Taxation Part 4

Question 1

What are progressive taxes?

Answer 1

The tax rate increases as the income increases

Question 2

What are proportional taxes?

Answer 2

The same percentage of tax is levied for all taxpayers, regardless of income or profit

Question 3

What are regressive taxes?

Answer 3

The same dollar amount of tax is paid by all taxpayers. which results in taking a larger percentage of income from a low-income person than a high-income person

Question 4

Why is income tax a progressive tax?

Answer 4

The higher your individual income, the greater the percentage of tax you must pay

Question 5

Why is company tax a proportional tax?

Answer 5

The same rate of tax is used for all companies, regardless of the profit earned

Question 6

Why is the GST a regressive tax?

Answer 6

A low income earner will pay the same amount of GST on the same item as a high income earner

Question 7

What are some examples of progressive taxes?

Answer 7

Income tax, medicare levy, capital gains tax

Question 8

What are some examples of regressive taxes?

Answer 8

Property rates, payroll tax, stamp duty, land tax, GST, fringe benefits tax, customs duty, excise and departure taxes

Question 9

What is income?

Answer 9

The amount of money earns from personal exertion and investments

Question 10

What is assessable income?

Answer 10

Gross income on which income tax must be paid, before any deductions are allowed

Question 11

What is included in assessable income?

Answer 11

Salary, wages, dividends, interest, rent, net capital gains, allowances, welfare benefits and tips

Question 12

What is exempt income?

Answer 12

Income which is non-assessable and no income tax is payable on

Question 13

What is included in exempt income?

Answer 13

Gifts, pocket money, inheritance, prize money, lottery winnings

Question 14

What are deductions?

Answer 14

Money you spend to enable you to earn income, such as stationery, equipment, electricity and tools

Question 15

How do you calculated taxable income?

Answer 15

Assessable Income - Allowable Deductions

Question 16

What is a payment summary?

Answer 16

Advice given to you at the end of the financial year by your employer showing your earnings during the year

Question 17

What does to substantiate a claim mean?

Answer 17

To produce records such as receipts to support your claim

Question 18

If a person has a hobby outside of their regular job, how is any income they earn from that classified?

Answer 18

Any income is not regarded as assessable income

Question 19

What would be some examples of assessable income for an electrician?

Answer 19

Salary, travel allowances, dividends and interest

Question 20

What would be some examples of allowable deductions for an electrician?

Answer 20

Overalls, TAFE course, tools, travel expenses and union fees

Question 21

What is the criteria for something to be an allowable deduction?

Answer 21

You must have incurred the expense in the course of earning your assessable income and it cannot be a private or domestic expense

Question 22

What are some examples of private deductions?

Answer 22

Normal travel to and from work every day and buying lunch

Question 23

What do allowable deductions do to your tax and what is the tax saving based on?

Answer 23

They reduce the amount of tax you need to pay, and the tax saving is based on your marginal tax rate

Question 24

What happens when you claim $500 in deductions?

Answer 24

You will not get a $500 tax saving, your taxable income will be reduced by $500