Question

SCENARIO A

Answer the questions in the following scenario. Be sure to show all your working.

The scenario is for the 2017/18 financial year. You will need to refer to the Australian Taxation Office’s (ATO’s) website for the tax rates and the medicare levy. Include the URL reference or a screen shot to demonstrate the information you obtained.

Stevie Slick is a real estate agent. She earn $583 per week plus a commission of 0.5% on properties she sells. In the 2017/18 financial year she sold $3 085 000 worth of property. In 2017/18 she was paid for 52 weeks.

During the financial year she also made a term deposit of $8000 invested for 6 months at a rate of 2.8% pa compounding monthly. The money was withdrawn at maturity.

Stevie is paid a monthly phone allowance of $90.

She has work related travel expenses of $1235 per year.

Stevie has a dependent spouse so is entitled to a tax offset of $580.

Stevie has a $1595 laptop. She estimates she uses it 50% of the time for work purposes. She is able to depreciate the laptop using the straight line method over a three year period and claim the depreciation as a tax deduction. (Assume a scrap value of $0).

1. Next year, Stevie’s boss is altering her work conditions and she won’t earn a commission. However, her weekly pay will increase to $880. Will Stevie have to pay more tax or less tax than in 2017/18? What is the percentage difference in tax? (Assume all other conditions are the same and use the 2017/18 tax table).

Standard normal curve 9 1 2 3 4 5 6 7 0.00.0000 0.0040 0.0080 0.0120 0.0160 0.0199 0.0239 0.0279 0.0319 0.0359 4 8 12 16 20 24 28 32 36 0.1 0.0398 0.0438 0.0478 0.0517 0.0557 0.0396 0.0636 0.0675 0.0714 0.0754 4 8 12 16 20 24 28 0.2 0.0793 0.0832 0.08710.0910 0.0948 0.0987 0.1026 0.1064 0.1103 0.11614 8 12 15 19 22 0.3 0.1179 0.1217 0.1255 0.1293 0.1331 0.1368 0.1406 0.1443 0.1480 0.15174 8 11 15 19 22 26 0.4 0.1554 0.1591 0.1628 0.1666 0.1700 0.1736 0.1772 0.1808 0.1844 0.1879 4 7 11 14 18 22 0.5 0.1915 0.1950 0.1985 0.2019 0.2054 0.2088 0.2123 0.2157 0.2190 0.2224 3 7 0.6 0.2258 0.2291 0.2324 0.2357 0.2389 0.2422 0.2454 0.2486 0.2518 0.2549 3 6 0.7 0.2580 0.2612 0.2642 0.2673 0.2704 0.2734 0.2764 0.2794 0.2823 0.28523 6 0.8 0.2881 0.2910 0.2939 0.2967 0.2996 0.3023 0.3051 0.3078 0.3106 0.3133 3 6 0.9 0.3159 0.3186 0.3212 0.3238 0.3264 0.3289 0.3315 0.3340 0.3365 0.3389 3 5 10 14 10 13 9 12 8 11 14 17 8 10 13 15 7 9 6 1.00.3413 0.3438 0.3461 0.3485 0.3508 0.3531 0.3554 0.3577 0.3599 0.36212 5 1.1 0.3643 0.3665 0.3686 0.3708 0.3729 0.3749 0.3770 0.3790 0.3810 0.383024 1.2 0.3849 0.3869 0.3888 0.3907 0.3925 0.3944 0.3962 0.3980 0.3997 0.4015 2 4 1.30.4032 0.4049 0.4066 0.4082 0.4099 0.4115 0.6131 0.4147 0.4162 0.4177 2 3 1.40.4192 0.4207 0.4222 0.4236 0.4251 0.4265 0.4279 0.4292 0.4306 0.43191 3 5 5 4 6 6 8 7 10 8 11 10 1.5 0.4332 0.4345 0,4357 0.4370 0.4382 0.4394 0.4406 0.4418 0.4429 0.4441 1 1.6 0.4452 0.4463 0.4474 0.4484 0.4495 0.4505 0.4515 0.4525 0.4535 0.4545 1 270.4554 0.4564 0.4573 0.4582 0.4591 0.4599 0.4608 0.4616 0.4625 0.4633 1 1.8 0.5641 0.4649 0.4646 0.4666 0.4671 0.4678 0.4686 0.4693 0.4699 0.4706 1 190.4713 0.4719 0.4726 0.4732 0.4738 0.4744 0.4750 0.4756 0.4761 0.4767 1 2 2 2 1 1 4 3 3 2 2 1 2 2. 00.4772 0.4778 0.4783 0.4788 0.4793 0.4798 0.4803 0.4808 0.4812 0.4817 01 2.1 0.4821 0.4826 0.4830 0.4834 0.4838 0.4942 0.4846 0.4850 0.4854 0.4757 1 2.2 0.4861 0.4866 0.4868 0.4871 0.4875 0.4878 0.4881 0.4884 0.4487 0.4890 0 2.3 0.4893 0.4896 0.4898 0.4901 0.4904 0.4906 0.4909 0.4911 0.4913 0.4916 0 2.4 0.4918 0.4920 0.4922 0.4925 0.4927 0.4929 0.4931 0.4932 0.4934 0.4936 0 3 3 1 0 0 3 1 1 1 1 2 1 1 1 2 2 1 1 3 2 2 2 2 2 1 2.5 0.4938 0.4940 0.4941 0.4943 0.4945 0.4946 0.4948 0.4949 0,4951 0.4952 0 0 260.4953 0.4955 0.4956 0.4957 0.4959 0.4960 0.4961 0.4962 0.4963 0.4964 0 0 27 0.4965 0.4966 0.4967 0.4968 0.4969 0.4970 0.4971 0.4972 0.4973 0.4974 0 0 28 0.4974 0.4975 0.4976 0.4977 0.4977 0.4978 0.4979 0.4979 0.4980 0.498100 290.4981 0.4982 0.4982 0.4983 0.4984 0.4984 0.4985 0.4985 0.4986 0.4986 0 0 0 0 0 1 0 0 1 1 0 0 1 1 1 0 0 1 1 1 0 0 1 1 1 0 0 1 1 1 1 0 3.00.4987 0.4987 0.4987 0.4988 0.4988 0.4989 0.4989 0.4989 0.4990 0.499000 3.1 0.4990 0.4991 0.4991 0.4991 0.4992 0.4992 0.4992 0.4992 0.4993 0.499300 3.2 0.4993 0.4993 0.4994 0.4994 0.4994 0.4994 0.4994 0.4995 0.4995 0.4995 0 0 3.3 0.4995 0.4995 0.4995 0.4996 0.4996 0.4996 0.4996 0.4996 0.4996 0.4997 0 0 3: 40.4997 0.4997 0.4997 0.4997 0.4997 0.4997 0.4997 0.4997 0.4997 0.4998 0 0 0 0 0 0 0 0 0 0 0 0 3.5 0.4998 0.4998 0.4998 0.4998 0.4998 0.4998 0.4998 0.4998 0.4998 0.4998 0 0 360.4998 0.4998 0.4999 0.4999 0.4999 0.4999 0.4999 0.4999 0.4999 0.4999 0 0 3.7 0.4999 0.4999 0.4999 0.4999 0.4999 0.4999 0.4999 0.4999 0.4999 0.4999 00 5.8 0.4999 0.4999 0.4999 0.4999 0.4999 0.4999 0.4999 0.4999 0.4999 0.499900 3.9 0.5000 0.5000 0.5000 0.5000 0.5000 0.5000 0.5000 0.5000 0.5000 0.5000 0 0 0 0 0 0 0 0 0 0

Answer 1

Comparison of Tax Liability due to change of work condition
Particulars		2017-18		2018-19
Weekly pay		583.00		880.00
Commission %		0.50		-
Commission earned		15,425.00		-
Property Sold		3,085,000.00		-
Weeks paid		52.00		52.00
Annual pay		30,316.00		45,760.00
Annual Commission paid		15,425.00		-
Term Deposit		8,000.00		8,000.00
Rate of interest PA		2.80		2.80
Rate of interest PM		0.23		0.23
Maturity Amount		8,112.66		8,112.66
Interest Income		112.66		112.66
Monthly Phone Allowance		90.00		90.00
Work related travel expenses annually		1,235.00		1,235.00
Laptop Cost		1,595.00		1,595.00
Lifecycle ( in years)		3.00		3.00
Depreciation amount in straight line method		531.67		531.67
50% Depreciation Amount		265.83		265.83
Depreciation % in straight line method		33.33%		33.33%
Medical Levy (on taxable income)		2.00%		2.00%
Tax offset for dependent spouse		580.00		580.00
taxable income		43,682.83		43,701.83
taxable income (round off)		43,683.00		43,702.00
Income Tax Payable		5,744.00		5,750.00
Medical Levy Payable		874.00		874.00
Income after Tax		37,065.00		37,078.00
Marginal Tax Rate %		32.50		32.50

There is minor change in percentage % of tax. When Stevie got commission and weekly pay, the tax and medical levy is calculated $37,065, while after change of work condition, she got only weekly pay. There is no major change in her income. Therefore, the change in tax and medical levy from $37,065 to $37078 i.e. difference of $13 only. The change of percentage is 0.04%.