1. Cambridge University Press  G K Powers 2013 10. Taxation Study guide 1

2. Cambridge University Press  G K Powers 2013 Allowable deductions Allowable deductions are approved by the Australian Taxation Office as a tax deduction such as:  Work-related expenses  Self-education expenses  Travel expenses  Car expenses  Clothing expenses  Tools used for work  Gifts and donations HSC Hint – Car expenses are claimed according to the engine capacity of the car. 2

3. Cambridge University Press  G K Powers 2013 Taxable income  Taxable income is the gross income minus any allowable deductions. It is the income used to calculate the tax to be paid.  Gross income is the total amount of money earned. Taxable income = Gross income ‒ allowable deductions HSC Hint – Gross income is the sum of income from all sources including interest from bank accounts. 3

4. Cambridge University Press  G K Powers 2013 Medicare levy  Medicare levy is an additional charge to support Australia’s universal health care system. It ensures that all Australians have access to free or low-cost medical and hospital care.  The Medicare levy is calculated at a rate of 1.5% of taxable income. HSC Hint – Medicare levy is added to tax payable to determine amount owed to the ATO. 4

5. Cambridge University Press  G K Powers 2013 Calculating tax  Personal income tax tables have an increasing rate of tax.  Tax refund = Tax paid – Tax payable  Tax owing = Tax payable – Tax paid HSC Hint – Find the correct tax bracket and calculate the tax payable using dollars not cents. 5

6. Cambridge University Press  G K Powers 2013 Calculating GST and VAT  To calculate the GST find 10% (or VAT rate) of the pre- tax price.  To calculate the total cost of an item add the GST (or VAT) to the pre-tax price.  To calculate the pre-tax price given the total cost of an item divide the total cost by 110% (or 100% + VAT rate). HSC Hint – To calculate the pre-tax price divide the final cost of the item by 1.10. 6

7. Cambridge University Press  G K Powers 2013 Graphing tax rates 1. Draw a number plane with the taxable income as the horizontal axis and the tax payable as the vertical axis. 2. Use information in the tax rate table to determine the points. Plot the points. 3. Join the points to make a straight line segment. 7