fact sheet - home | tax super and you · 2018-09-25 · you may refer to the fact sheet. 4. now...

Tax, Super+You.

Take Control.

Your Tax Activity 1

INCOME AND INCOME TAXWHEN DO WE NEED TO PAY TAX AND WHEN DON’T WE?

Money received from a hobby is not considered as assessable income unless the individual intends to create a business from the hobby. For example, if you have a regular job and enjoy painting pictures as an unrelated hobby in your spare time, any income from the paintings you sell is not regarded as assessable income.

Share incomePeople who own shares in a company are known as shareholders. The company may share any profits with the owners or shareholders. These payments are termed dividends and are included in the assessable income earned by the shareholder. There are two types of dividends:

� franked dividends � unfranked dividends.

Franked dividends are a share of a company’s distribution paid by an Australian company on which company tax has already been paid. That is, the company paid tax on its taxable income at the rate of 27.5% before distributing dividends. Franked dividends can be fully or partly franked. As tax has already been paid on the dividend, you will be entitled to claim a credit for the tax associated with the dividend. This is called a franking credit and will reduce the amount of tax payable by you as the shareholder.

Unfranked dividends are a share of a company’s distribution paid by an Australian company on which no company tax has been paid. This means there are no franking credits to offset any of the tax payable on the dividend.

INCOME TAXIndividuals may be liable (responsible by law) for a range of personal taxes. These taxes can be imposed on income that is

earned, purchasing goods or services, selling assets that are liable

for capital gains tax (CGT), and other transactions. You have a legal

responsibility to know what taxes you are liable to pay. You can’t

say, “I didn’t know I had to pay tax on it”.

The Australian income tax system relies on taxpayers self-assessing, which means you are responsible for working out

how much you need to declare and can claim on your tax return.

You provide this information to the Australian Taxation Office

(ATO), which then calculates how much income tax you must

pay. Details of how income tax works are described in other

topics in this module.

What is assessable income?Assessable income is income on which tax must be paid. Some

examples of assessable income are:

� wages and salaries, bonuses and commission received as employment income

� income support payments from the government such as age pensions, and family and youth allowances

� money received from property or investments, for example,

rent earned from leasing property or other items � interest from assets such as bank deposits or bonds � dividends earned from ownership of shares in a company � a capital gain on the sale of a CGT asset for more than you

paid for it.

What is not assessable income?Not all money received by an individual is considered to be

assessable income. Examples of non-assessable income are:

� pocket money � inheritances � lottery or prize winnings.

Fact sheet

Years 7-12

Activity 1: Fact sheet

Tax, Super+You.

Take Control.

Non-cash benefitsSometimes an employer provides a benefit to an employeeinstead of paying them cash income. Typical examples arethe private use of a motor car or payment of school fees. In amining area, non-business accommodation may be providedto many employees.

Prior to 1986, these benefits were not included in taxableincome and were not taxed under income tax laws. This wasseen as unfair, so fringe benefits tax (FBT) was introduced.The employee does not pay FBT; the employer providingthe benefit does. If an employee receives fringe benefitsabove $2,000, an amount of reportable fringe benefits will berecorded on their payment summary.Some taxpayers receive income in the form of cash. This canrange from the receipt of cash tips and gratuities to paymentof wages as ‘cash-in-hand’, and includes bartering services inexchange for other goods and services. This income is part ofassessable income, which is taxed.

TAXABLE INCOME AND ALLOWABLE DEDUCTIONS

Your taxable income is the total of your assessable income reduced by the amount of any allowable deductions. Allowable

deductions are expenses incurred in gaining or producing assessable income or necessarily incurred in running a business for the

purpose of producing your assessable income. Allowable deductions reduce the amount of income on which you have to pay tax.

TAX OFFSETSUnlike allowable deductions, which reduce assessable income, tax offsets (sometimes referred to as rebates) directly reduce the amount of tax payable. Tax offsets include health insurance. There are offsets for those who live in certain zones, earn a low income or care for an invalid. The tax you have to pay is calculated on your taxable income and this amount is then reduced by the amount of any tax offsets you are entitled to. For example, if you pay premiums to a registered health insurer you may be entitled to a private health insurance offset (sometimes called a private health insurance rebate).

WHAT ARE YOUR RESPONSIBILITIES?When you sign your tax return or lodge using myTax you aretaking responsibility for the claims you are making. If youbecome aware that your tax return is incorrect, you mustcontact the ATO as soon as possible to correct the error.

Remember, even if someone else – including a registered tax agent – helps you to prepare your tax return, you are stilllegally responsible for the accuracy of the information.

ASSESSABLEINCOME

= TAXABLEINCOME

ALLOWABLEDEDUCTIONS

TAX PAYABLE

TAX OFFSETS

TAX ON TAXABLE INCOME

FRANKINGCREDITS= - +

DIFFERENCE BETWEEN MINIMISATION AND EVASIONTax minimisation is when you legally arrange your tax affairs to reduce the amount of tax you pay.

Tax evasion is when you deliberately lie to the ATO to reduce your amount of tax payable. It causes a significant loss in tax revenue available to the government to spend on services like health, education and transport. Examples of tax evasion include not declaring assessable income, such as wages or tips, deliberately over-claiming expenses, avoiding GST, and not lodging a tax return to avoid paying tax. It is not tax avoidance if you get paid in cash. It becomes tax avoidance when you do not declare that cash income on your tax return.


Tax, Super+You.

Take Control.

TEST YOUR KNOWLEDGE1. Review what you already know about income tax.

� What is income?

� What is assessable income?

2. Read Fact sheet: Income and income tax. Confirm whether your understanding of income and assessable income is correct.

3. On your own, read the scenarios below and mark whether you think the income is assessable or not. You may refer to the fact sheet.

4. Now test your new knowledge: In pairs or small groups, decide whether the source of income is considered to be an assessable income in each scenario. Be ready to present your decision and justify it to the whole class.

YOU WILL: � explore how income derives from different sources � describe the difference between assessable and non-

assessable income for tax purposes

YOU WILL NEED: � Fact sheet: Income and income tax � Answer sheet: Task 1 – Assessable income

Source of income scenarioSolo Together

Is it assessable? Y/N Justify your decision

Jane found a $50 note in the street.

Molly works as an art teacher. She works part-time so her salary is less than that of a full- time teacher.

Xavier was unemployed for five months and received the Newstart Allowance.

Stacey has been left $20,000 in a will.

Dave won $200 first prize in a footy tipping competition.

Amelie earns wages from a part-time job in an office while she attends TAFE.

Con works part-time as a waiter, and he earned $80 in tips on Friday night.

Elly earned $100 interest on her bank account.

Leonardo is an accountant who paints pictures in his spare time. He received a $150 prize from a picture he entered in the local art show.

Tom earned $300,000 first prize in a poker tournament. He gave up his job as a baker to travel around to different tournaments and wins regularly.

Lee earned $85 from the sale of carrots grown in his backyard veggie garden.

TASK 1ASSESSABLE INCOMEYour Tax Activity 1: Income and income tax

Worksheet

Years 7-10

Activity 1: Task 1

Tax, Super+You.

Page 5

Take Control.

TASK 2 COMPREHENDING TAX TERMINOLOGY

YOU WILL: � explain the terms you need to understand texts and issues

that relate to income tax

YOU WILL NEED: � Fact sheet: Income and income tax � Answer sheet: Task 2 – Comprehending tax terminology

Your Tax Activity 1: Income and income tax

TEST YOUR UNDERSTANDING1. With a partner, arrive at an explanation of the difference between these paired tax terms. Refer to the fact sheet to assist you but

use your own words.

2. Be prepared to present your explanation to the class.

assessable income

non-assessable income

franked dividends

unfranked dividends

tax offsets (rebates)tax deductions

tax evasiontax minimisation

Worksheet

Years 7-10

Activity 1: Task 2

Tax, Super+You.

Page 7

Take Control.

Your Tax Activity 2

WORKING ANDPAYING TAX

1. How do I get aTFN?

2. What should Ido when I start a

part-time or full-time job?

3. How much taxdo I pay?

4. What recordsdo I need?

¢ ¢ ¢

What do you need to know when you enter the workforce to ensure that

you are paying the correct amount of tax? There are a number of steps that a

person needs to follow to become part of the Australian taxation system.

STEP 1: HOW DO I GET A TFN?A tax file number (TFN) is a unique nine-digit number issued by the Australian Taxation Office (ATO). It identifies each taxpayer. Once issued, your TFN is yours for life. Even if you marry, or move interstate or overseas, your TFN does not change.

What happens if I don’t get or have a TFN? If you don’t have a TFN, then:

� anyone who employs you needs to withhold the highest taxrate (currently 45%) plus Medicare levy from any wages,salaries or allowances you earn.

� banks, credit unions and other financial institutions orcompanies paying interest must also withhold tax at thehighest tax rate plus Medicare levy.

� you’ll pay extra tax on your superannuation. � you can’t make personal super contributions and you won’t

be eligible for super co-contributions. � you can’t defer your higher education fees if you decide to

study tertiary education. � your tax return and queries with the ATO may be slower to

process. � centrelink will generally not pay you allowances such as a

Youth Allowance, Newstart or Austudy.

How can I get a TFN?The easiest and fastest way to get a tax file number is online and then verifying your identity at a participating Australia Post office. Visit ato.gov.au/getTFN to apply and find out more.

Students who are unable to visit a participating Australia Post office can find other options for applying at ato.gov.au/TFN.

Who do I give my TFN to?Only certain people and organisations can legally ask for your TFN, the most common being:

� the ATO � your employer, after you start work � your bank or other financial institution � Centrelink � your university or tertiary institution � your superannuation fund.

Identity securityIdentity crime is something that can impact everyone, even when you’re still at school. It is important you look after your personal information, which can include your name, address, date of birth, bank details, and TFN. You should only share this information with people or organisations who are allowed to ask for it.

There are rules around who can request your tax file number - this may include your bank, your university when you apply for student loans, or your employer after you have started working for them.

Be careful what information you share with people, including on social media, as this information can be used to steal your identity. If someone steals your identity they could use it to open bank accounts in your name, or commit crimes such as lodging a tax return without your knowledge. This can cause problems for you in the future when you apply for student loans through your university or other tertiary institution.

If you think you have given your tax information away, you should contact the ATO immediately.

For more information, visit ato.gov.au/identitysecurity

Fact sheet

Years 7-12


Tax, Super+You.

Page 8

Take Control.

STEP 2: WHAT SHOULD I DO WHEN I START A PART-TIME OR FULL-TIME JOB?About taxWhen you start a job, your employer will ask you to complete a tax file number declaration. This form provides them with your TFNand other information so they can calculate the correct amount of tax to withhold from your pay.This system is called pay as you go (PAYG) withholding.Your employer is required to withhold tax from your wage payments and send these amounts to the ATO regularly. When you lodge your tax return at the end of the financial year, you will be entitled to a credit for the amount of tax which has been withheld from yourpay. This amount will be shown on your payment summary.You have 28 days after commencing employment to give your employer your TFN. After 28 days, your employer must withhold thehighest rate of tax (plus the Medicare levy) from your future payments until you provide them with your TFN.This means you’re paying more tax than you need to. The additional tax your employer deducts isn’t lost forever though. When youlodge your tax return, you will get back any overpaid tax.

About superYour employer may have to pay super contributions into a super fund for you if you are paid at least $450 in a month (before tax). Ifyou are under 18, you also need to be working more than 30 hours per week before your employer has to pay super for you.If you are eligible for compulsory super guarantee contributions, your employer usually gives you a choice of which super fund you want your super contributions paid into. Your super fund will send you an annual statement so you should check that your details arecorrect and the account options (such as insurance) are right for you.If you have worked in more than one job, think about combining your super into one account. You can find any of your lost super byusing the ATO's online services through myGov.

STEP 3: HOW MUCH TAX DO I PAY?How much tax will my employer deduct from my pay?

The PAYG withholding amount will depend on:

� your weekly, fortnightly or monthly wage or salary � whether your TFN was provided � the amount earned in relation to the tax-free threshold.

When you lodge your tax return at the end of the financial year, you will be entitled to a credit for the amount of tax which has been withheld from your pay.

Quik Chickens Pay slip

ABN 11 222 333 444 Employee No. 020

Name T. Citizen Pay date 20 February 2017

Employee status: Casual

Wages and allowances

7-14 February: 24 hours $*******480

Total wages and allowances $*******480

Tax and deductions

Tax $*******31

Superannuation 274

Payment – Banking details

Date: 20 February 2017 BSB 013-000 Account No: 123456789

$*******449

Period summary Total gross Taxable gross Taxation Net Superannuation

This period 480.00 480.00

31.00 449.00

46.00

Year to date $2,880.00

2,880.00 186.00

2,694.00 274.00


Tax, Super+You.

Page 9

Take Control.

What if you are under 18 years of age?Special rules apply to the income of people under the age of 18 years. Under these rules, certain types of income may be taxed at a higher rate. These higher rates do not apply to:

� income earned from part-time or full-time jobs � Centrelink payments � income from a business run by yourself.

Income that is not the result of your own work, for example, share dividends, bank interest or a distribution from a family trust, is called unearned income. The income tax rates that apply to unearned income for a person aged under 18 years are different from those that apply to earned income.

2016-17 tax ratesUnearned income Tax payable

$0 to $416 nil

$417 to $1,307 68 cents for every $1 over $416

$1,308 and above 47 cents for every $1 of the entire amount

What is the tax-free threshold?For most Australians the first $18,200 of your income, referred to as the tax-free threshold, is not taxed. There are exceptions to this rule for international students, newcomers to Australia and those leaving Australia.

What happens if I have more than one employer?If you have more than one payer at the same time, you are generally required to only claim the tax-free threshold from the payer who usually pays the highest amount (this is known as your primary source of income).

If you earn additional income, your second payer is required to withhold tax at the higher “no tax-free threshold” rate. Receiving Youth Allowance and having a part-time job is regarded as having two ‘payers’, just as if you have two part-time jobs.

However, if you are certain your total income for the year will be less than $18,200, you can claim the tax-free threshold from each payer. If your circumstances change, you must advise your employers or other payers by completing a Withholding declaration to avoid having a tax debt at the end of the year.

What else may be deducted from my pay packet for the ATO?

� Amounts owing for Higher Education Loan Program (HELP)or Higher Education Contribution Scheme (HECS)

� Medicare levy � Medicare levy surcharge

Medicare is a health care system that gives Australian citizens access to health care. It is funded by most taxpayers paying a Medicare levy of 2% of their taxable income. This levy exempts low income earners, and is paid along with income tax.

There is also a Medicare levy surcharge of between 1% and 1.5% which may be applied to individuals or families who have a high income and don’t have private patient hospital cover.

What happens if I am self-employed?The pay as you go (PAYG) instalments system allows you to pay instalments during the income year towards your expected income tax liability on your business and investment income.

Your actual tax liability is worked out at the end of the income year when your annual income tax return is assessed. Your PAYG instalments for the year are credited against your assessment to determine whether you owe more tax or are owed a refund.

PAYG instalments are generally paid either four times per year (quarterly) or twice a year (two instalments). However, some taxpayers are eligible to take up the option to pay one annual instalment per year. Your PAYG letter will tell you how often to pay.

STEP 4: WHAT RECORDS DO I NEED?

To prepare an accurate tax return and support the claims you

make, you need to keep careful records of your assessable

income and allowable deductions from all sources. You are

allowed to claim your allowable deductions, which reduce the

amount of income you pay tax on.

The total tax payable by a person under 18 with an unearned income of $18,000 would be calculated as follows:

Tax payable on the first $416 = 0

Tax payable on the next $891 = ($1,307 - $416) multiplied by 0.68

= $606

Tax payable on the next $16,693 = ($18,000 - $1,307) multiplied by 0.47

= $7,846

Total tax payable = $8,452

These higher tax rates were introduced to prevent the profit of a family business from being distributed to children who had not contributed to the running of the business. Profits were distributed to children primarily to reduce the overall amount of tax payable on the money controlled by the parents. This was a common tax avoidance technique before the introduction of these higher tax rates.


Tax, Super+You.

Page 10

Take Control.

APPLY YOUR KNOWLEDGE1. Read Fact sheet: Working and paying tax.2. Read the scenario below then complete the questions.

3. Study the weekly tax table below to find how much tax should have been deducted from Maya’s gross pay of$480.00 each week.

Your Tax Activity 2: Working and paying tax

TASK 1YOUR TFN

YOU WILL: � calculate the amount of tax payable and tax paid using tax

tables and a pay slip � describe the effects of not having a TFN when employed � identify responsible behaviours in relation to getting and

using a TFN � decide what defines an ‘informed’ citizen

YOU WILL NEED: � Fact sheet: Working and paying tax

ScenarioMaya recently started university and also her first job as a part-time casual sales assistant in a clothes store. Her weekly salary is $480. This is Maya’s only job and as she is an Australian resident for taxation purposes, she is entitled to the tax-free threshold ($18,200). She tells her friend, Raj, that she is concerned that her employer is not paying her correctly.

Worksheet

Years 7-10

Activity 2: Task 1

Tax, Super+You.

Page 11

Take Control.

F. Fashion Pay slip

ABN 11 222 333 444 Employee No. 017

Name M. Citizen Pay date 20 February 2017

Employee status: Casual

Wages and allowances

7-14 February: 24 hours $*******480

Total wages and allowances $*******480

Tax and deductions

Tax $*******235

Superannuation 00

Payment – Banking details

Date: 20 February 2017 BSB 013-000 Account No: 123456789

$*******245

Period summary Total gross Taxable gross Taxation Net Superannuation

This period 480.00 480.00 235.00 245.00

00.00

Year to date $2,880.00

2,880.00 594.00

2,286.00 00

4. Read Maya's pay slip for week 6.

5. Calculate:

� The amount of tax that was deducted from Maya's pay in this pay period

� The amount of tax that should have been deducted from Maya's pay over the six-week period

� The difference between amount of tax that should have been deducted from Maya’s pay and the amount that was actually

deducted over the six-week period

� The number of weeks Maya was paying a higher rate of tax

� The rate of tax that Maya paid over these two weeks

MAKE A DECISION6. Read the decision-making matrix below.

� Some of Maya’s conversation is in the decision-making matrix below. � Rate how informed she is. � Decide how informed Maya is about her rights and responsibilities in relation to her employment.

Activity 2: Task 1

Tax, Super+You.

Page 12

Take Control.

Maya’s issue Informed Not informed

Reasons for your decision of Maya’s actions around tax

I have not told my employer my TFN number. I heard you should not tell them before you start a job.

I’m six weeks into my job. In the first five weeks, I paid $359.00 in tax. In week 6, I paid $235.00 in tax.

I can’t recall how much I earned in the first two fortnightly pays because I didn’t keep the pay slips. But it was more than this pay slip!

I thought if you earned $18,200 a year you don’t have to pay tax. So, why is my pay slip so low?

I can’t get the extra tax I paid back!

Our friend, Julia, said on Facebook that she could help me. She says tax is simple because I’m just a uni student and casual worker. She asked me to send my TFN so she could sort out my tax online. But I didn’t send it. It didn’t feel right doing that on Facebook.

I heard that your employer has to pay superannuation. But my pay slip doesn’t show that any super has been sent anywhere. Besides, I don’t know where the super money goes.

I need to ask my manager about superannuation and my pay.

I had better get my TFN sorted out because my higher education fees are affected by my having TFN.

I think I am eligible for Austudy. I heard that having a TFN can help me with that. I’d better do some research.

7. Write a justification for your decision based on evidence from the fact sheet.

8. Analyse: What was the first thing that Maya failed to do that caused her problems?

9. Evaluate/decide: In your view, how ready is Maya for working? Use reasoning to justify your point of view.

10. Create: Being informed is a responsibility. Yet, sometimes we don’t know what we don’t know. Create a slogan of no more than 6 words, targeted at a young audience, about the importance of being informed about tax and employment.

� Key words to consider:

� Drafting

� Slogan

Activity 2: Task 1

Tax, Super+You.

Page 13

Take Control.


TASK 2 CREATING AN INFORMATION TEXT

YOU WILL: � create a text designed to inform young people about tax

and employment

YOU WILL NEED: � Fact sheet: Working and paying tax

RECAP YOUR UNDERSTANDING1. Consider Maya’s scenario described in Activity 2: Task 1 Your TFN. Discuss with a partner:

� How could Maya get all the information she needs to manage tax in relation to her job and her study? � In what way could this information be easily communicated to young people like Maya?

CREATE A PUBLIC INFORMATION TEXT2. Create a public information text for young people, using your knowledge of issues around TFNs and employment, to prepare

them as informed employees.

3. In groups, discuss public information texts:

� List any public information texts that you can recall. � Were they digital or non-digital? � What was their key message? � Why do you remember them? � What features of public information texts make you notice their key message and act on them?

Worksheet

Years 7-10

NOTES

Activity 2: Task 2

Tax, Super+You.

Page 14

Take Control.

4. Use the steps below to guide your writing process and read the considerations to inform your draft.

Stages of writing Considerations

Pre-writing Purpose: Audience: Text type: InformationMode and medium (spoken, written, digital, non-digital)

Your purpose, audience and mode/medium will influence what you write and how.

� What are some features of yourchosen mode of publication?

� How will your text be influencedby your mode of publication?

Drafting Draft the text for your information publication, which may require:

� slogan � introduction � menu � headings � sub-headings � sequence or arrangement of text to suit the medium

Identify important information needed for the text. Use :

� technical language � Simple present tense � action verbs � cause and effect language

Revising Check your writing. Read aloud to hear how it sounds. Ask a peer to revise.

Consider:

� Does it make sense? � Are the facts correct? � Is the technical language correct? � Can the vocabulary be improved? � Does it flow? Can sentences be

improved? � Is it to the point? � Is important text in a prominent place? � Is there a pattern so the reader is not

confused by changing styles of writingor images?

Editing Check spelling, grammar and punctuation. Check structure: Is there a pattern so the reader is not confused?

Publishing Create your communication product and apply to your final text.

Consider:

� where this text will be viewed or heardto ensure your product is a match to theaudience and message.

� all aspects of the publication: arrangement oftext and images, font, colour, types of images.

Use strategies, e.g. the ruler method, peer correction.

Activity 2: Task 2

Tax, Super+You.

Page 15

Take Control.


TASK 3TAX FOR THE UNDER 18s

YOU WILL: � calculate net income and gross income in relation to a

number of different scenarios � develop an evidence-based conclusion on whether tax for

under 18’s is fair

YOU WILL NEED: � Fact sheet: Working and paying tax � Answer sheet: Task 3 - Tax for the under 18s

APPLY YOUR KNOWLEDGE1. Read the section on Tax for the under 18s in the fact sheet Working and paying tax.

2. Read each scenario and then complete the questions. To answer the questions, you will need to refer to the following table on tax rates. (these rates do not include medicare levy and temporary budget repair levy. Do not include these levies in your answer).

Table 1: 2016-17 Tax rates Calculating taxTaxable income Tax on this income

0 – $18,200 Nil

$18,201 – $37,000 19c for each $1 over $18,200

$37,001 – $87,000 $3,572 plus 32.5c for each $1 over $37,000

$87,001 – $180,000 $19,822 plus 37c for each $1 over $87,000

$180,001 and over $54,232 plus 45c for each $1 over $180,000

Scenarios

Scenario 1: Ivan, who is under 18 years old, gains casual employment at the local supermarket and starts his job on 1 July 2016. He is scheduled to work 20 hours each week (including weekends) and is paid $12.00 per hour.

� Calculate Ivan’s expected income for the 2016-2017 financial year (assuming he worked for 52 weeks). Put your answer in thecorrect cell in column A.

� Using the Table 1, calculate the amount of tax that Ivan will pay on his 2016-2017 income (assume he has no deductions, taxoffsets or levies). Put your answer in cell B1 in Table 2.

Scenario 2. Ivan’s mother runs her own business and gives Ivan $300 a week. He is paid for 52 weeks and is not expected to work for the money.

� Calculate Ivan’s expected income for the 2016-2017 financial year. Put your answer in the correct cell in column A. � Calculate the tax Ivan will pay on this source of income (use the tax table in the fact sheet to help you). Put your answer in cell

B2 in Table 2.

Scenario 3. Imagine that Ivan’s mother’s business made $150,000 after expenses in the 2016-17 financial year. This amount includes the money she gave to Ivan ($300 a week for 52 weeks). The remaining amount is her income.

� Calculate her expected income for the 2016-17 financial year. Put your answer in the cell A4. � Using the table 2016-17 Tax rates, calculate the amount of tax that Ivan’s mother will pay on her 2016-17 income (assume she

has no deductions, tax offsets or levies). Put your answer in cell B4 in Table 2.

The total tax payable by a person on an annual income of $80,000 would be calculated as follows:

Tax payable on the first $18,200 = 0


= $3,572

Tax payable on the next $43,000 =($80,000 - $37,000) multiplied by 0.325

= $13,975


Worksheet

Years 7-10

Activity 2: Task 3

Tax, Super+You.

Page 16

Take Control.

Scenario 4. Imagine that Ivan’s mother didn’t give Ivan money from the business. Put her expected income for the 2016-17 financial year in cell A6. Using the table 2016-17 Tax rates, calculate the amount of tax that Ivan’s mother will pay on her 2016-17 income (assume she has no deductions, tax offsets or levies). Put your answer in cell B6 in Table 2.

Table 2: Calculating gross and net income

A B C

Scenario Gross income (ie before tax) Tax payable Net income

(ie income after tax)

1 Ivan’s earned income

2 Ivan’s unearned income

3 Ivan’s total income (A1+A2) (B1+B2)

4 Ivan’s mother’s income after giving Ivan a wage

5 Total family income (A3+A4) (B3+B4)

6 Ivan’s mother’s income if she does not give Ivan a wage

Assuming Ivan’s mother paid Ivan’s tax, did her decision to pay Ivan a wage cost or save her money? How much?

Scenario 5: Imagine the tax rate is the same for unearned income for under 18’s as it is for other taxpayers. Recalculate the amount of tax owed and net income for Ivan. Put your answers in Table 3. Now calculate the missing figures in row 3.

Table 3: Recalculating gross and net income

A B C

Scenario Gross income (ie before tax) Tax payable Net income

(ie income after tax)

1 Ivan’s total income A3 from table 1

2 Ivan’s mother’s income after giving Ivan a wage

A4 from table 1 B4 from table 1 C4 from table 1

3 Total

Compare the net family income earned in the following two scenarios:

� Tax for unearned income for under 18s exist (Table 1, row 5). � There is no separate tax rate for unearned income for children under 18 (Table 2, row 3).

? Calculate: � the net income (gross income less tax) for each scenario (put your answers in Column C). � the total family gross income, tax payable and net income (put your answers in cell C5).

Activity 2: Task 3

Tax, Super+You.

Page 17

Take Control.

DEVELOP AN EVIDENCE-BASED CONCLUSIONProvide an evidence-based conclusion on why the tax rate for unearned income for under 18’s should remain high to ensure the fairness of the tax system. Use the PEER method of writing a paragraph and remember to use evidence from the tables above to justify your argument.

Evidence-based conclusion on why the tax rate for unearned income for young people who are under 18 should remain high

Point State your position or the conclusion you want to make

Elaboration Explain in more detail why you reached this conclusion

EvidenceProvide evidence to support your conclusion

Relate Restate your conclusion/position

An evidence-basedconclusion is a conclusion that is based on research andanalysis of data andinformation

Activity 2: Task 3

Tax, Super+You.

Page 19

Take Control.

Your Tax Activity 3

COMPLETING YOUR TAX RETURN

WHAT IS A TAX RETURN?A tax return is the document used to inform the Australian Taxation Office (ATO) how much

income you earned and any tax deductions or tax offsets you are claiming for the financial year.

In Australia the financial year starts on 1 July and runs until 30 June the following year.

There are various reasons why an individual may need to lodge an income tax return, depending

on their personal circumstances. Generally, an Australian resident will have to lodge a tax return if

they earned more than $18,200 throughout the financial year. However, individuals who have had

tax deducted from their earnings need to lodge a tax return to obtain a tax refund even where

they earned less than $18,200.

Your employers will issue you with a payment summary after the end of the financial year. It

shows how much you earned and how much tax was deducted from your income. If you are self-

employed, you need to keep records of your income and any tax instalments you paid.

You have from 1 July to 31 October each year to lodge your tax return. You can lodge after this

date if you use a registered tax agent before 31 October. If you cannot lodge your tax return by 31

October or by your tax agent’s lodgment date, contact the ATO as soon as possible to find out if

you can lodge at a later date.

When you say the word ‘tax’, many people

automatically think of what they will do with their

potential tax refund. Find out what completing a

tax return involves.

If you don't lodge your tax return by the due date, you

may incur penalties and interest.

Fact sheet

Years 7-12


Tax, Super+You.

Page 20

Take Control.

HOW TO SUBMIT A TAX RETURN

Gather informationYou will need a range of information to complete and lodge your tax return. See page 22 for moreinformation.

i

i

Decide which way to complete and lodge your tax returnOn-line - myTax: the new streamlined tax return

MyTax is designed for anyone regardless of their circumstances or how complex their

tax affairs are. It’s available on tablets, smart phones and computers. MyTax pre-fills

your return with information provided by your employer, bank, government agencies

and others. This information is usually available by early August, so if you wait until then

all you’ll have to do is review the information, add any missing details and then select

‘submit’.

Go to ato.gov.au/DoINeedToLodge to find out more information about lodging online, to

see if you are eligible to use myTax and to watch a quick demonstration of how to create

a myGov account and link to the ATO.

Paper returns You can use the paper tax return for individuals and the Individual tax return instructions

to lodge your paper tax return by mail.

Tax agent Registered tax agents are people licensed to complete a tax return for a fee. The fee paid

to the tax agent for this work is tax deductible.

1

2ato.gov.au/DoINeedToLodge


Tax, Super+You.

Page 21

Take Control.

Get helpIf you need assistance in finishing the tax return, family members or friends can provide assistance, or you may be able to use Tax Help. This is a free community service administered by the ATO to people on low incomes to help them fulfil their tax obligations.

Lodge your tax returnWhat next? Once you lodge your tax return, you wait for the ATO to send you a notice of assessment. This tells you

if you are entitled to a refund or if you have a tax debt to pay. It is a good idea to check your notice of

assessment so you are sure it is correct.

How long do you have to wait? Usually the ATO issues you the notice of assessment and your refund, if you are entitled to one, within:

� 2 weeks if you lodged your tax return online using myTax, or you used a tax agent and they lodged

electronically, or � ten weeks if you posted your tax return to the ATO.

If your assessment results in a tax debt, the earliest you will have to pay it is 21 November. This date is

independent of the date you lodge your tax return. If your return is incomplete, incorrect or needs checking

by an ATO staff member, it may take longer to complete the process.

Sign your tax return You are responsible for the information your tax return contains, even if a tax agent or someone else preparesit. You will be responsible for any extra tax if there isa mistake in your return. You must sign your return to verify your identity, otherwise your tax return is notconsidered to be lodged.

i

i

iRetain your tax recordsThe ATO has some time to review your taxreturn and issue an amended assessment if a review shows inaccuracies that change your assessment. The standard review periodis two years, but for some taxpayers it is four years. Generally, you should keep your records for five years from the date the noticeof assessment is sent.


Tax, Super+You.

Page 22

Take Control.

Information needed to complete a tax return1. Information about assessable income

You are responsible for working out your assessable income. If you use a tax agent, or get help from a Tax Help volunteer, you

will still need all your records for them to work from. You will need statements relating to income, such as a payment summary

from each employer, statements of interest received from banks or other financial institutions, dividend statements from

companies, and statements of shares sold.

2. Information about allowable deductionsYou are allowed to reduce your assessable income by claiming allowable deductions. Work-related expenses are expenses

you may incur in the course of earning income. To be an allowable deduction, there must be a legitimate link between earning

the income and incurring the expense. Work-related expenses could include:

(a) the cost of tools and equipment used at work

(b) union fees(c) some work-related travel costs.

There are a number of other allowable deductions such as:

(a) gifts or donations over $2 to an approved charity

(b) the cost of preparing a tax return. Private or domestic expenses are not allowable deductions, for example, the cost of travelling to and from work and buying

lunch each day. You should keep written evidence of allowable deductions. This is called substantiation. The written evidence could be

invoices or receipts, or logbooks for travel claims. A deduction for the expense can be denied unless the substantiation

requirements are met. Documents that give proof must include the:

(a) name of the supplier(b) amount of the expense(c) date on which it was incurred(d) nature of the expense(e) date of the document.

3. Electronic funds transferYou will need to provide bank account details to receive a refund using electronic funds transfer (EFT).

4. Tax file number (TFN)A TFN is required to lodge a tax return. If you don't have a TFN, you need to apply for one.

5. Filling in your tax return and using the pre-filling service

When filling in your tax return, take care to enter each amount at the right place because there may be significant differences in

the way different items are taxed.

If you are using myTax you may be able to download some of your information using the ATO's pre-filling service. Employers, banks and other government agencies can provide data that is inserted directly into the relevant labels of your tax return. All you need to do is to review and compare them against your own records. The amount of pre-filling of data is becoming more extensive each year.

If there are discrepancies between personal records and the pre-filled information, you should contact the organisation that provided the information to the ATO before lodging the tax return. This can save you from having to amend your tax return or explain any differences to the ATO after you lodge.


Tax, Super+You.

Page 23

Take Control.

TEST YOUR UNDERSTANDING1. Review what you already know about tax deductions.

What is an allowable deduction?

How do allowable deductions affect the income tax you pay?

2. Read Fact sheet: Completing your tax return. Confirm whether your knowledge of allowable deductions is correct.

3. On your own, read the list of items below. Mark whether you think each item of expenditure is deductable or not. You may referto the fact sheet.

4. Now test your new understanding with others: In pairs or small groups, decide whether the item of expenditure is an allowablededuction. Be ready to present your decision and justify it to the whole class.

Item of expenditureSolo Together

Deductible? Y/N Justify your decision

The bus fares to and from work

A $100 donation to the Red Cross

The amount paid to your tax agent for preparing your tax return

The cost of taking a taxi to work because your car won't start

The cost of travelling between two places of work where neither location is your own home

Your Tax Activity 3: Completing your tax return

TASK 1REDUCING YOUR TAX

YOU WILL: � discriminate between allowable and non-allowable deductions � identify items of expenditure that can be claimed as a tax

deduction � understand the importance of substantiation

YOU WILL NEED: � Fact sheet: Completing your tax return � Answer sheet: Task 1 - Reducing your tax

Worksheet

Years 7-10

Activity 3: Task 1

Tax, Super+You.

Page 24

Take Control.

Item of expenditureSolo Together

Deductible? Y/N Justify your decision

The cost of protective overalls for a mechanic

The interest paid on money borrowed to purchase your own home

The interest paid on money borrowed to buy investment shares

The purchase of raffle tickets from RSPCA

A parking fine incurred while parked for work purposes

The cost of dry cleaning a compulsory work uniform

A donation of $1 to an approved charity

The cost of a briefcase to carry lunch and newspaper to work

The purchase of a specific uniform with a logo to wear in your job as a waiter

APPLY YOUR KNOWLEDGE5. Review what you already know about receipts for tax deductions.

What is substantiation?

Why is substantiation important?

6. Read Fact sheet: Completing your tax return. Confirm whether your knowledge of substantiation is correct.

7. Read the scenario and study the receipt:

Jo Blogges, who is a final year apprentice electrician, purchased a new electric drill for use at work. She has retained the receiptso that she can claim the drill as a work-related expense when completing her income tax return.

Activity 3: Task 1

Tax, Super+You.

Page 25

Take Control.

8. Highlight the features on the receipt to substantiate Jo’s work-related expense claim for the ATO. Refer to the Fact Sheet toidentify which features are necessary.

APPLY YOUR KNOWLEDGE9. Complete the paragraph to test your knowledge about income tax and completing a tax return.

Tax terminology: tax file number; taxable income; job; assessable income; TFN declaration; substantiation; assessable; allowable deductions; deductible

Jay has been told that tax is calculated on his ………............… ……….........…. He has been told that

………........……. …………........…. could include tools and equipment used in his job, self-education and some

other items. He has also been told that an inheritance from his grandmother is not included in his ….........……………

………...............….

The interest he earned on his bank account is ………..........…………….. He has applied for his ……..........……….

……............………… ……..........………. and has completed his ……….............…… ………...............…… He is well

organised and has kept all of his receipts so that he will be able to provide ……............………………. for his claims.

Activity 3: Task 1

Tax, Super+You.

Page 28

Take Control.


TASK 2LODGING YOUR TAX RETURN

YOU WILL: � identify the advantages and disadvantages of different

methods of lodging a tax return � complete a decision-making matrix to decide on the

method of lodging a tax return that suits most taxpayers � evaluate the suitability of different methods for different taxpayers � develop evidence-based proposals on which option

different taxpayers should use

YOU WILL NEED: � Fact sheet: Completing your tax return

There are three main ways that taxpayers can lodge their tax returns – Online through the Tax Office product myTax, through the post by completing a paper tax return or by using a registered tax agent. The features of each of these methods are listed in the table below:

Option AmyTax

Option BPaper Tax return

Option CRegistered taxation agent

The ATO’s online product that works on any smart device or computer with an internet connection.

Accessed via your myGov account at my.gov.au or from the ATO app on smartphones or tablets.

Designed for everyone regardless of their circumstances or how complex their tax affairs are.

A free service completed by individuals.

Pre-fills information that has already been provided to the ATO by your employer, banks, private health insurance fund or other government agencies such as Centrelink – (this information is usually provided by early August).

Allows individuals to fill in information if they want to submit their return before early August.

Includes integrated calculators and links to useful information, tax deductions with built-in checks to catch mistakes.

Guides individuals through the whole tax return process, and will generate a return that is tailored to each individual’s situation.

Allows individuals to save their return and go back to it at any time on any device.

Allows individuals to view or amend their return at any stage by logging into the ATO online services via myGov.

Relies on taxpayer to be accurate.

Refunds issued generally within 12 days of lodgment.

Must be completed by 31 October.

The ATO’s paper product that can be downloaded and printed, ordered online or by phone.

Designed for individuals with simple tax affairs. You cannot lodge a paper tax return if you have:

� personal services income � a net income or loss from a

business � deferred non-commercial

business losses.

A free service completed by individuals.

Requires individuals to complete all sections (no pre-filling).

Includes instructions on how to complete the return.

Return must be posted to the ATO at the individual’s expense.

Relies on taxpayers to be accurate.

Refunds issued within 50 days of lodgment.

Must be completed by 31 October.

A service provided by experts who understand the tax system.

Designed for everyone regardless of their circumstances or how complex their tax affairs are.

Costs vary depending on how complicated the return is.

The cost can be claimed on your return.

Requires information to be provided to the agent in order to complete the return.

Decisions on allowable deductions made by registered tax agent.

Help with ATO audits or amended returns.

Time that refunds are issued vary (If the agents submits electronically, within 12 days of lodgment).

The 31 October submission deadline doesn’t apply.

Feat

ures

of o

ptio

n

Worksheet

Years 7-10

Activity 3: Task 2

Tax, Super+You.

Page 29

Take Control.

ASSESS A RANGE OF OPTIONS1. Using the information in this table, identify the advantages and disadvantages of each option.

Option AmyTax



Advantages

Disadvantages

Criteria for selecting an option for completing tax

returnsOption AmyTax



Cost

Time it takes to complete the return

Audience – ie. does it cater to all taxpayers, or just some?

Effort – eg documents required including payment summary from each employer, statements of interest received from banks or other financial institutions, dividend statements from companies, and statements of shares sold

Accuracy

Ease of accessibility (ie how easy is it to access?)

Time it takes to get a refund

If the 31 October deadline for completing returns has lapsed

Use the legend below for evaluating each lodgment method against each criterion in the table above.

Highly suitable option Somewhat suitable option Not a very suitable option

üü ü O

2. Now that you have identified the advantages and disadvantages of each method, read the criteria to decide on the best optionfor completing a tax return.

Activity 3: Task 2

Tax, Super+You.

Page 30

Take Control.

DEVELOP AN EVIDENCE-BASED ARGUMENT3. Develop an evidence-based argument on the most suitable option of lodging a tax return based on the criteria.

When writing your argument, remember to use PEER to structure your paragraph.

Proposal about the most suitable option

PointState your proposed option (one sentence)

ElaborationExplain in a little more detail why you chose this option (one or two sentences)

Evidence/ExampleDiscuss the advantages and disadvantages of your proposed option in detail.Explain why the other options were less suitable(several sentences)

RelateRestate your proposed option (one sentence)

MAKE INFORMED DECISIONS4. Not all taxpayers are the same, and some options might be better suited to some taxpayers than others. Below is a description

of three different taxpayers. For each of these taxpayers, decide on the criteria in Table 2 that best suits their situation. Identifywhich option best suits each of these taxpayers and justify your selection.

Taxpayer A – is lodging a tax return for the first time. The taxpayer is young and very adept at using devices and the internet.

Taxpayer B – has always used a tax agent to lodge his tax return. He does not have a computer or smart phone and is not comfortable using these devices or the internet.

Taxpayer C – is a small business owner with a net income from the business.

Activity 3: Task 2

Tax, Super+You.

Page 33

Take Control.


TASK 3COMPLETING YOUR TAX RETURN

YOU WILL: � Complete a tax return for the last financial year

YOU WILL NEED: � Fact sheet: Completing your tax return

Worksheet

Years 7-10

Now that you have learned about the different ways you can complete a tax return, it is time to try filling in one yourself. As noted in the fact sheet, if you use the online ATO tool myTax, a lot of the information you need to provide to the ATO will be pre-filled by late August. If you want to complete your tax return prior to this date, you will need the information outlined in the Fact sheet: Completing your tax return, such as your PAYG payment summary and bank interest.

APPLY YOUR KNOWLEDGEUse the information below and the PAYG payment summary to fill in the attached tax return. As you had no savings, you did not earn interest in this financial year.

The attached tax return has been modified for educational purposes. It asks you to complete questions that will relate to you when you complete your own tax return online using myTax. When filling in the return, use your own personal details wherever possible, such as your own TFN, name, address, date of birth etc.

Your deductions

Compulsory uniform $345.45

Safety boots $192.45

Course on safe food handling $495.00

Donation to the Salvation Army $50.00

Laundry expenses* $150.00

(Because your work-related expenses add up to more than $300, you must be able to substantiate these expenses)

Information about the Medicare levy and Medicare levy surcharge If you use myTax, the ATO will calculate if you are:

1. eligible for a Medicare levy exemption or reduction2. liable for the Medicare levy surcharge.

There are several tests that apply to this decision – one of which is income.

Medicare levy In 2016–17 you do not have to pay the Medicare levy if your taxable income is equal to or less than $21,655. You will pay only part of the Medicare levy if your taxable income is between $21,655 and $27,608. The ATO will work out how much you have to pay.

Medicare levy surcharge The Medicare levy surcharge (MLS) is levied on individuals and families who do not have private health insurance. The base income threshold (under which you are not liable to pay the MLS) is $90,000 for singles and $180,000 for families.

*You can claim for the laundry of your compulsoryuniform ($150). You must have written evidence,such as diary entries and receipts, for your laundryexpenses if both:

� the amount of your claim is greater than $150,and

� your total claim for work-related expensesexceeds $300

ScenarioYou are single, under 18 and have been working part time at a local butcher shop for the past financial year. You want to fill in your tax return as early as you can so that you receive your return before you go on holidays in early August. MyTax has not yet pre-filled your information, so you are asked to provide it.

Activity 3: Task 3

Tax, Super+You.

Page 34

Take Control.

Activity 3: Task 3

2017

Payment summary for the year ending 30 June 2017

1/07/2016 30/06/2017

27/06/2017

TAX RETURN FOR INDIVIDUALS

Tax, Super+You.

Page 35

Take Control.

Tax, Super+You.

Page 36

Take Control.

Tax, Super+You.

Page 37

Take Control.

Tax, Super+You.

Page 38

Take Control.

Tax, Super+You.

Page 39

Take Control.

Tax, Super+You.

Page 46

Take Control.

EXTEND YOUR APPLICATION OF KNOWLEDGEYou will need to add snakes to the board. For each ladder, develop a card that explains why the player is progressing up the ladder – for example, the card for Number 5, could say: You lodged your tax return using myTax which saved you time and money. Also create cards for the number of each snake’s head. These will have to include disadvantages, for example, Because you lodged your return by mail, you will have to wait 60 days for your return.


TASK 4EXTENSION ACTIVITY

Worksheet

Years 7-10

Activity 3: Task 4

Tax, Super+You.

Page 47

Take Control.

Your Tax Activity 4

Tax equation template Ali's tax calculation ($)

Assessable income39,100

minus

Allowable deductions2,800

equals

Taxable income36,300

Use tax rates 2016–17 19c for each $1 over $18,200

Tax on taxable income3,439

minus

Tax offsets350

equals

Net tax payable3,089

plus Medicare levy 2% of taxable income

Medicare levy726

equals

Total amount payable3,815

minus

Tax credits5,100

equals

Refund or amount owingRefund due: 1,285

You can see from thistable, that Ali’s taxchanged becauseof offsets and theMedicare levy.

Many people like to do their own tax calculation to get an idea of whether they are due a refund or have a tax debt.

If you lodge via myTax, you will be given an estimate of your refund or tax due before you lodge your return.

Study the case study about Ali. Then look at the tax equation template in the section below called Income tax estimator to see how Ali’s income tax is calculated.

Case study: AliAli works full-time as a baker for Nicky’s Breads. His employer gives him a uniform, but Ali must keep it laundered.

He studies at night at the local TAFE to improve his skills so he can get a promotion to a store manager position, and keep up to date with the latest baking techniques. He has private health insurance with a complying fund. Ali has looked at his bank records and other documents so he can prepare his tax return.

INCOME TAX ESTIMATORAli could use the income tax estimator on the ATO website to calculate his tax position. Using the calculator would give Ali an estimate of his tax refund or debt.

Fact sheetYears 7-12

CALCULATING TAX DUE As part of your tax return you may be due a refund or

have a tax debt. Find out more about calculating tax

using some case studies.


Tax, Super+You.

Page 48

Take Control.

TAX OFFSETSTax offsets (sometimes referred to as rebates) directly reduce the amount of tax payable on your taxable income. There are several tax offsets including offsets for:

� health insurance � low income earners (The maximum tax offset of $445

applies if your taxable income is $37,000 or less. Thisamount is reduced by 1.5 cents for each dollar over $37,000)

� zones and overseas forces.

TAX LEVIES AND SURCHARGES

Medicare levyMedicare gives Australian residents access to health care. It is partly funded by taxpayers who pay a Medicare levy of 2% of their taxable income.

Your Medicare levy is reduced if your taxable income is below a certain threshold. In some cases you may not have to pay the levy at all.

In 2015–16 you do not have to pay the Medicare levy if your taxable income is equal to or less than $21,335 ($33,738 for seniors and pensioners).

Medicare Surcharge � The Medicare levy surcharge (MLS) is levied on Australian taxpayers who do not have an appropriate level of private hospital

insurance and who earn above a certain income. � The base income threshold (under which you are not liable to pay the MLS) is $90,000 for singles and $180,000 for families.

Sometimes your calculation may not be exactly the same as the ATO's calculation. The ATO will send a notice of assessment with their exact calculation of tax payable or a refund due.

Other leviesFrom time to time, the government imposes short-term levies to pay for extraordinary expenses. An example is the flood levy (also known as the Temporary Flood and Cyclone Reconstruction Levy) that was designed to help fund the rebuilding of essential infrastructure damaged by natural disasters that occurred in Queensland in late 2010 and early 2011. This included roads, bridges, and schools. The flood levy applied to 2011-12 income year and was paid by most taxpayers.

Another example is the Temporary budget repair levy of 2% that was imposed on that part of a person’s income which exceeds $180,000. The budget repair levy was imposed from 1 July 2015 to 30 June 2017.

Tax equationStep 1

Assessable income – allowable deductions= taxable income

Step 2 Calculate tax on taxable income

(using tax rate table)

Step 3 Tax on taxable income – tax offsets

= Net tax payable

Step 4 Net tax payable + Medicare levy + Medicare

surcharge = Total tax payable

Step 5 Total amount of tax payable – tax credits

= Refund or amount owing


Tax, Super+You. Take Control.

YOU WILL: � use real-life scenarios to decide what is assessable income

and allowable deductions � provide an explanation of what is not assessable income

and allowable deductions � calculate taxable income in a range of real-life situations

YOU WILL NEED: � Fact sheet: Calculating tax due � Answer Sheet: Task 1 - What is my taxable income?

Your Tax Activity 4: Calculating tax due

TASK 1WHAT IS MY TAXABLE INCOME?

1. Read the Fact sheet: Calculating tax due and the information in the text box below.

Some other facts: Allowable deductions must be related to earning an income

There are a number of allowable deductions that taxpayers can claim when they complete their tax returns. The principle test is whether the expenses relate to earning an income. For example, interest is income, an investment property that pays money in rent is income. Costs associated with earning this income can be deducted, such as interest on a property that earns rental income. Self-education expenses are also deductible when the course you undertake leads to a formal qualification, has a sufficient connection to your current employment and:

� maintains or improves the specific skills or knowledge you require in your current employment, or � results in, or is likely to result in, an increase in your income from your current employment.

You cannot claim a deduction for self-education expenses for a course that does not have a sufficient connection to your current employment even though it:

� might be generally related to it, or � enables you to get new employment.

2. Read the scenario below and answer the questions that follow.

ScenarioYou are a registered tax agent who completes tax returns for a number of clients. Three of your clients have presented you with their financial information. They are not sure what information is relevant.

APPLY YOUR UNDERSTANDING3. For Matt, Camilo and Susie, decide which information is relevant for the purpose of completing a tax return. To do this, you must

decide for each client, what on their list is:

� assessable income � allowable deductions

4. You are asked to explain to each client why you have not included income or deductions they listed.

Worksheet

Years 7-10

Activity 4: Task 1

Tax, Super+You.

Page 50

Take Control.

Money received during the year Amount ($)

Income or allowable deduction

(place a tick or cross next to the amount)

Explanation (explain why those with crosses are either not assessable income or allowable deductions)

Wages 11,700

Bank interest 60

Payments during the year

Accountant’s fee for preparation of tax return

70

Travel to and from work 390

Donations to an approved charity

30

Now that you have decided what items are assessable income and what items are allowable deductions, use an excel spreadsheet (or calculator) to calculate Matt’s taxable income. An example, with formulas is provided below:

Income and expenses Amount ($)

1 Assessable income

2 Wages from job 1 3000

3 Wages from job 2 1500

4 Interest earned 30

5 Total Assessable income =SUM(A2:A4)

6 Allowable deductions

7 Accountants Fees 80

8 Donations to approved charity 100

9 Approved education course 450

10 Union fees 200

11 Total allowable deductions =SUM(A7:A10)

12 Taxable income =A5-A11

MattMatt is 17 years old. While he is at school, he works part-time with a building supplies company on weekends and during vacations. He has provided you with the following list of income and expenses. You must decide whether what Matt has listed is assessable income and whether or not his expenses are allowable deductions. Provide an explanation of your decision in the column provided.

Note that the formula will change

depending on the number of entries

you have. In assessable income, A2

shows the first item and the A4 shows

the last. In allowable deductions, A7

shows the first and A10 shows

the last.

Taxable income = assessable income –allowable deductions(ie A5-A11)

Activity 4: Task 1

Tax, Super+You.

Page 51

Take Control.


Income or allowable deduction (place a tick or cross next to the amount)

Explanation (explain why those with crosses are either not

assessable income or allowable deductions)

Best player of the month award (gift voucher)

100

Singing fees 75,000

Bank interest 190

Rent from town house 19,840


Singing lessons 3,500

Football gear 800

Donations to an approved charity

300

Town house expenses (rates, agent and repairs)

3,100

Interest on mortgage for town house

13,800

Interest on mortgage of the house he lives in

12,100

Costume cleaning costs 1,100

Car expenses to and from work

3,800

Accountant's fee for preparation of tax return

200

Vacation expenses 7,000

CamiloCamilo is a very talented Spanish-style singer who sings regularly at a restaurant and at private functions. He is single, aged 25 and an Australian resident for tax purposes. Camilo plays soccer for a local amateur club. He owns two properties, the house he lives in and a town house which he rents out.

Now use an excel spreadsheet (or calculator) to calculate Camilo’s taxable income (use the example on how to use excel spreadsheet above).

You can only claim

expenses that are

directly related

to earning your

assessable income.

Activity 4: Task 1

Tax, Super+You.

Page 52

Take Control.

SusieSusie is a journalist who works for a large daily newspaper. She is married, aged 32 and is an Australian resident for tax purposes. Susie has term deposits with various banks.


Income or allowable

deduction (place a tick or

cross next to the amount)

Explanation (explain why those with crosses are

either not assessable income or allowable deductions)

Inheritance from grandparent's estate

105,000

Salary 65,000

Term deposit interest 21,000

Lottery winnings 1,000


Accountant's fee for preparation of tax return

180

Subscriptions to investment magazines

200

Donations to approved charity 610

Train travel expenses to work each day

1,100

Union fees to Association of Journalists

1,000

Depreciation of computer equipment (used for work)

480

Cost of TAFE course on furniture restoration

520

Mobile phone used for work 800

Now use an excel spreadsheet (or calculator) to calculate Camilo’s taxable income (use the example on how to use excel spreadsheet above).

Check your answers using the answer sheet.

You cannot claim the following as

allowable deductions:

� private or domestic expenses,

such as childcare fees or clothes

for your family

� expenses relating to income that

is not taxable, such as money you

earn from a hobby

� expenses that are specifically non-

deductible, such as entertainment

and parking fines.

Activity 4: Task 1

Tax, Super+You.

Page 56

Take Control.

APPLY YOUR KNOWLEDGEScenarioYou are a registered tax agent who completes returns. Two of your clients Julie and Andrew, want to know if they are due a refund or have tax payable. Julie and Andrew have provided you with their taxable income for the year ending 30 June 2016.

1. Calculate if Julie and Andrew are due a tax refund or have a tax bill for the 2016-17 income tax year. Use the tax rates table to calculate the tax payable.

Table 1: 2016-17 Tax rates An example of how to calculate taxTaxable income Tax on this income

0 – $18,200 Nil

$18,201 – $37,000 19c for each $1 over $18,200

$37,001 – $87,000 $3,572 plus 32.5c for each $1 over $37,000

$87,001 – $180,000 $19,822 plus 37c for each $1 over $87,000

$180,001 and over $54,232 plus 45c for each $1 over $180,000

Table 2: Step 1 of calculating tax dueA B C D E

ClientAssessable income ($)

Work related expenses ($)

Taxable income ($)

Tax payable on taxable income (Round to the nearest $)

Tax credits ($) Refund or bill

($) (E-D)

Julie 35,000 450 7,100

Andrew 85,000 980 17,200(A negative number means you have not paid enough tax so you have a bill)

You can estimate your tax return based on your taxable income (assessable income less allowable deductions). However, your return will depend on whether you are entitled to tax offsets (rebates) and whether you are required to pay levies or surcharges. Both offsets and levies/surcharges will be calculated automatically if you use the Tax Office online lodgment tool myTax.

Your Tax Activity 4: Calculating tax due

TASK 2 DO WE GET A REFUND?

YOU WILL: � use real-life scenarios to calculate tax due � recalculate tax due taking into account tax offsets and levies � develop an argument supporting the claim that Tax offsets

and levies make the tax system fairer

YOU WILL NEED: � Fact sheet: Calculating tax due � Answer sheet: Task 2 - Do we get a refund?

The total tax payable by a person on an annual income of $80,000 would be calculated as follows:

Tax payable on the first $18,200 = 0


= $3,572


= $13,975


Worksheet

Years 7-10

Activity 4: Task 2

Tax, Super+You.

Page 57

Take Control.

2. Read Fact sheet: Calculating tax due, particularly the section on tax offsets, levies and surcharges.

Julie and Andrew are both 29 years old and single. Neither pay health insurance and live in a capital city so are not entitled to zone offsets.

3. Using the information in the fact sheet and above, calculate Julie’s and Andrew’s:

� offsets (If eligible, low income offset as they are not eligible for any other offset) � medicare levy � medicare surcharge

Table 3: Step 2 of calculating tax dueA B C D E F G H

ClientTaxable income

($)

Tax on taxable

income ($)

Offset amount

($)

Net tax payable ($) (B-C)

Medicare levy ($)

Medicare surcharge

($)

Total tax payable ($)

(D+E+F)

Tax credits ($)

(See table 2)

Refund or amount owing ($)

(H-G)

Julie

Andrew

DEVELOP AN EVIDENCE-BASED ARGUMENT4. Using the PEER method of paragraph writing, develop an argument supporting the following statement:

“Tax offsets and levies help make the tax system fairer”.

Point State your argument

Tax offsets and levies help make the tax system fairer.

Elaboration Explain in more detail what your argument is – for example, what is fair?

Evidence Provide evidence to support your argument

Relate Restate your conclusion/position

Activity 4: Task 2

Tax, Super+You.

Page 59

Take Control.

Your Tax Activity 5

WHAT OTHER TAXES DO I HAVE TO PAY?OTHER PERSONAL TAXES

In addition to income tax, you may have to pay other personal taxes, such as capital gains tax (CGT) and goods and services tax (GST).

GOODS AND SERVICES TAX (GST)The GST was introduced on 1 July 2000. It is a tax on the supply of goods and services in Australia and on most goods imported into Australia.

The introduction of GST was a major change in Australia's tax structure. At the same time GST was introduced, sales tax was removed and personal income tax rates decreased. All individuals are consumers and therefore pay tax on most things they purchase.

The GST is a consumption tax. This means that tax is paid at each step along the chain of transactions from the maker to the end user who has to pay the cost of the tax.

The GST is 10% added to the cost of the good or service and must by law be included in the price. If you buy a bicycle from a GST-registered retailer for $1,100 then 1/11th of this total amount (in this case, $100) is GST. The retailer must collect the GST from you (the purchaser or consumer) and forward it to the ATO.

Some goods and services are 'GST-free'. The GST-free list includes:

� basic foods � most education � child care � certain health goods and services.

CAPITAL GAINS TAX (CGT) This tax was introduced in 1985. It was introduced because some taxpayers received amounts known as capital gains that were not regarded as income under the income tax laws and so were not taxed. This was identified as unfair, so laws were introduced to include capital gains as assessable income and liable for income tax.

Generally, you make a capital gain when you sell or dispose of a CGT asset for more than it cost. 'Cost' includes purchase costs, maintenance and loan interest. CGT is a tax on the gain or profit from selling certain assets such as shares, rental properties, collectables (art and antiques) and the sale of businesses. Cars are not subject to CGT and the family home is generally exempt from CGT unless it has been used as a place of business or for income producing purposes.

There is no set tax rate for CGT. The net capital gain is added to your other assessable income and taxed at your applicable income tax rate. The capital gain amount may be reduced by a discount provided you have owned the asset for at least 12 months. A discount of 50% applies only to individuals and trusts, while a 33.33% discount applies to super funds.

You may make a capital loss if an asset is sold for less than it cost. No tax is payable on a capital loss. A capital loss can only be offset against a capital gain. If you don't have a capital gain, your capital loss is carried forward to future years to be offset against future capital gains.

TAXES ON OVERSEAS TRAVELLERSAustralian citizens are liable to pay the passenger movement charge (often called a departure tax) when they travel overseas unless they are under 12 years of age. This tax is pre-paid with your international airline or ship ticket. If you bring goods like gifts and souvenirs back into Australia and the total value is above the 'duty-free limit', you may be liable to pay duty on these goods.

Information on taxes and duty on overseas travel can be found on the Department of Immigration and Border Protection website (https://www.border.gov.au/).

Fact sheet

Years 7-12


Tax, Super+You.

Page 60

Take Control.

THE CASE FOR GSTIn July 2000, the federal government introduced a 10% goods and services tax (GST), based on the value-added tax (VAT) model, as part of a broader package of taxation reform. The GST replaced the wholesale tax (WST) and a range of inefficient state taxes. Revenue from the GST is paid to the states and territories, providing them with a stable and growing source of revenue and removing their reliance on general assistance grants from the federal government.

The GST is a consumption tax. Before the GST, wholesale taxes were charged on products, but this occurred during the stages of production, which increased production costs and distorted economic decisions. The tax also aimed to reduce tax avoidance by charging tax directly to consumers at the cash point.

Tax reform is not a simple process. Each change has an impact on other aspects of the complex financial system. In weighing up the effects of changing the WST and other taxes, the federal government made significant changes to personal income taxes and social security payments. This included significantly reducing personal income taxes and large increases in government payments to families, pensioners and low income earners. Adjustments were also made to excise taxes and some specific indirect taxes to adjust for the removal of the WST and imposition of the GST.

In order to achieve passage of the tax reform bill through Parliament, several compromises were made to the proposed GST. The most notable of these was the removal of basic food and personal products from the GST base. Source: Reinhardt, S. and Steel, L. (15 June 2006). A Brief History of Australia’s Tax System. Tax Analysis Division, the Australian Treasury.

Points of view about the GSTProposing and implementing tax reform generates intense national debate. Individuals and groups from many sectors of society express their points of view based on their values and the impacts such changes will have on them or their representatives. Proposals and debates continue today about the role, advantages and disadvantages of GST. For example, there has been debate as to whether the GST should be increased to 15% to fund society’s increasing needs.

Source 1A significant advantage of a GST is that it is a transparent (clear) tax that is well understood and widely accepted by both business and consumers. However, critics argue that a goods and services tax is regressive, because poorer people spend most of their income on living expenses, and therefore most of what they earn is taxed. That is, those on lower incomes are hit with a larger share of tax on a given basket of goods and services than is a rich person buying the same basket of items.

Source: Nedra Fongalland, 15 March 2016, http://www.lockwood.com.au/gst-debate

Source 2Others agree but say that “bracket creep” is a much bigger threat to low-income households than a GST increase. They explain that people's wages have gone up but the income tax rates haven't been adjusted. Therefore, soon, some low-income earners on 23 cents in the dollar will be paying 28 cents in the dollar, which is actually a 20% increase in tax.

Source: (6 February, 2016) http://www.abc.net.au/news/2016-02-06/gst-reform-is-needed-to-avoid-us-style-health-system-weatherill/7144170

Source 3Many people are now arguing that the GST should be increased by another 5% points to 15%. At that level it would collect another $33 billion in revenue each year. However, 15 years from now, as Australia's growing aged population demands more of the national budget, people may wish to take the GST from 15% to 20%. With the average personal rate of income tax currently at 24%, this would mean Australians would have two large blocks of tax to pay – a 20% tax on consumption and a 24% tax on income, that is, a burdensome 44% that is hard to undo.Source: Paul Keating (former prime minister), 3 February 2016, Sydney Morning Herald on increasing the GST


Tax, Super+You.

Page 61

Take Control.

TASK 1INVESTIGATING OTHER TAXESYour Tax Activity 5: What other taxes do I have to pay?

YOU WILL: � analyse points of view about the advantages and

disadvantages of the GST � complete a costs and benefits analysis of the GST � identify the considerations that influence government

decisions about tax

YOU WILL NEED: � Activity 5: Fact sheet - What other taxes do I have to pay? � Post-it notes

Independently:1. Read “The case for GST” in Activity 5 - Fact sheet: What other taxes do I have to pay?

2. Review the first three paragraphs. Highlight or underline:

� the reasons for GST being introduced � the desired effects for GST being introduced � how other taxes and systems were changed to balance the imposition of a GST.

With others:3. Share your findings.

Independently:4. Read the points of view expressed about the GST.

With others:5. Discuss each source to be clear about the key messages.

6. Use highlighters or codes to identify the advantages and disadvantages of the GST expressed in these points of view.

7. Complete the following cost-benefit analysis matrix.

Worksheet

Years 7-10

INTERPRET TEXTS AND SHARE POINTS OF VIEW

Activity 5: Task 1

Tax, Super+You.

Page 62

Take Control.

COMPLETE A COST-BENEFIT ANALYSIS

Benefits (advantages) Costs (disadvantages)

With others:Bundling: Get to the essence of things…

8. Discuss and identify some key ideas that appear in the debate about the advantages and disadvantages of the GST.

� On separate post-its, write words or simple phrases that represent the key factors that influence government decisionsabout tax planning and implementing.

� Bundle the post-it notes into similar categories. � Name these bundles by their big idea. Test the usefulness of each name by asking: “Is this a factor that influences

government decisions about tax planning and implementing?”

Independently:9. Write a concluding statement using the bundle names to answer the question: “What are the factors that influence

government decisions about tax planning and implementation?”

Good

s an

d Se

rvic

es T

ax (G

ST)

COLLABORATIVELY CATEGORISE FINDINGS

DEVELOP A CONCLUSION

Activity 5: Task 1

Tax, Super+You.

Page 63

Take Control.

UNABLE TO MEET YOUR TAX OBLIGATIONS ON TIME

If you have difficulty in meeting your tax obligations, including lodgment and payment,

contact the ATO as soon as possible to work out alternative arrangements. The ATO has a

number of different options available in this situation. Which option is agreed to will depend

on negotiations between the ATO and you, taking account of the specific circumstances of

your situation.

Some of the possibilities include:

� additional time to lodge

� more time to pay tax debts without interest charge

� tax debts to be paid by instalment arrangements

� remission of general interest charges

� release from payment of certain taxes or penalties.

Your Tax Activity 6

FIXING A TAX PROBLEM Taxpayers have a responsibility to lodge their tax return by 31 October. Failure to lodge a return on time may result in a penalty for late lodgment and may cause a delay in receiving a tax refund if it is owed to you. After 31 October, tax returns can only be lodged by a registered tax agent. If you fail to pay any tax that is owed, you will accrue a general interest charge (GIC) on outstanding money. The GIC is reviewed quarterly and reflects changes to the reserve bank interest rate. Some years, the GIC has been high, such as 14.75% in July to September 2008.

MAKING AN AMENDMENTYou can request an amendment to correct a straightforward error in a return or assessment. Typical reasons for requesting an amendment would be forgetting to report income such as bank interest or omitting to claim an allowable deduction when lodging a tax return. Amendment claims must be made in writing. For guidelines on making a change to an income tax return or assessment, see Correct a mistake or amend a return on the ATO website.

MAKING AN OBJECTIONObjections usually result from a disagreement between the ATO and the taxpayer about an interpretation of the taxation laws. If you disagree with a notice of assessment, you can lodge an objection and ask to have the decision reviewed.

The ATO review is carried out by a person not involved in the original decision and must, by law, be carried out in an impartial manner. It is recommended that you contact the ATO to discuss the situation before lodging an objection – many misunderstandings can be resolved in this early stage.

MAKING A COMPLAINTThe Taxpayers' Charter outlines the relationship that the ATO seeks with the community – a relationship based on mutual trust and respect. The Charter states that the ATO respects the taxpayer's right to make a complaint.

The ATO is committed to treating complaints seriously, dealing with them quickly and learning from them. The steps you should take are:

� try to sort the problem out with the tax officer you have been dealing with

� talk to that officer's manager if not satisfied � contact ATO Complaints if you are still not satisfied after

those first two steps.

If you are unable to resolve your difficulty, or you are dissatisfied with the way the complaint has been handled, the Taxation Ombudsman may be able to help you. For details on how to make a complaint, see the Commonwealth Ombudsman website.

Did you know that you

have options if you have a tax concern?

Fact sheet

Years 7-12


Tax, Super+You.

Page 64

Take Control.

EXPLORE INFOGRAPHICS1. Think, pair, share: What is an infographic? Where have you come upon them? What is the purpose of an infographic? What are

the text features of an infographic?

2. Compare your answer to this definition: An infographic makes complex information easily understood through a visual representation of data and images that is concise, eye-catching and easily shared. Infographics use images, brief text and often statistics.

3. Locate and compare an infographic with some found by your peers.

Discuss: � Through what media is the infographic communicated? � Who is the intended audience? � What are the key messages? � What features promote the key messages? � Does the infographic share complex information in a concise, easily understood, eye-catching way? � How effective is the infographic in your opinion?

CALCULATE THE PENALTIES4. Study the scenarios below. Refer to the Fact sheet: Fixing a tax problem and the tables below to calculate the consequences for

the taxpayer.

(a) Harry failed to lodge his income tax return for the year. He submits his form on 17 December. Use the table below to calculate the penalty for failure to lodge.

Days Overdue Penalty Amount*28 days or less $18029 to 56 days $36057 to 84 days $54085 to 112 days $720113 days or more $900

DESIGN ANINFOGRAPHICYour Tax Activity 6: Fixing a tax problem

YOU WILL: � identify common problems experienced by young people in

relation to tax � calculate penalties for late lodgment of tax � analyse the purpose and design features of infographics � design and create an infographic that informs young people

about solutions to common tax problems � justify design and text choices for an infographic

YOU WILL NEED: � Activity 6: Fact sheet - Fixing a tax problem � Answer sheet: Design an infographic

Worksheet

Years 7-10

Display your sample infographics around the room for future inspiration.

Answer: * sample amounts

Activity 6: Design an infographic

Tax, Super+You.

Page 65

Take Control.

(b) After Harry submitted his tax return, he learned that he owed the ATO $1,000. Harry pays his outstanding tax 47 days after the due date. Calculate how much General interest charge (GIC) will be owed by Harry if the GIC rate is 8%. Use the scenario below to assist you to calculate the GIC.

Example of how to calculate General Interest Charge (GIC)*

Outstanding Tax = $4000, Days overdue = 64, GIC rate = 8% (0.08)

GIC = Outstanding tax x (GIC rate ÷ 365 x days overdue) GIC = $4,000 x (0.08 ÷ 365 x 64)GIC = $4,000 x 0.014 GIC = $56.00

.

(c) What has been the total financial cost for failing to lodge his tax return?

5. Explore options available to a taxpayer who has tax problems.

� Identify what Harry could have done to avoid the consequences. � Due to personal circumstances, it was not possible for Harry to lodge his tax return on time. What could Harry have done to

avoid penalty and interest charges? � However, noting that Harry failed to act on time, what can he now do to fix his tax problem?

CREATE AN INFOGRAPHICYour task is to use a design process to create an infographic, using a scenario as your guide.

6. Study the scenario below:

The ATO is concerned that young taxpayers seem unaware of what to do when they have a problem in completing and lodging a tax return or meeting their other tax obligations. A common reaction to tax problems is to ignore them. This is not the best response as the problems remain. The ATO would like to increase awareness of the options available for young taxpayers when they are not able to meet their tax obligations.

The aim of the information campaign is to make young people aware of the options they have to fix a tax problem. Given the age of the target group, the campaign is to deliver this information through an infographic designed for social media commonly used by young people.

7. You have been contracted to design an infographic to convey the ATO’s key messages to assist taxpayers with problems. In the scenario above, highlight text that identifies:

8.

9. Follow the design process below to create your infographic, ideally using digital resources.

10. Present and share designs. Justify your design choices. Seek and offer feedback using the criteria list.

Answer:

What is my challenge? How do I research it? What are my initial ideas?

What does the research show? What am I thinking? What are others thinking?

What ideas do I have? Which ideas are an opportunity to solve the challenge? What will I create? What problems will I have to resolve?

How do I make my infographic? How will I share my infographic? How will I explain and justify my design choices?

How effective was my infographic?

What will my mock-up or prototype be like? What feedback of my mock-up or prototype can I use to refine my ideas?

CriteriaYour infographic:

� uses a social medium that suits the intended audience and purpose � communicates complex messages in a concise, eye-grabbing, easy to understand way � clearly identifies common tax problems � clearly outlines solutions to common tax problems.

Activity 6: Design an infographic

* While GIC is calculated at a simple rate of interest in this scenario, GIC is normally a compounding interest and the rate is reviewed quarterly.

Answer:

your client’s problem your client’s campaign aim your client’s target audience your clients’ solution.

8.

9.

Tax, Super+You.

Page 67

Take Control.

Your Tax

It’s surprising how many everyday things are

affected by the tax system. Tax has a huge

impact on our society. INCOME TAXIn Australia, anyone earning over $18,200 in a financial year pays income tax. This money is used by the Australian Government to fund a wide range of services throughout the community. Let’s take a closer look at how some of this income tax revenue has been spent.

Your older brother has driven from interstate to visit you. Along the way he noticed how major roadworks have been completed along what used to be a series of notorious blackspot locations, making the journey much safer. Your brother also benefited from several new bypasses, allowing him to skip small country towns and the seventeen sets of traffic lights that used to hold him up!

All of these improvements were subsidised by income tax collected throughout Australia, producing a safer, faster and more fuel-efficient journey for your brother.

Tax from businessTax from businesses such as your shoe store forms an important part of Australia’s taxation revenue. Let’s explore how some of the tax from business is being used to help your community.

Meet Rosie, a single mum with two young children. Rosie’s son has breathing difficulties and needs constant medical care, meaning Rosie can’t work as much as she needs to. Up until recently the family could only afford to live in a small two bedroom flat. However today they are moving into a brand-new three bedroom townhouse, provided through the city’s public housing initiative.

Additional funding for this initiative was sourced from government revenue. The business taxes collected nationally contribute to this revenue, which is then redistributed by the Australian government to pay for public services. This additional funding allowed more houses to be built, providing Rosie and her young family with a roof over their heads.

Family assistanceFamily assistance programs throughout Australia are funded in part through taxation revenue. Let’s take a look at how these services will help you and your new family. Congratulations! It’s a girl!

You’ve chosen to start a family, and to help you on your way the local health clinic and parenting group contacts you to ask about your immediate needs and offer their support.

The local area nurse makes a house call, inspecting your new nursery and offering advice on everything from feeding schedules to bathing techniques for your little girl. The nurse also makes an appointment for you to have your baby immunised against deadly diseases such as diphtheria, whooping cough, polio and pneumococcal disease – all free of charge thanks to the National Immunisation Program.

Further studyPursuing further study is an amazingly worthwhile decision, but life as a student can be tough! Luckily a portion of Australia’s taxation revenue is used to assist students and universities, making the decision to study more affordable.

Shaun, your study buddy, worked hard at high school and was awarded a Commonwealth supported place at university. That means that he has to pay part of the cost of his education while the Australian Government pays for the rest. But Shaun also qualified for a student loan that allows him to defer the cost of the university fees. The Australian Government pays the fees on his behalf, and then he repays the government through the tax system once he graduates and starts earning a wage. Shaun also has a yearly travel concession pass that is subsidised by tax revenue.

Even with the help it’s not easy, but at least a student has a chance to fulfil his/her dream.

Stamp duty and ratesMany people are surprised by the range of important local services that are funded through stamp duty and rates. Let’s explore some of the more interesting uses of this tax revenue.

Your local council has just opened a new skate park and recreational hall near your new house. It’s a great place to meet friends and play sport, and your nephew and his mates love the half-pipe! The park is maintained by a local ranger, who ensures all of the equipment is in good order, the benches are clean and the lighting works at night.

All of these services are funded through your local council, using income collected from property rates. The state government has also contributed some of the stamp duty it collects with each property sale.

INTERACTIVETAX AND YOU

Fact sheetYears 7-10

Interactive: Fact sheet

Tax, Super+You.

Page 68

Take Control.

GOVERNMENT GOODS AND SERVICESLet’s look at some ways that government collects and distrubutes tax revenue.

Further studyThe Australian Government assists students in a number of ways:

� student loans that can be repaid over time through the tax system

� subsidised places at university for Australian citizens, reducing the cost of further study

� subsidised travel costs for students.

Getting a job When you start a new job, the income tax paid by employees throughout Australia helps to pay for a wide range of national, state and local services, such as:

� roads and highways � hospitals and healthcare � parks and recreation facilities.

Starting a familyThe Australian Government provides a range of benefits that you may be eligible for when you start a family. Some examples are:

� paid maternity leave � baby bonus � special tax deductions for families � health clinics and community services � immunisation.

Starting your own businessThe Australian Government provides a wide range of assistance to help new businesses, such as information available on the ATO website, personal assistance visits and small business seminars.

Buying a houseProperty purchases are both subject to tax and subsidised by tax revenue. Houses are subject to taxes such as stamp duty, but they can also be subsidised through tax-funded initiatives such as the First Home Owner Grant.

RetirementThe government provides an age pension. However, for some people, this pension may not be enough to support the lifestyle they desire. In the future, most Australians will rely on their superannuation (“super”) to pay for their retirement. Super is money set aside over your lifetime to provide for your retirement. For most people, contributing to super begins when you start work and your employer contributes to super for you. You can also build your super with your own contributions to take advantage of super’s favourable tax treatment. If you take an interest in your super when you’re young, you will have a better chance to save for the things you most like to do when you retire.

Australians also benefit from tax because a portion of Australia’s tax

revenue funds:Water — providing agencies responsible for water services and utilities

Energy — services and utilities such as electricity. For example, subsidises for the fossil fuel industry to bring

down the cost of electricity for the general public.

Parks — public facilities such as sports grounds, parks and recreation centres.

Emergency services —fire brigade, police and ambulance services and other services.

Healthcare —helping citizens meet the cost of healthcare, including funding hospitals, clinics, ambulances and

medication.

Roads — building, maintaining and improving our extensive network of roads, highways and freeways.

Transport —assisting various members of our community (students, certain public servants, politicians, senior

citizens and people with disabilities) to cover the cost of public transport.

These are just a few of the many more ways that tax revenue is distributed for the benefit of all citizens in Australia.

Interactive: Fact sheet

Tax, Super+You.

Page 69

Take Control.

TASK 1 INTERACTIVE TAX IN YOUR LIFE TODAYYour Tax

TAX IN YOUR LIFE TODAYWhether you know it or not, tax is already affecting many aspects of your life, providing goods, services and infrastructure that you probably use every day. Tax is collected in various ways. Some things incur tax, allowing the government to collect money or revenue. The collected revenue is then used by the government to subsidise (partially pay for) certain goods, services and public infrastructure.

IDENTIFY THE TAX INCURRED ON EVERYDAY ITEMS1. Examine the items in the bedroom.

YOU WILL: � test your new knowledge about income tax and how it

affects you

YOU WILL NEED: � Fact sheet: Interactive - Tax and you

Worksheet

Years 7-10

1

23

4

56

7

89

10

11

12

13

Interactive: Task 1

Tax, Super+You.

Page 70

Take Control.

2. Consider which things in the bedroom may be affected by taxation. For each item, decide whether it:

� has incurred tax — you paid tax on it when you purchased the item � was subsidised by tax revenue — the cost of the item was partly paid for by the government � was not affected by taxation.

3. Refer to your notes from the Your tax module if needed.

Item Incurred tax Subisidised by tax Not affected by tax

1. Internet access

2. Travel card

3. Ventolin inhaler

4. Hockey stick and local sports facilities

5. Glass of water

6. Electricity

7. Your house

8. Income pay slip

9. Audio system

10. T-shirt

11. Collectable toy

12. Apple

13. World Vision sponsor child

4. Use the answer sheet to check your answers.

MAKE PREDICTIONS5. Predict what future impacts you think the tax system will have on you personally:

When you leave school

Beyond that

It’s surprising how

many everyday things are affected by the tax system.

Taxation, and the distribution of tax revenue, has a huge

impact on our society.

Interactive: Task 1

Tax, Super+You.

Page 73

Take Control.

TASK 2 INTERACTIVETAX IN YOUR LIFE TOMORROWYour Tax

SAY HELLO YOU TO YOUR FUTURE1. Consider your possible futures: Soon you’ll leave school. Predict some big decisions that may lie ahead. Then, create and label a

futures timeline (similar to the one below) that shows some of the possible big stages in your adult life.

2. Consider: Did you consider study, getting a job and maybe further study later on? Perhaps you hope to start a family, buy a home, travel the world, or launch your own business. In all these stages, you will pay tax in some form. Importantly, tax will be returned to you in the form of services for individiuals, the community and the nation.

3. Associate life stages to tax rights and responsibilities: As you start a new life stage, you will have rights and responsibilities in relation to tax. Identify the correct answer to these scenarios? You can check your answers using the answer sheet.

3.1 How will the decision to do further study change your relationship with tax? � I can apply for a student loan to help fund my studies. � I should apply for an Australian business number (ABN) to quote when I buy my textbooks. � I will need to lodge a form with the ATO to get back the goods and services tax (GST) on my course fees. � I will have to start paying company tax.

3.2 How will the decision to get a job change your relationship with tax? � I will have to start lodging business activity statements (BAS). � I will have to lodge a tax file number (TFN) declaration form. � I will have to start paying fringe benefits tax (FBT). � I need to keep receipts for all my lunches so I can claim a tax deduction.

3.3 How will the decision to start a family change your relationship with tax? � I need to see a financial planner to set up a family trust. � I need to register with the ATO to claim back the GST on my childcare fees. � I may be able to claim certain tax offsets in my income tax return. � I will have to start lodging business activity statements (BAS).

3.4 How will the decision to start your own business change your relationship with tax? � I will need to lodge a business plan and a budget with the ATO. � I won’t have to pay tax at all. � I will have to apply for an ABN. � I will need to set up a new Facebook account.

3.5 How will the decision to buy a house change your relationship with tax? � I will pay stamp duty on the house purchase. � I will begin to pay rates for local services. � I will need to register an ABN for the house. � Because it’s my home, I will get a refund of the GST paid when it was built.

YOU WILL: � predict some choices you will make in the years ahead � identify how tax will affect you and the people you know in

the years ahead � analyse our rights and responsibilities in relation to tax � argue the benefits of tax

YOU WILL NEED: � Fact sheet: Interactive - Tax and you � Answer sheet: Interactive - Tax in your life tomorrow

Worksheet

Years 7-10

Interactive: Task 2

Tax, Super+You.

Page 74

Take Control.

3.6 How will retirement change your relationship with tax? � I can rely on the government age pension to pay for all the things I want to do when I retire. � If I take control of my super when I’m young, this will assist me in ensuring that I have the money I need when I retire. � I don’t need to think about super until I’m a lot older. � I don’t need to worry about super because my employer will look after me.

CREATE A PERSUASIVE TEXT ON THE BENEFITS OF TAXYour task is to create a persuasive text about the benefits of tax. A persuasive text argues a point of view.

4. Reflect: There are many points of view about paying tax, such as how much tax we pay, how we are taxed, and what tax revenue is spent on. Share with your peers your experience of the benefits of tax.

5. Develop a point of view about tax: What would you say if asked, “What are the benefits of paying tax?” or “Is a GST fair?” To create a persuasive text about the benefits of tax, you must start with a clear question. It may be, “What are the benefits of paying tax?”, which is general. Or you may wish to explore a specific type of tax, such as “Is GST fair?” Write your question here:

6. Study the structure of a persuasive text: A persuasive text presents a point of view, and then lists a number of reasons to justify the point of view. Each reason must be supported by evidence (facts, examples), which may include some personal relevant observations or experiences. The reasons and their supporting evidence form an argument. A good persuasive text considers others’ points of view and counters them. A persuasive text finishes with a summary of the author's point of view and the main argument/s.

7. Study the persuasive text template below. Later, this can guide your writing.

Persuasive text

Topic sentence (the question; or the question as a statement) attention-grabbing

Your point of view Persuasive and emotive language e.g. I believe…; it’s hard to imagine…

Point (reason) Evidence (supporting fact, real life example, personal experience)

Explanation

Link to the question

Persuasive and emotive language e.g. I believe…; it’s hard to imagine…

Paragraph 1 Paragraph 2 Paragraph 3

Counter-argument Argue what someone might oppose you on

Summing up Summarise three main reasons (brief)

Closing statement or a call to action

Interactive: Task 2

Tax, Super+You.

Page 75

Take Control.

8. Complete a cost-benefit analysis. It is important that points of view are informed by an analysis of the facts. To present an argument about the benefits of tax, you must collect evidence. Recording your research allows you to analyse information for advantages and disadvantages, and this will help develop your point of view to make an argument.

Use the Tax in your life tomorrow fact sheet and the cost-benefit analysis table below to locate and record information that can inform your point of view. üüStrong reason to pay tax üSound reason to pay tax O Not a reason to pay tax

Facts Advantages Disadvantages Reasons that may inform an argument

Example: There are many forms of tax we have to pay ü We pay too many taxes

Example: Throughout our lives we will use many government goods and services

üüWe receive a lot for paying tax

9. Decide: What is your point of view when asked, “ ?” [insert your question]

(Having analysed the evidence, your point of view may differ to your class mates.)

10. Develop a persuasive text: Now, you are ready to create a structured argument that presents your point of view about the benefits of tax. Refer to the persuasive text template (step 7) to guide the structure and language of your writing.

Interactive: Task 2

Tax, Super+You.

Page 78

Take Control.

CHALLENGE QUIZYOUR TAXYour Tax

PLAN THE QUIZ1. Organise yourselves into teams to play the Challenge quiz: Your tax.

2. Read the rules then do the quiz. (Or, you can use the questions to create your own review challenge activity for the Your tax module).

You might want to allow lesson notes to be used during the quiz or have a review session before playing the quiz.

HOW TO PLAY THE CHALLENGE QUIZFollow the rules to do the quiz:

� Each team chooses a topic from the Your tax module. � Each team must start by answering one 100-point question correctly before moving to the higher point questions. � If a team answers the question correctly, they earn the allocated points. � If a team answers the question incorrectly, the next team earns the opportunity to answer the same question. � A team has one minute to answer the question. The team can use that time to consult and agree on a response, before the

nominated member provides the answer. � A team must have a total score of 600 points before they can attempt to answer a 500-point question. � Your teacher may apply penalties for students who call out answers or interfere with other groups.


affects you

YOU WILL NEED: � Answer sheet: Challenge quiz - Your tax

Worksheet

Years 7-10

Challenge Quiz

Tax, Super+You.

Page 79

Take Control.

Points Topic 1: Income and income tax

100 List three sources of income.

200 Define the term ‘assessable income’.

300 What is a ‘franked dividend’?

400 What is ‘tax evasion’?

500 Define the term ‘tax minimisation’.

Points Topic 2: Working and paying tax

100 What is a TFN?

200 Name three consequences if you do not have a TFN.

300 What needs to be filled in when you start work in a job?

400 What is meant by ‘pay as you go (PAYG) withholding’?

500 How does being under 18 years of age affect the tax you pay?

Points Topic 3: Completing your tax return

100 What are the dates of the Australian financial year?

200 What is a ‘payment summary’?

300 List two ways you can submit your tax return.

400 Explain the pre-filling service.

500 Explain what is meant by ‘self assessment’.

Points Topic 4: What other taxes do I have to pay?

100 How much is the GST and on what things?

200 What items are GST-free?

300 What is a ‘capital gain’?

400 What taxes are there on overseas travellers?

500 What is the situation if you make a capital loss?

Points Topic 5: Fixing a tax problem

100 Outline what is meant by an ‘amendment to a tax return’.

200 Explain when a taxpayer could lodge an objection.

300 Outline what the Taxpayers’ Charter contains.

400 If you cannot pay a tax debt on time, what should you do?

500 Outline the first two steps a taxpayer should take when they have a complaint.

YOUR TAX CHALLENGE QUESTIONS

Challenge Quiz

Tax, Super+You.

Page 82

Take Control.

QUICK QUIZ: YOUR TAX After you’ve finished all the topics in the module, Your tax, you can take an individual quiz to see if you’re a tax expert. There are 15 questions in this activity. Choose ONE answer for the first 13 items.

1. Fred is a school student and wants to get a Tax File Number (TFN) as he is starting a part-time job. The easiest way for him to get a TFN is through:

� applying online and verifying his identity at a participating Australia Post office � Centrelink � his employer � the bank his pay will be deposited with

2. The maximum rate of tax withheld if you do not provide a tax file number to your employer is: � the same tax rate, with or without providing a TFN � 19%, which is the lowest marginal tax rate � 49%, which is the highest marginal tax rate, plus the Medicare levy and the Budget repair levy � 19%, which is the lowest marginal tax rate, plus the Medicare levy surcharge

3. Ali works casually and has two part-time jobs at the same time. He can claim the tax-free threshold from one employer. What is the amount of tax-free threshold that Ali can claim?

� $18,200 � $12,000 � $3,000 � $1,500

4. Maria wants to know the correct form she has to use to claim the tax-free threshold from her employer. The correct form is: � Tax return � myTax � Notice of assessment � Tax file number declaration

5. Sam and Jill are both 17 years old. They are Australian residents and plan to travel overseas. They want to know when they pay their departure tax. It is paid:

� on the day of departure from Australia � one week before departure � when they pay for their airline ticket � one month before departure

6. Jane wants to know what a tax return is, as she has heard it mentioned at work. It is a form she: � fills in when she starts work � uses to tell the ATO how much income she earned during the year � uses to tell the ATO how much income she earned and her allowable deductions for the financial year � uses to tell the ATO her allowable deductions for the financial year

Your Tax

QUICK QUIZYOUR TAX


affects you

YOU WILL NEED: � Answer sheet: Quick quiz - Your tax

Worksheet

Years 7-10

Quick Quiz

Tax, Super+You.

Page 83

Take Control.

7. Lee has completed his tax return and wants to lodge it. The completed tax return should be lodged: � by 1 July of each year � between 1 July and 31 October � when you leave a job � as soon as you start a new job

8. John can lodge his tax return by: � getting assistance from a Tax Help volunteer � going online and using myTax � using a registered tax agent � doing any of the above

9. The best definition of assessable income is all income received: � by any person in Australia during a financial year � by an Australian resident, before allowable deductions � including dividends � less allowable deductions and tax offsets

10. The amount of fringe benefits tax an employee is liable for is: � a minimum of 46.5% including the Medicare levy � at a rate of 45% if they have given their tax file number to their employer � at a rate of 27.5%, which is the company tax rate � none of the above

11. Tax avoidance can occur when a taxpayer: � does not declare all of their income � overstates their allowable deductions � incorrectly claims a tax offset � does any of the above

12. The goods and services tax introduced in Australia in 2000 is paid on: � some goods and services in Australia � all goods and services � some goods and services produced in and most goods imported into Australia � only goods and services produced in Australia

13. You make a capital gain when you: � sell or dispose of a CGT asset � sell or dispose of a CGT asset at a profit � sell or dispose of shares � sell or dispose of shares for a loss

14. Read through the list. Write either ‘submit’ or ‘not submit’ as to whether an individual has to submit a tax return if they:a) get $100 per month pocket money from their parentsb) are aged 14 and received $1,900 in franked dividendsc) had a part-time job earning $5,900 and paid $885 in taxd) are a professional poker player and won $80,000e) are an overseas student doing a four-month course and have a part-time job with no tax taken out

15. Sophia is aged 17 years and she works in a fast food chicken store. Write either ‘yes’ or ‘no’ if she should include the following items in her tax return for the year:a) $200 gift voucher for being ‘Staff member of the month’b) $6,500 directly debited from her shift earnings and $975 tax withheld by her employerc) $20 contributed for a group wedding present for a fellow workerd) $80 paid for a uniform with the company’s logoe) $120 interest from a term depositf) $80 per month in taxi fares home as she finished work late

Quick Quiz