Abel lives in Australia. He earned an annual taxable income of $289,303.26 in the 2015/2016 tax year and $311,001 in the 2016/2017 tax year. He studied the revised Australian tax tables which showed that from 1 July 2016 individual tax rates for certain brackets had changed. The Australian tax tables for the 2015/2016 and 2016/2017 tax years are given on ANNEXURE C. Use the information above and ANNEXURE C to answer the questions that follow. 4.1.1 Identify the taxable income bracket(s) affected by the tax rate changes introduced from 1 July 2016. 4.1.2 Explain the tax implications of the medical levy on individual tax payers. 4.1.3 Abel stated that the tax and medical levy due for the 2016/2017 tax year was $9,882.94 more than the amount that was due for the 2015/2016 tax year. Verify, showing ALL calculations, whether his statement is CORRECT.

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Abel lives in Australia - NSC Mathematical Literacy - Question 4 - 2017 - Paper 2

Question 4

Abel lives in Australia. He earned an annual taxable income of $289,303.26 in the 2015/2016 tax year and $311,001 in the 2016/2017 tax year. He studied the revised A... show full transcript

Worked Solution & Example Answer:Abel lives in Australia - NSC Mathematical Literacy - Question 4 - 2017 - Paper 2

Step 1

Identify the taxable income bracket(s) affected by the tax rate changes introduced from 1 July 2016.

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Answer

The taxable income brackets affected by the tax rate changes from 1 July 2016 include:

$37,001 -$ 87,000
$87,001 -$ 180,000
$180,001 and over.

These brackets reflect the changes in the rates applied to incomes within these ranges.

Step 2

Explain the tax implications of the medical levy on individual tax payers.

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Answer

The medical levy, which is set at 2% on taxable income, is an additional tax imposed on individual taxpayers to fund the public healthcare system.

Higher income earners may be subject to this levy, impacting their overall tax liabilities. This could potentially raise their total tax due, making tax planning essential for individuals to understand the full extent of their tax obligations.

Step 3

Verify, showing ALL calculations, whether his statement is CORRECT.

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Answer

To verify Abel's statement, we calculate the tax and medical levy for both the 2015/2016 and 2016/2017 tax years.

For the 2016/2017 tax year:

Calculate the tax due:

Tax due = $54,232 + 45% of ($ 311,001 - $180,000) =$ 54,232 + 45% of $131,001 =$ 54,232 + $59,950.45 =$ 113,182.45
Calculate the medical levy:

Medical levy = 2% of $311,001 =$ 6,220.02
Total tax due = $113,182.45 +$ 6,220.02 = $119,402.47

For the 2015/2016 tax year:

Calculate the tax due:

Tax due = $54,547 + 45% of ($ 289,303.26 - $180,000) =$ 54,547 + 45% of $109,303.26 =$ 54,547 + $49,186.47 =$ 103,733.47
Calculate the medical levy:

Medical levy = 2% of $289,303.26 =$ 5,786.07
Total tax due = $103,733.47 +$ 5,786.07 = $109,519.54

Difference in tax and medical levy due:

$119,402.47 -$ 109,519.54 = $9,882.93

Abel's assertion is correct as the difference amounts to $9,882.93, which is indeed more than the$ 9,882.94 he stated.

Abel lives in Australia - NSC Mathematical Literacy - Question 4 - 2017 - Paper 2

Worked Solution & Example Answer:Abel lives in Australia - NSC Mathematical Literacy - Question 4 - 2017 - Paper 2

Identify the taxable income bracket(s) affected by the tax rate changes introduced from 1 July 2016.

Explain the tax implications of the medical levy on individual tax payers.

Verify, showing ALL calculations, whether his statement is CORRECT.

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