Tutorial 2 Employment Income-1 PDF

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COLLEGE OF BUSINESSBKAT2013 – PRINCIPLES OF TAXATION (SEM A102)TUTORIAL 2 – EMPLOYMENT INCOMEDate of submission: 27 Feb 2011QUESTION 1Mr Sidek works as accountant in Sime Bhd since 1st January 2002. He provides the following information for the year 2010 as follows: a. Salary of RM13,350 per month a...

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COLLEGE OF BUSINESS BKAT2013 – PRINCIPLES OF TAXATION (SEM A102) TUTORIAL 2 – EMPLOYMENT INCOME Date of submission: 27 Feb 2011

QUESTION 1 Mr Sidek works as accountant in Sime Bhd since 1 st January 2002. He provides the following information for the year 2010 as follows: a. Salary of RM13,350 per month after his EPF contribution of 11%. b. Commission of getting new customers amounting to RM5,500. c. Monthly allowance: i. Entertainment - RM300 per month ii. Travelling - RM250 per month iii. Parking allowance - RM200 per month d. He is given 10,000 unit of share at RM1 per share. The market value at the time option granted was RM3 per share. He exercises his option on 31 October 2010 where the market value then is RM6 per share. e. Shopping voucher worth RM200 was given by the company for Hari Raya purpose. f. Two units of computers (notebook) worth RM5,000 each were given to him. g. RM1,000 monthly for tax allowance. h. As a professional accountant he needs to pay to Malaysian Institute of Chartered Accountant RM300 per year to maintain his membership. i. He resigned from Sime Bhd on 30 November 2010 at age of 52 years old and was paid RM72,000 as a gratuity to recognize for his service in the company. j. His is provided with a Honda civic car costing RM80,000 a six year old by his employer. The market value of the car is RM100,000 and uses 25% of it for private use. The car was sold to him when he resign for RM50,000 (market value RM55,000) in which he took the offer. k. A fully furnished accommodation is provided by the company till the date of his resignation. His company rented the accommodation for RM2,000 per month including the value of furniture for RM500 each month. A servant was provided which is employed and paid by the company at RM700 per month. l. The following additional appliances were also provided by the company: 1

i. Organ valued at RM8,000 (prescribed life span is 10 years) ii. High dimension television valued at RM6,300 (prescribed life span is 7 years) m. Medical cost amounting to RM3,500 was paid by his employer in related to his family members. n. He has contributed to an unapproved retirement fund set up by Sime Bhd. He received the following amount upon his resignation: i. His contribution - RM35,000 ii. Employer contribution - RM25,000 iii. Interest earned - RM 8,000 o. He only uses 20% of entertainment allowance for personal use and RM3,000 was spent on official travelling. REQUIRED Compute the adjusted employment income for Mr Sidek for the year of assessment 2010.

QUESTION 2 Since 1.3.04, Nadya has been working with Nice Recipe Sdn Bhd, a herbs marketing manager. On 1.9.10, she resigned from the company. As an appreciation, the company had awarded her with a gratuity of RM36,000, a compensation for lost of employment amounting to RM40,000 and also an excellent service award in term of watch worth RM3,000 and cash of RM12,000. The followings are Nadya’s income and expenditure for year 2010: Monthly gross salary of RM8,200. Petrol and traveling allowance of RM1,000 per month. Leave passages: Labuan, Sabah Kuantan, Pahang Penang Kota Bharu Jogjakarta, Indonesia Dublin

RM 1,200 (including accommodation of RM400) 700 900 600 1,000 2,400 (not including of food allowance of RM650)

The company provided her with a fully furnished house including air-conditioners, curtains, carpets and kitchen equipments. The annual value of the house is RM25,000. Nadya was required to pay RM350 per month as a rental payment to the employer. Nadya hired a gardener to maintain the house compound. The employer reimbursed the salary of the gardener of RM250 per month. 2

The employer also subscribed landline telephone for the house provided to Nadya. The bills for year 2010 amounted to RM750 were under Nice Recipe Sdn Bhd. Nadya also enjoyed medical and dental benefits provided by the employer. The annual amount was RM10,000 and RM500 respectively. Besides that, the company also provided their employees RM200 meal allowance per month and paid their parking fees at RM30 monthly. On 14.10.10, Nadya withdrew all contribution in a fund established by Nice Recipe Sdn Bhd amounted to RM38,000 on 30.11.10. 40% of the withdrawal was employee’s contribution and the balance consisted of employer’s contribution and profit earned. Nice Recipe Sdn Bhd paid for part of Nadya’s tax liability for YA 2009 amounting to RM1,900. The employer also offered the employees to purchase company’s goods at the discounted price. Throughout the year, Nadya took up to RM2,500 cost of goods. Apart from that, Nadya was also provided with child care allowance of RMRM4,000 per year as she has two children ages 5 and 12 years old and they are sent to child care centre. At the end of the year, she reported that the costs of official traveling was RM7,900. REQUIRED: Determine the statutory income from employment of Nadya for the YA 2010.

QUESTION 3 Jefri, an employee of Banface Sdn Bhd has received the following income or benefits for the year ended 31 December 2010: (All the benefits were provided for the full year ended 31 December 2010, unless stated otherwise). a. Salary

RM132,000

b. Entertainment allowance

RM30,000

c. Childcare allowance

RM3,600

d. Travelling allowance

RM18,000

This amount is inclusive for allowance between home and workplace. At the year end, Jefri claims that a sum of RM8,000 was incurred for official purposes.

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e. For the financial year ending 31 December 2010, Banface Sdn Bhd has paid bonus amounting to RM18,000 in two equal installments. These payments were made on 15 December 2010 and 15 January 2011 respectively. f. The company paid a total of RM900 for the internet subscription fees registered in the company’s name. Banface Sdn Bhd also paid the yearly subscriptions in respect of Jefri’s membership to a golf club, amounting to RM12,000. g. Reimbursement of salary in respect of a driver employed by Jefri amounting to RM1,500 on a monthly basis was given since 1 April 2010. h. Since 1 April 2010, a domestic helper, which employed by the company, at a monthly salary of RM800 was provided to Jefri. i. Banface Sdn Bhd paid the following expenses in respect of Jefri’s holidays with his wife and child: Pulau Australia Pangkor (March 2010) (July 2010) Cost of air fare Cost of meals and accommodation

RM2,400 RM2,600

RM800 RM2,200

j. The use of a car costing RM220,000. k. Jefri was allowed to stay in a hotel from 1 January 2010 to 30 April 2010. The charges amounting to RM23,000.

l. Starting 1 May 2010, a fully furnished house was provided to Jefri. Banface Sdn Bhd incurred a monthly rental of RM3,000. Jefri was required to pay a sum of RM250 per month for the maintenance of the premises. A fridge costing RM6,000 purchased by the company, was among facilities provided in that house. The life span of the fridge is 10 years. m. The income tax payable by Jefri is borne by the company. Income tax payable by Jefri for the year of assessment 2008 amounted to RM22,000. The tax payable for the year of assessment 2010 is expected to be RM24,000. n. Jefri claimed that entertainment expenses for official purposes amounting to RM33,000 in 2010.

REQUIRED: Compute the adjusted employment income of Jefri for the year of assessment 2010.

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