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Taxation

Calculate taxable income from gross income and deductions, find PAYG tax withheld using a tax table, calculate the Medicare levy, and determine whether a tax return results in a refund or a payment owing.

Worked examples

Finding taxable income

Straightforward

Problem

James earns a gross income of $72 000\$72\,000 per year and claims allowable deductions of $3 500\$3\,500. Find his taxable income.

Medicare levy and annual PAYG tax withheld

Moderate

Problem

Aisha's annual taxable income is $69 000\$69\,000. The Medicare levy is 2%2\% of taxable income. A fortnightly tax table shows that $489\$489 is withheld each fortnight in PAYG tax. Calculate (i) the Medicare levy and (ii) the total PAYG tax withheld over the year.

Net income and tax refund from a tax return

Challenging

Problem

Raj's taxable income is $65 000\$65\,000. His employer withheld $14 000\$14\,000 in PAYG tax during the year. Using the tax table below and a Medicare levy of 2%2\%, determine whether Raj receives a refund or owes a payment, and state the amount.

| Taxable income | Tax on this income |
|---|---|
| $45 001\$45\,001 – $120 000\$120\,000 | $5 092\$5\,092 plus 32.532.5 cents for each $1\$1 over $45 000\$45\,000 |

Practise

Q1·Straightforward
Priya earns a gross income of $62 000\$62\,000 and has allowable deductions of $1 800\$1\,800. What is her taxable income?
Q2·Straightforward
Marcus earns a gross income of $48 500\$48\,500 and claims work-related deductions of $3 250\$3\,250. What is his taxable income?
Q3·Straightforward
A teacher earns $79 000\$79\,000 gross income and claims deductions of $2 640\$2\,640. What is her taxable income?
Q4·Straightforward
Jasmine's gross income is $35 800\$35\,800. She claims self-education expenses of $1 200\$1\,200 and work-related car expenses of $900\$900. What is her taxable income?
Q5·Moderate
Emma's annual taxable income is $55 000\$55\,000. The Medicare levy is 2%2\% of taxable income. Calculate her Medicare levy.
Q6·Moderate
A fortnightly tax table shows that an employee earning $2 600\$2\,600 per fortnight has $468\$468 withheld in PAYG tax. How much PAYG tax is withheld in total over 2626 fortnights?
Q7·Moderate
Daniel's annual taxable income is $82 000\$82\,000. The Medicare levy is 2%2\% of taxable income. Calculate his Medicare levy.
Q8·Moderate
A weekly tax table shows that a worker earning $1 350\$1\,350 per week has $270\$270 withheld in PAYG tax. What is the total PAYG tax withheld over 5252 weeks?
Q9·Challenging
Aiden's taxable income is $43 000\$43\,000. Use the tax table below to calculate his income tax.

| Taxable income | Tax on this income |
|---|---|
| $0\$0 – $18 200\$18\,200 | Nil |
| $18 201\$18\,201 – $45 000\$45\,000 | 1919 cents for each $1\$1 over $18 200\$18\,200 |
Q10·Challenging
Sofia's taxable income is $68 000\$68\,000. Use the tax table below to calculate her total tax liability (income tax plus Medicare levy).

| Taxable income | Tax on this income |
|---|---|
| $45 001\$45\,001 – $120 000\$120\,000 | $5 092\$5\,092 plus 32.532.5 cents for each $1\$1 over $45 000\$45\,000 |

The Medicare levy is 2%2\% of taxable income.
Q11·Challenging
Leo's taxable income is $75 000\$75\,000. His employer withheld $21 000\$21\,000 in PAYG tax during the year. Use the tax table and Medicare levy to find the size of his tax refund.

| Taxable income | Tax on this income |
|---|---|
| $45 001\$45\,001 – $120 000\$120\,000 | $5 092\$5\,092 plus 32.532.5 cents for each $1\$1 over $45 000\$45\,000 |

Medicare levy: 2%2\% of taxable income.
Q12·Challenging
Chloe's taxable income is $58 000\$58\,000. Her employer withheld $9 500\$9\,500 in PAYG tax during the year. Use the tax table and Medicare levy to find the amount she owes the ATO.

| Taxable income | Tax on this income |
|---|---|
| $45 001\$45\,001 – $120 000\$120\,000 | $5 092\$5\,092 plus 32.532.5 cents for each $1\$1 over $45 000\$45\,000 |

Medicare levy: 2%2\% of taxable income.