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INCOME TAX

INCOME TAX.

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INCOME TAX

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  1. INCOME TAX When you are paid a salary, an amount will be deducted and sent to the government to pay for facilities. This is calledincometax, and the amount you paydepends on how much you earn.This amount is not a setpercentage, but increases as theamount you earn increases,according to a classification oftax subdivisions. Example:John’s gross salary is $45 730 per year. aHow much does he pay in income tax? bIf he is given a raise of $5000 per year, how much of this will he actually receive? Solution: Tax on first $6000 = 0 Tax on $6001 − $21 600 =(21 600- 6 000) × 17 = 15 600 × 17 = $2652 100 100 Tax on $21 601 − $45 730 = (45 730 - 21 600) × 30 = 24 130 × 30 = $7239 100 100 Total tax = 0 + 2652 + 7239 = $ 9891

  2. b.If John will get $5000 pay rise the he will still be on the same classification He will receive: 5000 × 70 = $ 3500 100 Capital gains tax Capital gains tax (CGT) is the tax paid on any profit you make from an investment. In that sense, it is a component of your income tax. The profit made from an investment is called acapital gain. Example:Daisy buys shares for $35 000 in October and sells them for $63 000 in March of the next year.If her salary for that financial year is $82 390, how much capital gains tax will she pay on theprofit she makes on the shares? Solution: Profit = Sale price - Purchase ptice= 63 000 − 35 000 = $28 000 Capital gains tax = 28 000 × 42 = $11 760 100 Goods and services tax The goods and services tax (GST) is a tax of 10% which is added to the price of most goods (including cars) and services (such as insurance).

  3. Example: aIf the cost of electricity supplied in one quarter is $288.50, how much GST will be added tothe bill? bIf the selling price of a washing machine is $990, how much of this is GST? Solution: a GST = 288.5 × 10/100 = $28.85 b New price with GST =990 Original price = ? We use the formula: New price = original price × percentage increase 990 = original price × 110/100 original price = 990 × 100 = $900 110 GST = 990 - 900 = $90 Stamp duty Stamp duty is a term commonly used to describe the duty or tax charged by the government on various commercial transactions. This includes thepurchaseof land, houses, motor vehicles, life insurance and livestock. Currently stamp duty onpropertyis payable according to the table.

  4. Example:Brett buys a house for $480 000. What is the value of the stamp duty payable on this purchase? Solution: Excess = 480 000 - 115 000 = $365 000 Stamp duty = 2560 + 365 000 × 6/100 = $24 460

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