The paper 'Concept of the Australian Tax Office' is a wonderful example of a financial and accounting assignment. Direct tax revenue is the tax that is directly paid directly to the government by individuals, to whom tax is imposed. Examples include the income tax, corporate tax, and the capital gains tax. Therefore, these persons should file a tax return. In Australia, the Australian tax office (ATO) collects these taxes on behalf of the government. Assessable income is the income on which tax is to be levied (Cassidy 349). There are deductions to be made on the assessable income before tax is calculated.
These deductions involve money that is spent to earn that income. Therefore, gross assessable income can be defined as the income on which tax is levied excluding the associated deductions. Taxable income is the net assessable income. That is the assessable income less than all the associated deductions. In Australia, the principle of the more you earn, the more tax you pay prevails. In most cases, this is not true because the level of deductions varies from an individual to another or the source of income is also a factor because there are exemptions. Income year refers to the year in which income is obtained.
In Australia, the income year of the financial year starts from 1st July to 30th June the following year (Cassidy 349). The marginal tax rate is the rate that is applied when one’ s tax obligation changes as a result of the rising income. It is illustrated by the formulae below: Where m is the marginal tax, t is the change in tax and i is the change in income. On the other hand, the average tax rate is the ratio of the payable tax to the taxable income or spending as shown by the formulae below: a = t / i Where a is the average tax, t the amount of tax paid, and the taxable income. Q2.
Calculation of tax payable and Average rate tax a) Tax payable = 2,652 + 30% (25,000-21,600) = 3,672 Average rate tax = 3,672/25,000 = 14.68% b) Tax payable = 2,652 + 30% (45,000-21,600) = 9,672 Average tax rates = 9,672/45,000 = 21.5% Q3. Calculation of situations a) There will be no tax payable on the amount of income amounting to $4,500.
In Australia the current tax free threshold is set at $6,000. Since the amount of gross tax payable is nil, the average tax rate will also be nil. The standard rate currently on Medicare levy is set at 1.5% of the taxable income in Australia (Chris. Et. al 86). Therefore, on amount of 4,500 the Medicare levy will be $67.5. b) The gross tax payable = 0 + 17% (8,000 – 6,000) = 340 The average tax = 340/8000 = 4.25% Medical levy = 1.5%*8,000 = 120 c) The gross tax payable = 0 + 17 %( 13,000-6,000) = 1,190 The average tax = 1,190/13,000 = 9.2% Medicare levy = 1.5%*13,000 = 195 d) The gross tax payable = 2,652 + 30 %( 45,000-21,600) = 9,672 Average tax rate = 9,672/45,000 = 21.5% Medicare levy = 1.5%*45,000 = 675 e) The gross tax payable= 11,772+ 42% (60,000-52,000) =15, 132 Average tax rate = 15, 132/60,000 =25.2% Medicare levy =1.5%*60000=900 Workings for tax income and tax payable are shown below: a) Taxable income = 5,600 – 250 = 5,350 Tax payable is nil. b) Taxable income = 15,000-400 =14,600 Tax payable = 0 + 17% (14,600-6,000) =. Medicare levy = 1.5%*14,600 =219 c) Taxable income = 27,000 – 350 = 26,650 Tax payable = 2,652 + 30 %( 26,650-21,600) =4,167.
Cassidy, Julie, (2007). Concise Income Tax. The federation press. Pg 349
McCourt, Philip, (2009).. Australian master guide. CCH Australian limited. Pg 113
Woellner Rob, Barkoczy Stephen, Murphy Shirley, Evans Chris, (2009). Australian taxation law. CCH Australia limited.pg 86