It's winter time and we have had plenty of rain to refill our tanks
which is an ideal opportunity to luxuriate in a hot bath. As I am
lying here and the hot water soaks into my (c)old bones, I can't help
thinking of Mrs Archimedes who used to fill up her husband's bath
right up to the brim.
Good old Mr Archimedes found that the water slopped over the sides when he jumped
in, and by weighing the amount of water spilt, and weighing himself,
he discovered a formidable argument against baths,
or at least full
ones, in that a floating body displaces its own weight of water. He
also discovered that the displaced water wet the bath-towel and made it
so heavy that when he hung it on the towel-rail it pulled out the nails
and the rail fell off the wall. So he invented the screw.
On such small incidents hangs the fate of the world!
I doubt I would
ever have come up with such wonderful ideas. I have never managed to join
Mensa (although, I am sure, if I tried I would be entitled
to join their subsidiary organisation, Moron.) I have a hard enough
time working my way through the 2003 TAX-PACK which has just landed
in my mailbox reminding me that another year's 'Swindle Sheet' is due.
Looking at the sheer size of this year's TAX PACK, I am convinced
we could solve all our energy problem if we could just find a way
to harness all the energy that's spent in filling out our tax forms.
Perhaps we need another 'tax reform' of the kind Lady Godiva was offered
by her husband Leofric, Earl of Mercia, who promised to reduce the
high taxes he levied on the residents of Coventry if she agreed
to ride naked through the streets of the town.
Luckily, most retired
people (of which I am one) are no longer in need of such drastic tax
reforms as the most effective way to avoid taxes is to stop having
any income.
Or, if you need some income (and don't we all?), then let it be in the form of partly or fully "franked" dividends. Thanks to the Government's dividend imputation rules, franking credits are offset against an individual's personal tax and, from the 2000/01 income year, if those franking credits are in excess of an individual's tax bill, are refunded to the individual. Here is how it works:
Let's assume a very simplistic example whereby you hold shares in a company which pays company tax of 30% on its earnings. The remaining 70% are distributed as dividends. So if you receive (say) $10,000 in dividends, then this amount is "grossed up" again to its pre-company tax level of a 100% (remember that the $10,000 you receive represents only 70% of the company's pre-tax profit!) or $14,285.71. Therefore, you are being taxed on an income of $14,285 even though you only receive $10,000 in cash. So how much tax do you pay on an income of $14,285? (assuming you have no other income) $1,408.45, that's how much. However - and this is where the franking credit kicks in - you receive a credit for the tax the company paid, namely $4,285.71 which is offset against your tax assessment which in this particular example means that you receive a tax refund of $2,877.26. Three cheers for dividend imputation!!!
And so endeth this year's tax lesson! Happy New Tax Year!
Best wishes and
from the Riverbend Quartet!
Peter & Padma & Malty
& Rover
Sunday, 29 June 2003