Ta x , Super+You. Take Control.

Your Tax Activity 1 Years 7-12 INCOME AND

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

Money received from a hobby is not considered as assessable INCOME TAX income unless the individual intends to create a business from the hobby. For example, if you have a regular job and enjoy painting Individuals may be liable (responsible by law) for a range of pictures as an unrelated hobby in your spare time, any income personal taxes. These taxes can be imposed on income that is from the paintings you sell is not regarded as assessable income. earned, purchasing goods or services, selling assets that are liable for capital gains tax (CGT), and other transactions. You have a legal Share income responsibility to know what taxes you are liable to pay. You can’t People who own shares in a company are known as say, “I didn’t know I had to pay tax on it”. shareholders. The company may share any profits with the The Australian income tax system relies on taxpayers self- owners or shareholders. These payments are termed dividends assessing, which means you are responsible for working out and are included in the assessable income earned by the how much you need to declare and can claim on your tax return. shareholder. There are two types of dividends: You provide this information to the Australian Taxation Office „„ franked dividends (ATO), which then calculates how much income tax you must „„ unfranked dividends. pay. Details of how income tax works are described in other topics in this module. Franked dividends are a share of a company’s distribution paid by an Australian company on which company tax has already What is assessable income? been paid. That is, the company paid tax on its taxable income at the rate of 26% before distributing dividends. Franked Assessable income is income on which tax must be paid. Some examples of assessable income are: 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 „ eceived as „ wages and salaries, bonuses and commission r the tax associated with the dividend. This is called a franking employment income credit and will reduce the amount of tax payable by you as the „ nment such as „ income support payments from the gover shareholder. age pensions, and family and youth allowances „„ money received from property or investments, for example, Unfranked dividends are a share of a company’s distribution paid rent earned from leasing property or other items by an Australian company on which no company tax has been „„ interest from assets such as bank deposits or bonds paid. This means there are no franking credits to offset any of the „„ dividends earned from ownership of shares in a company tax payable on the dividend. „„ a capital gain on the sale of a capital gains tax (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 „„ irregular and unexpected income such as lottery or prize winnings „„ some scholarships.

Page 1 Activity 1: Fact sheet Ta x , Super+You. Take Control.

Non-cash benefits Sometimes an employer provides a benefit to an employee = TAXABLE instead of paying them cash income. Typical examples ar INCOME e the private use of a motor car or payment of school fees. In a mining area, non-business accommodation may be pr ovided to many employees. ASSESSABLE INCOME Prior to 1986, these benefits were not included in taxable income and were not taxed under income tax laws. This was seen as unfair, so fringe benefits tax (FBT) was introduced. The employee does not pay FBT; the employer providing the benefit does. If an employee eceivesr fringe benefits above $2,000, an amount of reportable fringe benefits will be recorded on their payment summary.

Some taxpayers receive income in the form of cash. This can range from the receipt of cash tips and gratuities to payment of wages as ‘cash-in-hand’, and includes bartering services in exchange for other goods and services. This income is part of assessable income, which is taxed. ALLOWABLE DEDUCTIONS 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. For example a teacher can't claim a tax deduction for the cost of presents she bought for her students but she can claim the cost of attending a work related conference.

TAX OFFSETS WHAT ARE YOUR RESPONSIBILITIES? Unlike allowable deductions, which reduce assessable income, When you sign your tax return or lodge using myTax you ar tax offsets (sometimes referred to as rebates) directly reduce taking responsibility for the claims you ar e the amount of tax payable. Tax offsets include health insurance. e making. If you become aware that your tax return is incorrect, you must There are offsets for those who live in certain zones, earn a contact the ATO as soon as possible to correct the error. low income or care for an invalid. The tax you have to pay is calculated on your taxable income and this amount is then Remember, even if someone else – including a registered reduced by the amount of any tax offsets you are entitled to. For tax agent – helps you to prepare your tax return, you ar example, if you pay premiums to a registered health insurer you legally responsible for the accuracy of the information. e still may be entitled to a private health insurance offset (sometimes called a private health insurance rebate). DIFFERENCE BETWEEN MINIMISATION AND EVASION

Tax minimisation is when you legally arrange your tax affairs to reduce the amount of tax you pay. FRANKING CREDITS Tax evasion is when you deliberately lie to the ATO to reduce your amount of tax TAX PAYABLE TAX ON TAXABLE = INCOME 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- TAX OFFSETS 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.

Page 2 Activity 1: Fact sheet Ta x , Super+You. Take Control.

Your Tax Activity 1: Income and income tax Years 7-10 TASK 1 ASSESSABLE INCOME Worksheet YOU WILL: YOU WILL NEED:

„„ explore how income derives from different sources „„ Fact sheet: Income and income tax „„ describe the difference between assessable and non- „„ Answer sheet: Task 1 – Assessable income assessable income for tax purposes TEST YOUR KNOWLEDGE

1. 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.

Solo Together Source of income scenario Is it assessable? Y/N Justify your decision

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 in prizes through various poker tournaments. 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.

Page 3 Activity 1: Task 1 Ta x , Super+You. Take Control.

Your Tax Activity 1: Income and income tax Years 7-10 TASK 2 COMPREHENDING TAX TERMINOLOGY Worksheet YOU WILL: YOU WILL NEED:

„„ explain the terms you need to understand texts and issues „„ Fact sheet: Income and income tax that relate to income tax „„ Answer sheet: Task 2 – Comprehending tax terminology

TEST YOUR UNDERSTANDING

1. 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 evasion tax minimisation

Page 4 Activity 1: Task 2 Ta x , Super+You. Take Control.

Your Tax Activity 2 Years 7-12 WORKING AND PAYING TAX Fact sheet 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.

4. What records 1. How do I get a 2. What should I 3. How much tax do I need? TFN? do when I start a do I pay? ¢ part-time or ¢ ¢ full-time job?

Who do I give my TFN to? STEP 1: HOW DO I GET A TFN? Only certain people and organisations can legally ask for your A tax file number (TFN) is a unique nine-digit number issued by TFN, the most common being: the Australian Taxation Office (ATO). It identifies each taxpayer. „„ the ATO Once issued, your TFN is yours for life. Even if you marry, or „„ your employer, after you start work move interstate or overseas, your TFN does not change. „„ your bank or other financial institution „„ Centrelink What happens if I don’t get or have a TFN? „„ your university or tertiary institution If you don’t have a TFN, then: „„ your superannuation fund. „ „ anyone who employs you needs to withhold the highest tax Identity security rate (currently 45%) plus Medicare levy from any wages, Identity crime is something that can impact everyone, even when salaries or allowances you earn. you’re still at school. It is important you look after your personal „ „ banks, credit unions and other financial institutions or information, which can include your name, address, date of birth, companies paying interest must also withhold tax at the bank details, and TFN. You should only share this information highest tax rate plus Medicare levy. with people or organisations who are allowed to ask for it. „„ you’ll pay extra tax on your superannuation. „„ you can’t make personal super contributions and you won’t There are rules around who can request your tax file number - be eligible for super co-contributions. this may include your bank, your university when you apply for „„ you can’t defer your higher education fees if you decide to student loans, or your employer after you have started working study tertiary education. for them. „ „ your tax return and queries with the ATO may be slower to Be careful what information you share with people, including process. on social media, as this information can be used to steal your „ „ centrelink will generally not pay you allowances such as a identity. If someone steals your identity they could use it to open Youth Allowance, Newstart or Austudy. bank accounts in your name, or commit crimes such as lodging a tax return without your knowledge. This can cause problems How can I get a TFN? for you in the future when you apply for student loans through The easiest and fastest way to get a tax file number is online and your university or other tertiary institution. then verifying your identity at a participating Australia Post office. Visit ato.gov.au/getTFN to apply and find out more. If you think you have given your tax information away, you should contact the ATO immediately. Students who are unable to visit a participating Australia Post office can find other options for applying at ato.gov.au/TFN. For more information, visit ato.gov.au/identitysecurity

Page 5 Activity 2: Fact sheet Ta x , Super+You. Take Control. STEP 2: WHAT SHOULD I DO WHEN I START A PART-TIME OR FULL-TIME JOB?

About tax When you start a job, your employer will ask you to complete a tax file number declaration. This form pr ovides them with your TFN and 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 fr om your pay. 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 the highest 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 you lodge your tax return, you will get back any overpaid tax.

About super Your employer may have to pay super guarantee contributions into a super fund for you if you are paid at least $450 in a month (before tax). If you are under 18, you also need to be working more than 30 hours per week befor e 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 ar e correct 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. Y ou can find any of your lost or unclaimed super by using 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 2018 Employee status: Casual Wages and allowances 7-14 February: 24 hours $*******480 Total wages and allowances $*******480 Tax and deductions Tax $*******27 Superannuation 274 Payment – Banking details Date: 20 February 2018 $*******449 BSB 013-000 Account No: 123456789

Period summary This period Year to date Total gross 480.00 $2,880.00 Taxable gross 480.00 2,880.00 Taxation 31.00 162.00 Net 449.00 2,694.00 Superannuation 46.00 274.00

Page 6 Activity 2: Fact sheet Ta x , Super+You. 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.

2017-18 tax rates Unearned income Tax payable These higher tax rates were introduced to prevent the profit of a family business from being distributed to children who had not $0 to $416 Nil contributed to the running of the business. Profits were distributed to children primarily to reduce the overall amount of tax payable on the $417 to $1,307 Nil plus 66% of the excess over $416 money controlled by the parents. This was a common tax avoidance Over $1,307 45% of the total amount of income that is technique before the introduction of these higher tax rates. not excepted income.

What is the tax-free threshold? Medicare is a health care system that gives Australian citizens For most Australians the first $18,200 of your income, referred to access to health care. It is funded by most taxpayers paying a as the tax-free threshold, is not taxed. There are exceptions to Medicare levy of 2% of their taxable income. This levy exempts this rule for international students, newcomers to Australia and low income earners, and is paid along with income tax. those leaving Australia. There is also a Medicare levy surcharge of between 1% and 1.5% which may be applied to individuals or families who have a What happens if I have more than high income and don’t have private patient hospital cover. one employer? If you have more than one payer at the same time, you are What happens if I am self-employed? generally required to only claim the tax-free threshold from the The pay as you go (PAYG) instalments system allows you to payer who usually pays the highest amount (this is known as pay instalments during the income year towards your expected your primary source of income). income tax liability on your business and investment income. If you earn additional income, your second payer is required to Your actual tax liability is worked out at the end of the income withhold tax at the higher “no tax-free threshold” rate. Receiving year when your annual income tax return is assessed. Your PAYG Youth Allowance and having a part-time job is regarded as instalments for the year are credited against your assessment to having two ‘payers’, just as if you have two part-time jobs. determine whether you owe more tax or are owed a refund. However, if you are certain your total income for the year will PAYG instalments are generally paid either four times per year be less than $18,200, you can claim the tax-free threshold from (quarterly) or twice a year (two instalments). However, some each payer. If your circumstances change, you must advise taxpayers are eligible to take up the option to pay one annual your employers or other payers by completing a Withholding instalment per year. Your PAYG letter will tell you how often to pay. 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) STEP 4: WHAT RECORDS DO I NEED? „ „ Student Financial Supplement Scheme (SFSS) To prepare an accurate tax return and support the claims you „ „ Student Start-up Loan (SSL) make, you need to keep careful records of your assessablee „ „ Trade Support Loan (TSL) income and allowable deductions from all sources. Youeduce ar the „ „ Medicare levy allowed to claim your allowable deductions, which r „ „ Medicare levy surcharge amount of income you pay tax on.

Page 7 Activity 2: Fact sheet Ta x , Super+You. Take Control.

Your Tax Activity 2: Working and paying tax Years 7-10 TASK 1 YOUR TFN Worksheet YOU WILL: YOU WILL NEED:

„„ calculate the amount of tax payable and tax paid using tax „„ Fact sheet: Working and paying 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

APPLY YOUR KNOWLEDGE

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

Scenario Maya 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.

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.

Page 8 Activity 2: Task 1 Ta x , Super+You. Take Control.

4. Read Maya's pay slip for week 6. F. Fashion Pay slip ABN 11 222 333 444 Employee No. 017 Name M. Citizen Pay date 20 February 2018 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 2018 $*******245 BSB 013-000 Account No: 123456789

Period summary This period Year to date Total gross 480.00 $2,880.00 Taxable gross 480.00 2,880.00 Taxation 235.00 594.00 Net 245.00 2,286.00 Superannuation 00.00 00

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 MAKE A DECISION

6. 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.

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?

Page 9 Activity 2: Task 1 Ta x , Super+You. Take Control.

Not Reasons for your decision of Maya’s issue Informed informed 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 Youth Allowance. I heard that having a TFN can help me with that. I’d better do some research.

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

Page 10 Activity 2: Task 1 Ta x , Super+You. Take Control.

Your Tax Activity 2: Working and paying tax Years 7-10 TASK 2 CREATING AN INFORMATION TEXT Worksheet YOU WILL: YOU WILL NEED:

„„ create a text designed to inform young people about tax „„ Fact sheet: Working and paying tax and employment RECAP YOUR UNDERSTANDING

1. 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 TEXT

2. 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? NOTES

Page 11 Activity 2: Task 2 Ta x , Super+You. Take Control.

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

Stages of writing Considerations

Your purpose, audience and mode/ Pre-writing medium will influence what you write Purpose: and how. Audience: „„ What are some features of your Text type: Information chosen mode of publication? Mode and medium (spoken, written, digital, non-digital) „„ How will your text be influenced by your mode of publication?

Drafting Draft the text for your information publication, which may Identify important information require: needed for the text. Use : „„ slogan „„ technical language „ „ introduction „„ Simple present tense „„ menu „„ action verbs „„ headings „„ cause and effect language „„ sub-headings „„ sequence or arrangement of text to suit the medium

Consider: „„ Does it make sense? „„ Are the facts correct? „„ Is the technical language correct? Revising „„ Can the vocabulary be improved? Check your writing. „„ Does it flow? Can sentences be Read aloud to hear how it sounds. improved? „„ Is it to the point? Ask a peer to revise. „„ Is important text in a prominent place? „„ Is there a pattern so the reader is not confused by changing styles of writing or images?

Editing Check spelling, grammar and punctuation. Use strategies, e.g. the ruler method, Check structure: Is there a pattern so the reader is not peer correction. confused?

Consider: „„ where this text will be viewed or heard to ensure your product is a match to the Publishing audience and message. Create your communication product and apply to your „„ all aspects of the publication: arrangement of final text. text and images, font, colour, types of images.

Page 12 Activity 2: Task 2 Ta x , Super+You. Take Control.

Your Tax Activity 2: Working and paying tax Years 7-10 TASK 3 TAX FOR THE UNDER 18s Worksheet YOU WILL: YOU WILL NEED:

„„ calculate net income and gross income in relation to a „„ Fact sheet: Working and paying tax number of different scenarios „„ Answer sheet: Task 3 - Tax for the under 18s „„ develop an evidence-based conclusion on whether tax for under 18’s is fair APPLY YOUR KNOWLEDGE

1. 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 the medicare levy. Do not include the medicare levy in your answer).

Table 1: 2020-21 Tax rates Calculating tax Taxable income Tax on this income The total tax payable by a person on an annual income of $80,000 would be calculated as follows: 0 – $18,200 Nil Tax payable on the first $18,200 = 0 $18,201 – $45,000 19c for each $1 over $18,200 Tax payable on the next $26,800 = = $5,092 $45,001 – $120,000 $5,092 plus 32.5c for each $1 over $45,000 ($45,000 - $18,200) multiplied by 0.19 $120,001 – $180,000 $29,467 plus 37c for each $1 over $120,000 Tax payable on the next $35,000 = = $11,375 $180,001 and over $51,667 plus 45c for each $1 over $180,000 ($80,000 - $45,000) multiplied by 0.325 Total tax payable = $16,467 Scenarios

Scenario 1: Ivan, who is under 18 years old, gains casual employment at the local supermarket and starts his job on 1 July 2018. 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 2020-2021 financial year (assuming he worked for 52 weeks). Put your answer in the correct cell in column A. „„ Using the Table 1, calculate the amount of tax that Ivan will pay on his 2018-2019 income (assume he has no deductions, tax offsets or levies). Put your answer in cell B1 in ableT 2.

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

„ Calculate Ivan’s expected income for the 2020-2021 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

Scenario 3. Imagine that Ivan’s mother’s business made $150,000 after expenses in the 2020-2021 financial year. This amount includes the money she deposits into his bank account. ($300 a week for 52 weeks). The remaining amount is her income. „ Calculate her expected income for the 2020-2021 financial year. Put your answer in the cell A4. „ Using the table 2020-2021 Tax rates, calculate the amount of tax that Ivan’s mother will pay on her 2020-2021 income (assume she has no deductions, tax offsets or levies). Put your answer in cell B4 in Table 2.

Page 13 Activity 2: Task 3 Ta x , Super+You. Take Control.

Scenario 4. Imagine that Ivan’s mother didn’t give Ivan money from the business. Put her expected income for the 2020-2021 financial year in cell A6. Using the table 2020-2021 Tax rates, calculate the amount of tax that Ivan’s mother will pay on her 2020-2021 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 Gross income Net income Scenario (ie before tax) Tax payable (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

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

1 Ivan’s total income A3 from table 1

2 Ivan’s mother’s income A4 from table 1 B4 from table 1 C4 from table 1 after giving Ivan a wage

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).

Page 14 Activity 2: Task 3 Ta x , Super+You. Take Control. DEVELOP AN EVIDENCE-BASED CONCLUSION

Provide 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 An evidence-based conclusion is a method of writing a paragraph and remember to use evidence from the tables above to conclusion that is justify your argument. based on research and analysis of data and information

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

Evidence Provide evidence to support your conclusion

Relate Restate your conclusion/ position

Page 15 Activity 2: Task 3 Ta x , Super+You. Take Control.

Your Tax Activity 3 Years 7-12 COMPLETING YOUR TAX RETURN Fact sheet

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.

WHAT IS A TAX RETURN? TO) how much A tax return is the document used to inform the Australian Taxation Office (A . 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. n, depending There are various reasons why an individual may need to lodge an income tax retur n if on their personal circumstances. Generally, an Australian resident will have to lodge a tax retur 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. . It Your employers will issue you with a payment summary after the end of the financial year 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.

If you don't lodge your tax return by the due date, you may incur penalties and interest.

Page 16 Activity 3: Fact sheet Ta x , Super+You. Take Control. HOW TO SUBMIT A TAX RETURN

Decide which way to complete and lodge your tax return On-line - myTax: the new streamlined tax return s available on tablets, smart phones MyTax is designed for individuals and sole traders. It’ 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 eview the information, add any August, so if you wait until then all you’ll have to do is r missing details and then select ‘submit’. e information about lodging online, to 1 Go to ato.gov.au/DoINeedToLodge to find out mor 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 n instructions You can use the paper tax return for individuals and the Individual tax retur to lodge your paper tax return by mail.

Tax agent n for a fee. The fee paid Registered tax agents are people licensed to complete a tax retur to the tax agent for this work is tax deductible. i

ato.gov.au/DoINeedToLodge 2 Gather information You will need a range of information to complete and lodge your tax return. See page 22 for mor information. e i Page 17 Activity 3: Fact sheet Ta x , Super+You. Take Control.

Get help If 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. i Sign your tax return You are responsible for the information your tax return contains, even if a tax agent or someone else prepar it. You will be responsible for any extra tax if ther es a mistake in your return. You must sign your return e is to verify your identity, otherwise your tax retur considered to be lodged. n is not i Lodge your tax return What next? efund Once you lodge your tax return, on myTax, you will see a detailed breakdown of your estimated r or debt. You can find the finalised refund or debt in your myGov account where the ATO will post your efund has been paid into notice of assessment. You can pay your debt on myGov and see when your r your bank account. 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.

Retain your tax records The ATO has some time to r eview your tax return and issue an amended assessment if a review shows inaccuracies that change your assessment. The standard r eview period i is two years, but for some taxpayers it is four years. Generally, you should keep your records for five years from the date the notice of assessment is sent.

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Information needed to complete a tax return Information about assessable income 1. , you You are responsible for working out your assessable income. If you use a tax agent, or get help from a Tax Help volunteer elating to income, such as a payment summary will still need all your records for them to work from. You will need statements r from each employer, statements of interest received from banks or other financial institutions, dividend statements from eceives companies, and statements of shares sold. If you use myTax, most of this information is pre-filled from details the ATO r from employers or banks, but you still need to make sure it is accurate and complete.

2. Information about allowable deductions e expenses You are allowed to reduce your assessable income by claiming allowable deductions. Work-related expenses ar ning you may incur in the course of earning income. To be an allowable deduction, there must be a legitimate link between ear the income and incurring the expense. Work-related expenses could include: (a) the cost of tools, equipment or assets used at work, such as power tools or safety glasses (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 a deductible gift recipient (DGR) (b) the cost of preparing a tax return.

om work and buying Private or domestic expenses are not allowable deductions, for example, the cost of travelling to and fr , the cost of travelling between the schools only is lunch each day. However if a teacher had to work at two schools in one day tax deductible.

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

Filling in your tax return and using the pre-filling service 5. ences in When filling in your tax return, take care to enter each amount at the right place because there may be significant differ 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.

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Your Tax Activity 3: Completing your tax return Years 7-10 TASK 1 REDUCING YOUR TAX Worksheet YOU WILL: YOU WILL NEED:

„„ discriminate between allowable and non-allowable deductions „„ Fact sheet: Completing your tax return „„ identify items of expenditure that can be claimed as a tax „„ Answer sheet: Task 1 - Reducing your tax deduction „„ understand the importance of substantiation TEST YOUR UNDERSTANDING

1. 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 refer to the fact sheet.

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

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Solo Together Item of expenditure 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 a deductible gift recipient (DGR)

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 KNOWLEDGE

5. 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 receipt so that she can claim the drill as a work-related expense when completing her income tax return.

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

ABN 12 345 678 901

APPLY YOUR KNOWLEDGE

9. 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.

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Your Tax Activity 3: Completing your tax return Years 7-10 TASK 2 LODGING YOUR TAX RETURN Worksheet YOU WILL: YOU WILL NEED:

„„ identify the advantages and disadvantages of different „„ Fact sheet: Completing your tax return 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

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 A Option B Option C myTax Paper Tax return Registered taxation agent

The ATO’s online product that works on any smart The ATO’s paper product that A service provided by experts device or computer with an internet connection. can be downloaded and printed, who understand the tax system. ordered online or by phone. Accessed via your myGov account at my.gov.au Designed for everyone regardless or from the ATO app on smartphones or tablets. Designed for individuals with of their circumstances or how simple tax affairs. You cannot lodge complex their tax affairs are. Designed for individuals and sole traders regardless a paper tax return if you have: of their circumstances or how complex their tax Costs vary depending on how affairs are. „„ personal services income complicated the return is. „„ a net income or loss from a A free service completed by individuals. The cost can be claimed on your business Pre-fills information that has already been return. „„ deferred non-commercial provided to the ATO by your employer, business losses. Requires information to be banks, private health insurance fund or other provided to the agent in order to government agencies such as Centrelink – (this A free service completed by complete the return. information is usually provided by early August). individuals. Decisions on allowable Allows individuals to fill in information if they Requires individuals to complete want to submit their return before early August. deductions made by registered all sections (no pre-filling). tax agent. Includes integrated calculators and links to Includes instructions on how to useful information, tax deductions with built-in Help with ATO audits or complete the return. checks to catch mistakes. amended returns. Features of option Guides individuals through the whole tax return Return must be posted to the Time that refunds are issued process, and will generate a return that is ATO at the individual’s expense. vary (If the agents submits tailored to each individual’s situation. electronically, within 12 days of Relies on taxpayers to be lodgment). Allows individuals to save their return and go accurate. back to it at any time on any device. The 31 October submission Refunds issued within 50 days of deadline doesn’t apply. Allows individuals to view or amend their return lodgment. at any stage by logging into the ATO online services via myGov. Must be completed by 31 October. Relies on taxpayer to be accurate.

Refunds issued generally within 12 days of lodgment.

Must be completed by 31 October.

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ASSESS A RANGE OF OPTIONS

1. Using the information in this table, identify the advantages and disadvantages of each option.

Option A Option B Option C myTax Paper Tax return Registered taxation agent

Advantages

Disadvantages

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

Criteria for selecting an option for completing tax Option A Option B Option C returns myTax Paper Tax return Registered taxation agent

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

Page 24 Activity 3: Task 2 Ta x , Super+You. Take Control. DEVELOP AN EVIDENCE-BASED ARGUMENT

3. 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

Point State your proposed option (one sentence)

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

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

Relate Restate your proposed option (one sentence) MAKE INFORMED DECISIONS

4. 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. Identify which 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.

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Your Tax Activity 3: Completing your tax return Years 7-10 TASK 3 COMPLETING YOUR TAX RETURN Worksheet YOU WILL: YOU WILL NEED:

„„ Complete a tax return for the last financial year „„ Fact sheet: Completing your tax return

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 pay as you go (PAYG) payment summary and bank interest.

Scenario You 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. APPLY YOUR KNOWLEDGE

Use the information below and the pay as you go (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 *You can claim for the laundry of your compulsory uniform ($150). You must have written evidence, such as Compulsory uniform $345.45 diary entries and receipts, for your laundry expenses if Safety boots $192.45 both: „ Course on safe food handling $495.00 „ the amount of your claim is greater than $150, and „„ your total claim for work-related expenses exceeds Donation to the Salvation Army $50.00 $300 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 reduction 2. liable for the Medicare levy surcharge.

There are several tests that apply to this decision – one of which is income. Medicare levy In 2020-21 you do not have to pay the Medicare levy if your taxable income is equal to or less than $22,801. You will pay only part of the Medicare levy if your taxable income is between $22,801 and $28,501. 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.

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TAXTAX RETURN FOR FOR INDIVIDUALS INDIVIDUALS 20162021

PAYG payment summary – Individual – non business PaymentPayment summarysummary for the year endingending 3030 June June 2016 2018

Payee details NOTICE TO PAYEE If this payment summary shows an amount in the total tax withheld box you must lodge a tax return. If no tax JO ANDREW CITIZEN was withheld, you may still have to lodge a tax return. 111 HILL STREET For more information on whether you have to lodge, or about this payment and how it is taxed, you can: NEWTOWN VIC 3000 • visit www.ato.gov.au AUSTRALIA • phone 132861 between 8.00am and 6.00pm (EST), Monday to Friday.

Day/Month/Year Day/Month/Year to Period of payment 01/07/2020 30/06/2021

Payee’s tax file number 123 456 789 TOTAL TAX WITHHELD $ 526

Lump sum payments Type Gross payments $ 22,672 A $ CDEP payments $ B $

Reportable fringe benefits amount $ D $ FBT year 1 April to 31 March Reportable employer $ E $ superannuation contributions Total Allowances Total allowances are not included in Gross payments above. This $ amount needs to be shown separately in your tax return.

Deductions:

Workplace Givings:

Exempt Foreign Income:

Payer details Payer’s ABN or withholding payer 99 111 111 111 Branch number 001 number Payer’s name Best Butchers

Signature of authorised person J. Doe Date 27/06/2021

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TAX RETURN FOR INDIVIDUALS 2021

2020 2021

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TAX RETURN FOR INDIVIDUALS 2021 2020-21

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TAX RETURN FOR INDIVIDUALS 2021

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TAX RETURN FOR INDIVIDUALS 2021

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TAX RETURN FOR INDIVIDUALS 2021

2020-21

2020 2021

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Your Tax Activity 3: Completing your tax return Years 7-10 TASK 4 EXTENSION ACTIVITY Worksheet EXTEND YOUR APPLICATION OF KNOWLEDGE

You 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.

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Your Tax Activity 4 Years 7-12 CALCULATING Fact sheet As part of your tax return you may be due a refund or TAX DUE have a tax debt. Find out more about calculating tax using some case studies.

Many people like to do their own tax calculation to get an idea of He studies at night at the local TAFE to improve his skills so he whether they are due a refund or have a tax debt. can get a promotion to a store manager position, and keep up to date with the latest baking techniques. He has private health If you lodge via myTax, you will be given an estimate of your insurance with a complying fund. Ali has looked at his bank refund or tax due before you lodge your return. records and other documents so he can prepare his tax 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. INCOME TAX ESTIMATOR

Ali could use the income tax estimator on the ATO website to Case study: Ali calculate his tax position. Using the calculator would give Ali an Ali works full-time as a baker for Nicky’s Breads. His employer estimate of his tax refund or debt. gives him a uniform, but Ali must keep it laundered.

Tax equation template Ali's tax calculation ($) 39,100 Assessable income minus 2,800 Allowable deductions equals 36,300 Taxable income 19c for each $1 over $18,200 Use tax rates 2020-21 3,439 Tax on taxable income minus 350 Tax offsets equals 3,089 Net tax payable 2% of taxable income plus Medicare levy 726 Medicare levy equals You can see from this 3,815 table, that Ali’s tax Total amount payable changed because minus of offsets and the 5,100 Medicare levy. Tax credits equals Refund due: 1,285 Refund or amount owing

Page 34 Activity 4: Fact sheet Ta x , Super+You. Take Control. TAX OFFSETS

Tax equation Tax offsets (sometimes referred to as rebates) directly reduce the Step 1 amount of tax payable on your taxable income. There are several Assessable income – allowable deductions tax offsets including offsets for: = taxable income „ health insurance „ low income earners (The maximum tax offset of $700 Step 2 applies if your taxable income is $37,500 or less. This Calculate tax on taxable income amount is reduced by 5 cents for each dollar between 5 and $45,000 and 1.5 cents for each (using tax rate table) $37, 00 dollar between $45,001 and $66,667) „„ zones and overseas forces. Step 3 Tax on taxable income – tax offsets = Net tax payable

Step 4 Net tax payable + Medicare levy + Medicar e surcharge = Total tax payable

Step 5 Total amount of tax payable – tax credits = Refund or amount owing

TAX LEVIES AND SURCHARGES

Medicare levy Medicare 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 2017–18 you do not have to pay the Medicare levy if your taxable income is equal to or less than $21,980 ($34,758 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.

Other levies From 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 2014 and applies to the 2014-15, 2015-16 and 2016-17 income years.

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Your Tax Activity 4: Calculating tax due Years 7-10 TASK 1 WHAT IS MY TAXABLE INCOME? Worksheet YOU WILL: YOU WILL NEED:

„„ use real-life scenarios to decide what is assessable income „„ Fact sheet: Calculating tax due and allowable deductions „„ Answer Sheet: Task 1 - What is my taxable income? „„ provide an explanation of what is not assessable income and allowable deductions „„ calculate taxable income in a range of real-life situations

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 directly 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.

Scenario You 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 UNDERSTANDING

3. 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.

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Matt Matt 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.

Income or allowable Money received during the deduction Explanation year Amount ($) (place a tick or cross (explain why those with crosses are either not next to the amount) assessable income or allowable deductions)

Wages 11,700

Bank interest 60

Payments during the year

Accountant’s fee for 70 preparation of tax return

Travel to and from work 390

Donations to a deductible gift 30 recipient (DGR)

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) Note that the formula will change 6 Allowable deductions depending on the number of entries 7 Accountants Fees 80 you have. In assessable income, A2 shows the first item and the A4 shows 8 Donations to approved charity 100 the last. In allowable deductions, A7 9 Approved education course 450 shows the first and A10 shows the last. 10 Union fees 200

11 Total allowable deductions =SUM(A7:A10)

12 Taxable income =A5-A11

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

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Camilo Camilo 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.

Income or Explanation Money received during the allowable deduction (explain why those with crosses are either not year Amount ($) (place a tick or cross assessable income or allowable next to the amount) deductions)

Best player of the month 100 award (gift voucher)

Singing fees 75,000

Bank interest 190

Rent from town house 19,840

Payments during the year

Singing lessons 3,500

Football gear 800

Donations to a deductible gift 300 recipient (DGR)

Town house expenses (rates, 3,100 agent and repairs)

Interest on mortgage for town 13,800 house

Interest on mortgage of the 12,100 house he lives in

Costume cleaning costs 1,100

Car expenses to and from 3,800 work

Accountant's fee for 200 preparation of tax return

Vacation expenses 7,000

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.

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Susie Susie 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 Explanation Money received during the deduction (explain why those with crosses are year Amount ($) (place a tick or either not assessable income or allowable cross next to the deductions) amount)

Inheritance from grandparent's 105,000 estate

Salary 65,000

Term deposit interest 21,000

Lottery winnings 1,000

Payments during the year

Accountant's fee for 180 preparation of tax return

Subscriptions to investment 200 magazines

Donations to a deductible gift 610 recipient (DGR)

Train travel expenses to work 1,100 each day

Union fees to Association of 1,000 Journalists

Depreciation of computer 480 equipment (used for work)

Cost of TAFE course on 520 furniture restoration

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, „ e fees or clothes such as childcar for your family elating to income that „„ expenses r is not taxable, such as money you earn from a hobby „„ expenses that are specifically non- deductible, such as entertainment and parking fines.

Page 39 Activity 4: Task 1 Ta x , Super+You. Take Control.

Your Tax Activity 4: Calculating tax due Years 7-10 TASK 2 DO WE GET A REFUND? Worksheet YOU WILL: YOU WILL NEED:

„„ use real-life scenarios to calculate tax due „„ Fact sheet: Calculating tax due „„ recalculate tax due taking into account tax offsets and levies „„ Answer sheet: Task 2 - Do we get a refund? „„ develop an argument supporting the claim that Tax offsets and levies make the tax system fairer APPLY YOUR KNOWLEDGE

Scenario You 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 2021.

1. Calculate if Julie and Andrew are due a tax refund or have a tax bill for the 2020-21 income tax year. Use the tax rates table to calculate the tax payable.

Table 1: 2020-21 Tax rates An example of how to calculate tax Taxable income Tax on this income The total tax payable by a person on an annual income of $80,000 would be calculated as follows: 0 – $18,200 Nil Tax payable on the first $18,200 = 0 $18,201 – $45,000 19c for each $1 over $18,200 Tax payable on the next $26,800 = = $5,092 $45,001 – $120,000 $5,092 plus 32.5c for each $1 over $45,000 ($45,000 - $18,200) multiplied by 0.19 $120,001 – $180,000 $29,467 plus 37c for each $1 over $120,000 Tax payable on the next $35,000 = = $11,375 $180,001 and over $51,667 plus 45c for each $1 over $180,000 ($80,000 - $45,000) multiplied by 0.325 Total tax payable = $16,467

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

Assessable Work related Taxable income Tax payable on taxable income Refund or bill Client Tax credits ($) income ($) expenses ($) ($) (Round to the nearest $) ($) (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.

Page 40 Activity 4: Task 2 Ta x , Super+You. 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 due A B C D E F G H

Refund Taxable Tax on Offset Net tax Medicare Medicare Total tax Tax credits or amount Client income taxable amount payable levy surcharge payable ($) ($) owing ($) ($) income ($) ($) ($) (B-C) ($) ($) (D+E+F) (See table 2) (H-G)

Julie

Andrew

DEVELOP AN EVIDENCE-BASED ARGUMENT

4. 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 Tax offsets and levies help make the tax system fairer. State your argument

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

Page 41 Activity 4: Task 2 Ta x , Super+You. Take Control.

Your Tax Activity 5 Years 7-12 WHAT OTHER TAXES DO I HAVE TO PAY? Fact sheet OTHER PERSONAL TAXES CAPITAL GAINS TAX (CGT)

In addition to income tax, you may have to pay other personal This tax was introduced in 1985. It was introduced because taxes, such as capital gains tax (CGT) and goods and services some taxpayers received amounts known as capital gains that tax (GST). 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. GOODS AND SERVICES TAX (GST) Generally, you make a capital gain when you sell or dispose of a CGT asset for more than it cost. 'Cost' includes purchase costs, The GST was introduced on 1 July 2000. It is a tax on the supply of maintenance and loan interest. CGT is a tax on the gain or profit goods and services in Australia and on most goods imported into from selling certain assets such as shares, rental properties, Australia. collectables (art and antiques) and the sale of businesses. Cars The introduction of GST was a major change in Australia's tax are not subject to CGT and the family home is generally exempt structure. At the same time GST was introduced, sales tax from CGT unless it has been used as a place of business or for was removed and personal income tax rates decreased. All income producing purposes. individuals are consumers and therefore pay tax on most things There is no set tax rate for CGT. The net capital gain is added they purchase. to your other assessable income and taxed at your applicable The GST is a consumption tax. This means that tax is paid at income tax rate. The capital gain amount may be reduced by each step along the chain of transactions from the maker to the a discount provided you have owned the asset for at least 12 end user who has to pay the cost of the tax. months. A discount of 50% applies only to individuals and trusts, while a 33.33% discount applies to super funds. 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 You may make a capital loss if an asset is sold for less than it GST-registered retailer for $1,100 then 1/11th of this total amount cost. No tax is payable on a capital loss. A capital loss can only (in this case, $100) is GST. The retailer must collect the GST from be offset against a capital gain. If you don't have a capital gain, you (the purchaser or consumer) and forward it to the ATO. your capital loss is carried forward to future years to be offset against future capital gains. Some goods and services are 'GST-free'. The GST-free list includes:

„„ basic foods „„ most education TAXES ON OVERSEAS TRAVELLERS „„ child care „„ certain health goods and services. Australian 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 Home Affairs website (https://www.homeaffairs. gov.au/).

Page 42 Activity 5: Fact sheet Ta x , Super+You. Take Control. THE CASE FOR GST

In 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 GST Proposing 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 1 Source 3 A significant advantage of a GST is that it is a transparent Many people are now arguing that the GST should be increased (clear) tax that is well understood and widely accepted by both by another 5% points to 15%. At that level it would collect business and consumers. However, critics argue that a goods another $33 billion in revenue each year. However, 15 years from and services tax is regressive, because poorer people spend now, as Australia's growing aged population demands more of most of their income on living expenses, and therefore most of the national budget, people may wish to take the GST from 15% what they earn is taxed. That is, those on lower incomes are to 20%. With the average personal rate of income tax currently at hit with a larger share of tax on a given basket of goods and 24%, this would mean Australians would have two large blocks services than is a rich person buying the same basket of items. 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: Nedra Fongalland, 15 March 2016, http://www.lockwood.com.au/gst-debate Source: Paul Keating (former prime minister), 3 February 2016, Sydney Morning Herald on increasing the GST

Source 2 Others 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

Page 43 Activity 5: Fact sheet Ta x , Super+You. Take Control.

Your Tax Activity 5: What other taxes do I have to pay? Years 7-10 TASK 1 INVESTIGATING OTHER TAXES Worksheet

YOU WILL: YOU WILL NEED:

„„ analyse points of view about the advantages and „„ Activity 5: Fact sheet - What other taxes do I have to pay? disadvantages of the GST „„ Post-it notes „„ complete a costs and benefits analysis of the GST „„ identify the considerations that influence government decisions about tax INTERPRET TEXTS AND SHARE POINTS OF VIEW

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 analysismatrix.

Page 44 Activity 5: Task 1 Ta x , Super+You. Take Control. COMPLETE A COST-BENEFIT ANALYSIS

Benefits (advantages) Costs (disadvantages) Goods and Services Tax (GST)

COLLABORATIVELY CATEGORISE FINDINGS

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 decisions about 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?”

DEVELOP A CONCLUSION

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?”

Page 45 Activity 5: Task 1 Ta x , Super+You. Take Control.

Your Tax Activity 6 Years 7-12 FIXING A TAX

PROBLEM Fact sheet Taxpayers have a responsibility to lodge their tax return by 31 objection and ask to have the decision reviewed. October. Failure to lodge a return on time may result in a penalty The ATO review is carried out by a person not involved in for late lodgment and may cause a delay in receiving a tax the original decision and must, by law, be carried out in an refund if it is owed to you. After 31 October, tax returns can only impartial manner. It is recommended that you contact the ATO be lodged by a registered tax agent. If you fail to pay any tax to discuss the situation before lodging an objection – many that is owed, you will accrue a general interest charge (GIC) on misunderstandings can be resolved in this early stage. 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 A COMPLAINT

The Taxpayers' Charter outlines your rights. It explains what you MAKING AN AMENDMENT can expect from the ATO when dealing with your tax and super matter. The Charter also lets you know what to do if you are not You can request an amendment to correct a straightforward error in satisfied. The Charter states that the ATO respects the taxpayer's a return or assessment. Typical reasons for requesting an amendment right to make a complaint. would be forgetting to report income such as bank interest or omitting The ATO is committed to treating complaints seriously, dealing to claim an allowable deduction when lodging a tax return. Individuals with them quickly and learning from them. The steps you should and sole-traders can request an amendment through ATO online take are: services on myGov. For guidelines on making a change to an income „ tax return or assessment, see Correct a mistake or amend a return on „ try to sort the problem out with the tax officer you have the ATO website. been dealing with „„ talk to that officer's manager if not satisfied „„ contact ATO Complaints if you are still not satisfied after MAKING AN OBJECTION those first two steps. If you are unable to resolve your difficulty, or you are dissatisfied Objections usually result from a disagreement between the ATO with the way the complaint has been handled, the Inspector- and the taxpayer about an interpretation of the taxation laws. General of Taxation may be able to help you. For details on how to If you disagree with a notice of assessment, you can lodge an make a complaint, see the Inspector-General of Taxation website - https://igt.gov.au. UNABLE TO MEET YOUR TAX OBLIGATIONS ON TIME Did you know that you 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 have options if you have has a number of different options available in this situation. Which option is agreed to a tax concern? 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.

Page 46 Activity 6: Fact sheet Ta x , Super+You. Take Control.

Your Tax Activity 6: Fixing a tax problem Years 7-10 DESIGN AN INFOGRAPHIC Worksheet

YOU WILL: YOU WILL NEED:

„„ identify common problems experienced by young people in „„ Activity 6: Fact sheet - Fixing a tax problem relation to tax „„ Answer sheet: Design an infographic „„ 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 EXPLORE INFOGRAPHICS

1. 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?

Display your sample infographics around the room for future inspiration.

CALCULATE THE PENALTIES

4. 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 $180 29 to 56 days $360 57 to 84 days $540 85 to 112 days $720 113 days or more $900 Answer: * sample amounts

Page 47 Activity 6: Design an infographic Ta x , Super+You. 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)* Answer:

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

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

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

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 INFOGRAPHIC

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

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

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

What is my challenge? What will my mock-up or prototype be like? How do I make my infographic? How do I research it? What feedback of my mock-up or prototype can I use to How will I share my infographic? What are my initial ideas? refine my ideas? How will I explain and justify my design choices?

What ideas do I have? What does the research show? Which ideas are an opportunity to solve the challenge? What am I thinking? What will I create? What are others thinking? What problems will I have to resolve? How effective was my infographic?

Criteria Your 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.

Page 48 Activity 6: Design an infographic Ta x , Super+You. Take Control.

Your Tax Years 7-10 INTERACTIVE Fact sheet

TAX AND YOU It’s surprising how many everyday things are affected by the tax system. Tax has a huge impact on our society. INCOME TAX The local area nurse makes a house call, inspecting your In Australia, anyone earning over $18,200 in a financial year pays new nursery and offering advice on everything from feeding income tax. This money is used by the Australian Government to schedules to bathing techniques for your little girl. The fund a wide range of services throughout the community. Let’s take a nurse also makes an appointment for you to have your baby closer look at how some of this income tax revenue has been spent. immunised against deadly diseases such as diphtheria, Your older brother has driven from interstate to visit you. Along whooping cough, polio and pneumococcal disease – all free of the way he noticed how major roadworks have been completed charge thanks to the National Immunisation Program. along what used to be a series of notorious blackspot locations, making the journey much safer. Your brother also benefited Further study from several new bypasses, allowing him to skip small country Pursuing further study is an amazingly worthwhile decision, but towns and the seventeen sets of traffic lights that used to hold life as a student can be tough! Luckily a portion of Australia’s him up! taxation revenue is used to assist students and universities, All of these improvements were subsidised by income tax making the decision to study more affordable. collected throughout Australia, producing a safer, faster and Shaun worked hard at high school and was accepted into more fuel-efficient journey for your brother. university to study medicine. Shaun was also was awarded a medical rural bonded scholarship from the department of Tax from business health, worth $26,310 a year. Shaun will also get a FEE-HELP Tax from businesses such as your shoe store forms an important loan to deter the rest of his tuition fees until he starts earning part of Australia’s taxation revenue. Let’s explore how some of enough money to repay it. the tax from business is being used to help your community. Most local students studying an undergraduate degree in a Meet Rosie, a single mum with two young children. Rosie’s Commonwealth Supported Place, are eligible for a FEE-HELP son has breathing difficulties and needs constant medical loan which lets them defer the costs of their tuition fees. For a care, meaning Rosie can’t work as much as she needs to. Up FEE-HELP loan this means the Australian government pays until recently the family could only afford to live in a small two the loan directly to your university and then you repay that loan bedroom flat. However today they are moving into a brand-new through the tax system. three bedroom townhouse, provided through the city’s public For 2018-19, the repayment threshold for all student loans is housing initiative. $51,957 and the repayment amount is 2% of their income. Additional funding for this initiative was sourced from government revenue. The business taxes collected nationally Stamp duty and property rates contribute to this revenue, which is then redistributed by the Many people are surprised by the range of important local Australian government to pay for public services. This additional services that are funded through stamp duty and rates. Let’s funding allowed more houses to be built, providing Rosie and her explore some of the more interesting uses of this tax revenue. young family with a roof over their heads. Your local council has just opened a new skate park and recreational hall near your house. It’s a great place to meet Family assistance friends and play sport. The park is maintained by a local ranger, Family assistance programs throughout Australia are funded in part who ensures all of the equipment is in good order, the benches through taxation revenue. Let’s take a look at how these services are clean and the lighting works at night. will help you and your new family. Congratulations! It’s a girl! All of these services are funded through your local council, using You’ve chosen to start a family, and to help you on your way income collected from property rates. The state government has the local health clinic and parenting group contacts you to ask also contributed some of the stamp duty it collects with each about your immediate needs and offer their support. property sale.

Page 49 Interactive: Fact sheet Ta x , Super+You. Take Control. GOVERNMENT GOODS AND SERVICES

Let’s look at some ways that government collects and distrubutes tax revenue.

Further study Starting your own business The Australian Government assists students in a number of ways: The Australian Government provides a wide range of assistance to help new businesses, such as information available on the „„ student loans that can be repaid over time through the tax ATO website, personal assistance visits and small business system seminars. „„ subsidised places at university for Australian citizens, reducing the cost of further study „„ subsidised travel costs for students. Buying a house Property purchases are both subject to tax and subsidised by tax Getting a job revenue. Houses are subject to taxes such as stamp duty, but they can also be subsidised through tax-funded initiatives such When you start a new job, the income tax paid by employees as the First home super saver scheme. throughout Australia helps to pay for a wide range of national, state and local services, such as: Retirement „„ roads and highways Super is money set aside during your working life for when you „„ hospitals and healthcare retire. For most people, super begins when you start work and „„ parks and recreation facilities. your employer starts paying a portion of your wages into a super fund for you. Your money is invested by super funds to grow. Starting a family The government does provide an age pension for those people The Australian Government provides a range of benefits that you in our community who need it. Super will help you have a more may be eligible for when you start a family. Some examples are: comfortable lifestyle.

„„ parental leave pay You can also build your super with your own contributions to „„ dad and partner pay take advantage of super’s favourable tax treatment. If you take „„ special tax deductions for families an interest in your super when you’re young, you will have a „„ health clinics and community services better chance to save for the things you most like to do when „„ immunisation. 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.

Page 50 Interactive: Fact sheet Ta x , Super+You. Take Control.

Your Tax Years 7-10 TASK 1 INTERACTIVE TAX IN YOUR LIFE TODAY Worksheet YOU WILL: YOU WILL NEED:

„„ test your new knowledge about income tax and how it „„ Fact sheet: Interactive - Tax and you affects you TAX IN YOUR LIFE TODAY

Whether 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 ITEMS

1. Examine the items in the bedroom.

7 11 6 5 13 9 1 8 10 2 3 12 4

Page 51 Interactive: Task 1 Ta x , Super+You. 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 PREDICTIONS

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

When you leave school

It’s surprising how many everyday things are affected by the tax system. Beyond that Taxation, and the distribution of tax revenue, has a huge impact on our society.

Page 52 Interactive: Task 1 Ta x , Super+You. Take Control.

Your Tax Years 7-10 TASK 2 INTERACTIVE TAX IN YOUR LIFE TOMORROW Worksheet YOU WILL: YOU WILL NEED:

„„ predict some choices you will make in the years ahead „„ Fact sheet: Interactive - Tax and you „„ identify how tax will affect you and the people you know in „„ Answer sheet: Interactive - Tax in your life tomorrow the years ahead „„ analyse our rights and responsibilities in relation to tax „„ argue the benefits of tax SAY HELLO YOU TO YOUR FUTURE

1. 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.

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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 TAX

Your 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… Paragraph 2 Paragraph 3 Point (reason) Paragraph 1 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…

Counter-argument Argue what someone might oppose you on

Summing up Summarise three main reasons (brief)

Closing statement or a call to action

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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.

üü Strong reason to pay tax ü Sound reason to pay tax O Not a reason to pay tax

Reasons that may inform Facts Advantages Disadvantages an argument Example: There are many ü We pay too many taxes forms of tax we have to pay

Example: Throughout our lives We receive a lot for paying tax we will use many government üü goods and services

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 guidethe structure and language of your writing.

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Your Tax Years 7-10 CHALLENGE QUIZ YOUR TAX Worksheet YOU WILL: YOU WILL NEED:

„„ test your new knowledge about income tax and how it „„ Answer sheet: Challenge quiz - Your tax affects you

PLAN THE QUIZ

1. 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 QUIZ

Follow 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.

Page 56 Challenge Quiz Ta x , Super+You. Take Control.

YOUR TAX CHALLENGE QUESTIONS

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.

Page 57 Challenge Quiz Ta x , Super+You. Take Control.

Your Tax Years 7-10 QUICK QUIZ YOUR TAX Worksheet YOU WILL: YOU WILL NEED:

„„ test your new knowledge about income tax and how it „„ Answer sheet: Quick quiz - Your tax affects you 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 ™™ 45%, which is the highest marginal tax rate, plus the Medicare 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

Page 58 Quick Quiz Ta x , Super+You. 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 the 27.5% 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 parents b) are aged 14 and received $1,900 in franked dividends c) had a part-time job earning $5,900 and paid $885 in tax d) are a professional poker player and won $80,000 e) 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 employer c) $20 contributed for a group wedding present for a fellow worker d) $80 paid for a uniform with the company’s logo e) $120 interest from a term deposit f) $80 per month in taxi fares home as she finished work late

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