- 17 Marks
Question
Mr. Osei Bobie, an amputee, was the Senior Accountant of Soroku Mine Company Limited (a mining company) for many years with a basic salary of GH¢54,000 per annum. He was entitled to a company vehicle, fuel, and driver.
He acted for the Director of Finance in March, April, and May 2016, during which month his salary was raised to GH¢5,000 per month.
Mr. Osei Bobie was housed in the company lavishly furnished accommodation on the mine.
He was also entitled to the following monthly allowances:
- Professional allowance GH¢400
- Responsibility allowance GH¢500
Mr. Osei Bobie resigned from Soroku Mine Limited on 30 June 2016. He received the following on his resignation:
- He was allowed to take home the company’s pick-up he was using valued at GH¢5,000.
- Cash gifts from staff GH¢6,100.
On 1 August 2016, he took up an appointment as Accounts Manager of Phinex Limited (a retailing company) on a salary of GH¢72,000 per annum. His other entitlements were agreed as follows:
- Responsibility Allowance – GH¢150 per month
- Cost of Living Allowance – GH¢200 per month
- Risk Allowance – GH¢100 per month
- Overtime Pay – GH¢250 per month
- Bonus – GH¢1,500 in each December
- Vehicle and fuel
- Accommodation only
Mr. Osei Bobie finances the following insurance policies and also contributes to the Social Security and National Insurance Trust (SSNIT):
| Insured | Premium | Sum Assured |
|---|---|---|
| Mrs. Gameli (sister) | GH¢500 | GH¢4,000 |
| Mr. Osei Bobie | GH¢3,600 | GH¢35,000 |
Mr. Osei Bobie is not married, but he is responsible for his three children, who are all attending registered Senior High Schools. Mr. Osei Bobie supports his 72-year-old grandmother with GH¢300 per month despite her immense wealth. His grandmother depends entirely on him.
Required:
a) Compute the assessable income and tax payable of Mr. Osei Bobie for the year 2016. (17 marks)
Answer
Osei Bobie
Computation of chargeable income for the Year of Assessment 2016
| Soroku Mines | Amount (GH¢) |
|---|---|
| Basic Salary (6/12 x 54,000) | 27,000 |
| Acting Allowance (5,000 – 54,000/12) x 3 | 1,500 |
| Professional Allowance (6 x 400) | 2,400 |
| Responsibility Allowance (6 x 500) | 3,000 |
| Cash Gifts | 6,100 |
| Total Cash Emoluments from Soroku Mines | 40,000 |
| Benefits in Kind | |
|---|---|
| Pick-up (value) | 5,000 |
| Vehicle, Fuel, Driver (12.5% of 40,000) | 5,000 |
| Accommodation (6 x 600) | 3,600 |
| Total Benefits in Kind | 8,600 |
| Total Employment Income from Soroku Mines | 48,600 |
| Phinex Limited | Amount (GH¢) |
|---|---|
| Basic Salary (5/12 x 72,000) | 30,000 |
| Responsibility Allowance (5 x 150) | 750 |
| Cost of Living Allowance (5 x 200) | 1,000 |
| Risk Allowance (5 x 100) | 500 |
| Overtime Pay (5 x 250) | 1,250 |
| Total Cash Emoluments from Phinex Limited | 33,500 |
| Benefits in Kind | |
|---|---|
| Vehicle with Fuel (10% of 33,500) | 3,350 |
| Accommodation (7.5% of 33,500) | 2,513 |
| Total Employment Income from Phinex Limited | 38,513 |
| Total Employment Income (Soroku + Phinex) | 87,113 |
Less Reliefs:
- Social Security Contribution (5.5% of 27,000 + 30,000) = GH¢3,135.00
- Disability Relief (25% of 87,113) = GH¢21,770.25
- Responsibility Allowance = GH¢200.00
- Child Education (2 children x GH¢200) = GH¢400.00
- Aged Dependence Relief = GH¢100.00
Total Reliefs = GH¢25,813.25
Total Chargeable Income = GH¢61,299.75
| Income | Rate | Tax (GH¢) |
|---|---|---|
| First 2,592 | Nil | – |
| Next 1,296 | 5% | 64.80 |
| Next 1,812 | 10% | 181.20 |
| Next 33,180 | 17.5% | 5,806.50 |
| Remaining 22,419.75 | 25% | 5,604.94 |
| Total Tax | 11,657.44 | |
| Bonus Tax (GH¢1,500 @ 5%) | 75.00 | |
| Total Tax Payable | 11,732.44 |
- Tags: Assessable Income, Employment Income, Tax computation
- Level: Level 3
- Topic: Business income - Corporate income tax
- Series: NOV 2017
- Uploader: Dotse