Q54 · Practice questionComplex familiar5 marks
QUESTION 54 (5 marks)
Using the supplied hypothetical schedule, calculate tax and average tax rates for incomes of $40 000 and $80 000. Ignore all deductions and other taxes. Explain whether the schedule is progressive.
WORKED SOLUTION
5 marksPractice marking scheme
Answer
$4000 (10%) and $16 000 (20%); progressive.
Working
At $40 000, tax is 20% of the $20 000 above the tax-free bracket: $4000. At $80 000, tax is 20% of $40 000 plus 40% of $20 000 = $16 000. Average rates are 4000/40 000 = 10% and 16 000/80 000 = 20%. The share of income paid rises with income; the marginal rate is not applied to the whole income.
Marking criteria
- Calculates both tax liabilities using brackets. [2 marks]
- Calculates both average rates. [1 mark]
- Explains progressivity and distinguishes marginal from average rates. [2 marks]
Practice question aligned to the current QCAA syllabus; review the worked solution and marking criteria.
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