax payable, not taxable income, and HELP debt does not reduce taxable income either.

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