Mr. Man has been working for a trading company as a sales manager for many years. His current monthly salary is $20,000. With effect from 1 April 2010, his employer provided him with a flat, for which he has to pay a nominal rent of $1,000 per month to the company.
On 1 April 2010, Mr. Man was married with Miss Poon. He received a red packet of $2,000 cash from his employer together with a voucher of honeymoon tour to Phuket at a value of $10,000. During the honeymoon trip, Mr. Man spent $8,000 for souvenirs and extra meals. He did not recover this from his employer.
Mr. Man bought a car on 1 April 2010 and used it for both his private and employment purposes. He incurred the following running expenses for his car:
Period Amount incurred
1.4.10 to 31.3.11 $24,000
1.4.11 to 30.6.11 $ 7,000
The assessor agreed with Mr. Man that the extent of private use of his car was 25%.
Depreciation allowance for the car in respect of the year of assessment 2010/11 as agreed with Inland Revenue Department was $28,800.
On 30 June 2011, Mr. Man's employment was terminated without prior notice by his employer and he received the following income:
1. $100,000 from the company's provident fund which was not a recognized occupational retirement scheme. Mr. Man and his employer each contributed equal amount to the fund.
2. $60,000 for three months' salary in lieu of notice.
3. $15,000 of three months' housing allowance up to 30 September 2011. Mr. Man has moved out of the flat on 1 July 2011.
4. $9,333 in lieu of his two week's annual leave.
In July 2011, he sold his car for $24,600 and the balancing charge on his car as agreed with the Inland Revenue was $13,400.
With effect from 1 September 2011, Mr. Man took up a new employment with another Hong Kong company, AB Ltd, at a monthly salary of $24,000. Under this employment, he was required to work both in Hong Kong and Singapore. During the period 1 September 2011 to 31 March 2012, Mr. Man returned to Hong Kong for a total of 70 days, being 7 days on holiday and 63 days on business for his employer. AB Ltd provided him with a flat in Hong Kong and one room in a hotel in Singapore. Mrs. Man remained in Hong Kong and lived in the flat provided by Mr. Man's employer since 1 September 2011.
Required:
(a) Compute the net assessable income for the years of assessment 2010/11 and 2011/12 for Mr. Man.
(b) Explain the basis of your computation.