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

4.1.1 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 changes introduced from 1 July 2016 are:

$37 001 -$ 87 000
$87 001 -$ 180 000
$180 001 and above

These brackets have revised tax rates which are applicable from the mentioned date.

Step 2

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

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Answer

The medical levy is an additional tax imposed on taxpayers, calculated as 2% of their taxable income. This levy is designed to help fund the public health system and applies to individuals with higher incomes. Those earning above a certain threshold may be required to pay this levy, impacting their overall tax liability.

Step 3

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

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Answer

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

Tax due for 2016/2017:

Tax calculation:
- For income of $311 001:
$Tax = 54 547 + 45\% (311 001 - 180 000) = 54 547 + 58 950,45 = 113 182,45$
Medical levy:
- 2% of $311 001:
$Medical Levy = 0.02 \times 311 001 = 6 220,02$
Total for 2016/2017:
$Total = 113 182,45 + 6 220,02 = 119 402,47$

Tax due for 2015/2016:

Tax calculation:
- For income of $289 303,26:
$Tax = 54 547 + 45\% (289 303,26 - 180 000) = 54 547 + 49 186,47 = 103 733,47$
Medical levy:
- 2% of $289 303,26:
$Medical Levy = 0.02 \times 289 303,26 = 5 786,07$
Total for 2015/2016:
$Total = 103 733,47 + 5 786,07 = 109 519,54$

Difference:

Difference between the two totals:

119 402,47 - 109 519,54 = 9 882,94

Abel's statement is therefore CORRECT.

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

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

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