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In the context of Unit 3/4 Further Maths, can someone, if possible, please explain income tax, capital gains tax, stamp duty and provide some examples?

Thanks


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Income Tax

Income tax is tax levied directly on income. For example: if Mr. Smith earned $60,000 (pre-tax) for his full-time work job as a Mathematician - a portion of his salary would be "withheld" (atleast in Australia) and paid to the Tax Office on his behalf.

The Tax Office (in Australia at least) have a system that basically says:

  • $0 - $18,200: No income tax
  • $18,201 - $37,000: 19c for every dollar over $18,200
  • $37,001 - $80,000: $3,572 + 32.5c for every dollar over $37,000
  • $80,001 - $180,000: $17,547 + 37c for every dollar over $80,000
  • $180,001 and over: $54,547 + 45c for every dollar over $180,000

Therefore,

The income tax for $60,000 would be calculated as follows:

  • $18,200 x nil = $0 +
  • $18,800 x ($37,000 - $18,200) * 19c = $3, 572 +
  • $23,000 ($60,000 - $37,000) x 32.5c = $7, 475

Therefore, we calculate $3,572 + $7,475 = $11,047.

So his total tax to be withheld annually would be $11,047.

Therefore, his "after tax" salary in this example would be $48,953.

Note: as far as I'm aware, the VCE Further Maths curriculum doesn't require you to remember/memorize or know the various tax rates. This is really a small business question and has very little to do with VCE Further Maths perse, but they could probably ask a question where they gave you the tax rate and you had to calculate the pre-tax or after-tax amount.

Capital Gains Tax

Capital gains tax is a tax levied on capital gains. The most common example of this is real estate or shares. For example, let's say you bought a house for $800,000 AUD and sold it for $1,000,000 AUD.

This would "trigger" a capital gains tax on the capital gain of $200,000.

I highly doubt you're expecting to know the exact capital gains rates, but they might give you a question like the above example and tell you the capital gains tax rate is, for example, 30%.

You would then be expected to calculate 30% of the capital gain - which would be 0.3 * 200,000 = 60,000

I doubt they'd give you anything more complicated than that in the context of VCE Further Maths.

Stamp Duty

Stamp duty is a duty levied on the legal recognition of certain documents.

When you buy Victorian land, which may include buildings, you are liable to pay duty. The duty payable is based on the market value of the property or the purchase price, whichever is greater.

Again, I doubt that they'd expect you to memorize stamp duty tax rates, etc but they might give you the percentages and ask you to calculate it.

Hope that helps!


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