Question

Taxable income

Tax on this income
 $0−$18200
 Nil
 $18201−$37000
 19c for each $1 over $18200
 $37001−$80000
 $3572 plus 32.5c for each $1 over $37000
 $80001−$180000
 $17547 plus 37c for each $1 over $80000
 $180001+
 $54547 plus 45c for each $1 over $180000
An young accountant earns $3120 a fortnight, with no allowable tax deductions

i. What is the accountant’s taxable income?



ii. How much tax does the accountant owe in a year?



iii. What is the accountant’s annual net pay?



iv. What is the accountant’s fortnightly net pay?


b A young lawyer earns $3120 a fortnight with allowable tax deductions totalling $2560 a year.
 
i. What is the lawyer’s taxable income?



ii. How much tax does the lawyer owe in a year?



iii. What is the lawyer’s annual net pay?



iv. What is the lawyer’s fortnightly net pay?




c How much less money does the lawyer in question b have each week compared to the accountant in question a?

Answer 1

a.

i. The accountant's taxable income can be calculated as follows:

$3120 x 26 = $81,120 (fortnightly income x number of fortnights in a year)

Therefore, the accountant's taxable income is $81,120.

ii. To calculate the tax owed, we need to use the tax brackets provided.

For the first $18,200, the tax is nil.

For the next $18,800 ($37,000 - $18,200), the tax is calculated as follows:

($81,120 - $18,200) x 0.19 = $12,166.60

Therefore, the accountant owes $12,166.60 in tax for the year.

iii. The annual net pay can be calculated as follows:

$81,120 - $12,166.60 = $68,953.40

Therefore, the accountant's annual net pay is $68,953.40.

iv. The fortnightly net pay can be calculated as follows:

$68,953.40 / 26 = $2,650.52

Therefore, the accountant's fortnightly net pay is $2,650.52.

b.

i. The lawyer's taxable income can be calculated as follows:

$3120 x 26 = $81,120 (fortnightly income x number of fortnights in a year)

$2560 allowable tax deduction per year

$81,120 - $2560 = $78,560

Therefore, the lawyer's taxable income is $78,560.

ii. To calculate the tax owed, we need to use the tax brackets provided.

For the first $18,200, the tax is nil.

For the next $18,800 ($37,000 - $18,200), the tax is calculated at the rate of 19c for each $1 over $18,200.

For the next $43,000 ($80,000 - $37,000), the tax is calculated at the rate of 32.5c for each $1 over $37,000.

For the next $100,000 ($180,000 - $80,000), the tax is calculated at the rate of 37c for each $1 over $80,000.

Therefore, the tax owed is:

($18,800 x 0.19) + ($43,000 x 0.325) + ($100,000 x 0.37) = $20,221

Therefore, the lawyer owes $20,221 in tax for the year.

iii. The annual net pay can be calculated as follows:

$81,120 - $20,221 = $60,899

Therefore, the lawyer's annual net pay is $60,899.

iv. The fortnightly net pay can be calculated as follows:

$60,899 / 26 = $2,341.50

Therefore, the lawyer's fortnightly net pay is $2,341.50.

c.

The accountant's fortnightly net pay is $2,650.52 and the lawyer's fortnightly net pay is $2,341.50.

The lawyer has a fortnightly net pay that is $309.02 less than the accountant's.