Earning and managing money

Question 1

Salary

Answer 1

A payment for a years worth of work, which is than divided into equal monthly, fortnightly or weekly payments.

Question 1

Advantages and Disadvantages of salary pay

Answer 1

Advantages - permanent employment, Superannuation, sick pay and holiday pay
Disadvantages - No overtime for extra work, hours are fixed

Question 2

Annual leave loading

Answer 2

A payment calculated as a fixed percentage of the normal pay, over a fixed number of weeks. Usually paid at the beginning of annual holidays to meet the increased expenses of the holidays.

Question 3

Annual leave loading - example

Answer 3

Tom works a 40 hour week, rate of $18.50. He receives 17.5% of 4 weeks normal pay. hat is his holiday pay?
4 weeks pay = 4 x 40 x 18.50 = $2960
Loading = 17.5% of 2960
= 0.175 x 2960
= $518
Holiday pay = 2960 + 518
= $3478

Question 4

Bonus

Answer 4

An extra payment or gift earned as reward for achieving a goal. Payed in addition to normal income

Question 5

Bonus - example

Answer 5

Ambers employer has decided to reward all employees with a bonus of 5% of annual pay. What is Ambers bonus if her annual pay is $68560?
Bonus = 5% of 68560
= 0.05 x 68560
= $3428

Question 6

Commission

Answer 6

Commission is usually a percentage of the value of the goods sold. People such as real estate agents
and salespersons are paid a commission.

Question 7

Advantages and Disadvantages of commission

Answer 7

Advantages - High sales increase the income, may receive a small payment plus the commission
Disadvantages - Income may vary each week, competition for customers is usually high

Question 8

Commission - example

Answer 8

An electrical goods salesman is paid $570.50 a week plus 4% commission on all sales over $5000 a week. Find his earnings in a week in which his sales amounted to $6800.

1. Commission on sales of over $5000 is $1800.
   Sales = 6800 – 5000 = 1800
2. Write the quantity (earnings) to be found.
   Earnings = 570.50 + (4% of $1800)
3. Add weekly payment and commission of 4% on $1800
   = 570.50 + (0.04 × 1800)
4. Evaluate and write using correct units.
   = $642.50

Question 9

Piecework

Answer 9

Piecework is a fixed payment for work completed. People who are employed to complete a particular task, such as an electrician installing lights, are earning piecework.

Question 10

Royalties

Answer 10

A royalty is a payment for the use of intellectual property such as a book or song. It is calculated as a percentage of the revenue or profit received from its use. People such as creative artists and authors receive a royalty.

Question 11

Income from the government

Answer 11

Some people receive a pension, allowance or benefit from the government. For example, the age pension is payable for a person who has reached 65 years of age (male). The requirements for receiving these incomes may change according to the priorities of the current government.

Question 12

Allowable tax deductions

Answer 12

Allowable tax deductions are amounts allowed by the Australian Taxation Office (ATO) to be deducted from gross income to calculate a lower taxable income.
Allowable tax deductions include:

• work-related expenses – costs incurred while performing your job
• self-education expenses – costs of education related to your work
• travel expenses – costs of travel directly connected with your work
• car expenses – costs of using your car related to your work
• clothing expenses – costs of work clothing and laundry
• tools – cost of work tools
• gifts and donations – gifts made to an eligible organisation.

Question 13

Taxable income

Answer 13

The taxable income is the gross income minus any allowable deductions. The gross income is the total amount of money earned from all sources. It includes interest, profits from shares or any payment received throughout the year.

Question 14

Taxable income - formula

Answer 14

Taxable income = Gross income - Allowable tax deductions

Question 15

Taxable income - example

Answer 15

Anthony is a businessman who earns
a gross salary of $93 250 per year. His accountant completed his tax return and calculated $2890 in allowable tax deductions.
What is Anthony’s taxable income?

1. Write the quantity (taxable income) to be calculated.
2. Subtract the deductions from the gross income.
3. Evaluate and write using the correct units.
   Taxable income = 93 250 – 2890
   = $90 360

Question 16

Gross pay, net pay, deductions

Answer 16

Gross pay is the total of an employee’s pay, including all allowances, overtime pay, commissions and bonuses. It is the amount of money before any deductions are made.

Question 17

Gross pay, Net pay and Deductions - formula

Answer 17

Net pay = Gross pay - Deductions

Question 18

Gross pay, Net pay and Deductions - example

Answer 18

Laura is a nurse who receives a gross weekly wage of $2345. She has the following deductions taken from her pay:
* Income tax – $861
* Health fund payments – $48.25
* Superannuation – $67.95
What is Laura’s net pay?
1. Write the quantity (net pay) to be found.
Net pay
2. Write the formula for net pay.
Net pay = Gross pay − deductions
3. Substitute the values for gross pay
and deductions.
= 2345 − (861 + 48.25 + 67.95)
4. Evaluate and write using correct units.
= $1367.80

Question 19

Calculating tax

Answer 19

The amount of taxation varies according to the amount of money you earn. A tax return must be lodged with the ATO each year. It is statement of the income earned and the tax paid during the financial year from 1 July to 30 June.

Question 20

Tax refund - formula

Answer 20

Tax refund = Tax paid - Tax payable

Question 21

Medicare levy

Answer 21

Medicare levy is an additional charge to support Australia’s universal health care system. It ensures that all Australians have access to free or low-cost medical and hospital care. The Medicare levy is calculated at a rate of 2% of taxable income

Question 22

Medicare levy - example

Answer 22

The Medicare levy is 2% of the taxable income. What is the Medicare levy if the taxable income is
$90 600?

1. Write the Medicare rate of the taxable income.
   Medicare levy = 2% of $90 600
2. Express as a decimal 0.02.
   = 0.02 × 90 600
3. Evaluate.
   = $1812