Mathematics Standard • Year 11 • Module 3 • Lesson 8

Calculating Income Tax

Build fluency with the 2024–25 ATO tax brackets: identify the correct bracket, apply base + marginal-rate × excess, add the Medicare levy, and reconcile against PAYG withheld.

Build · Skill Drill

Reference — 2024–25 ATO tax brackets (residents)

Taxable income	Tax on this income
$0 – $18,200	Nil
$18,201 – $45,000	Nil + 19c for each $1 over $18,200
$45,001 – $120,000	$5,092 + 32.5c for each $1 over $45,000
$120,001 – $180,000	$29,467 + 37c for each $1 over $120,000
$180,001 +	$51,667 + 45c for each $1 over $180,000

Medicare levy = 2% of taxable income (added separately).

1. Quick recall

Answer each question in the space provided. 1 mark each

Q1.1 A taxable income of $63,000 falls in which bracket? Write the bracket and the base amount.

Bracket: ____________________________ Base amount: $ ____________

Q1.2 Write the formula for Medicare levy.

Medicare levy = Taxable income × ____________

Q1.3 If PAYG withheld > total tax liability, the worker receives a ____________. If PAYG withheld < total tax liability, the worker has a ____________.

Stuck? Revisit lesson § Tax Refund or Tax Debt — Reconciling PAYG.

2. Worked example — full tax calculation with refund

Follow each line of working. Every step has a reason on the right.

Problem. Asha has a taxable income of $58,400. Her employer withheld $11,200 in PAYG tax for the year. Calculate (a) income tax, (b) Medicare levy, (c) total tax liability, and (d) her refund or debt.

Step 1 — Identify the bracket.

$58,400 is in the $45,001 – $120,000 bracket.

Reason: write the bracket first to prevent using the wrong base amount or threshold.

Step 2 — Income tax (base + marginal × excess).

Income tax = $5,092 + 0.325 × ($58,400 − $45,000)
= $5,092 + 0.325 × $13,400
= $5,092 + $4,355
= $9,447.00

Reason: the 32.5% rate applies only to the income above $45,000.

Step 3 — Medicare levy (separate step).

Medicare levy = $58,400 × 0.02 = $1,168.00

Reason: 2% of taxable income, NOT 2% of the income tax figure.

Step 4 — Total tax liability.

Total liability = $9,447.00 + $1,168.00 = $10,615.00

Step 5 — Compare PAYG withheld with total liability.

$11,200.00 > $10,615.00 → Refund = $11,200.00 − $10,615.00 = $585.00

Reason: PAYG exceeds the liability — Asha receives a refund.

Conclusion. Asha receives a tax refund of $585.00.

3. Faded example — fill in the missing steps

Lucas has a taxable income of $96,800. His PAYG withheld for the year was $22,100. Fill each blank. 4 marks

Step 1 — Bracket: $96,800 is in the $ __________ – $ __________ bracket. Base = $ ____________.

Step 2 — Income tax:

Income tax = $ ________ + 0.325 × ($96,800 − $ ________)
= $5,092 + 0.325 × $ ____________
= $ ____________

Step 3 — Medicare levy: Medicare = $96,800 × ________ = $ ____________

Step 4 — Total liability: = $ ________ + $ ________ = $ ____________

Step 5 — Refund or debt: $22,100 ____ $ ________ → ____________ of $ ____________.

Stuck? Revisit lesson § Worked Example 2 — Tax Debt Outcome.

4. Graduated practice — Income tax calculations

Show your working below each part. Use the bracket table on this worksheet.

Foundation — bracket identification and single-step (4 questions)

Q	Problem	Answer
4.1 1	Which bracket contains a taxable income of $42,000?
4.2 1	Which bracket contains a taxable income of $135,000?
4.3 1	Calculate the Medicare levy on a taxable income of $72,500.
4.4 1	Calculate the Medicare levy on a taxable income of $108,000.

Standard — typical HSC difficulty (6 questions)

Show the bracket, the substitution, and label the final answer with units.

4.5 Calculate the income tax on a taxable income of $35,400. 2 marks

4.6 Calculate the income tax on a taxable income of $62,800. 2 marks

4.7 Calculate the income tax on a taxable income of $128,400. 2 marks

4.8 Calculate the total tax liability (income tax + Medicare levy) on a taxable income of $74,200. 2 marks

4.9 A worker has a taxable income of $51,600 and PAYG withheld of $8,400. Calculate their refund or debt. 2 marks

4.10 A worker has a taxable income of $89,400 and PAYG withheld of $19,100. Calculate their refund or debt. 2 marks

Extension — multi-step and effective rate (2 questions)

4.11 A worker has a taxable income of $145,200. Calculate the income tax, Medicare levy and total tax liability. Then calculate the effective tax rate (total liability ÷ taxable income × 100) to 1 d.p. 3 marks

4.12 Sienna earns $78,600 salary and $1,420 in bank interest. Her allowable deductions total $2,860. Her PAYG withheld was $16,400. Calculate her refund or debt. 3 marks

Stuck on 4.12? Calculate taxable income first (gross − deductions), then apply the bracket formula. Don't apply the brackets to gross income.

5. Self-check the easy 3

Tick the first three once you've checked your method works.

For 4.1 I picked the $18,201 – $45,000 bracket — $42,000 sits comfortably inside.

For 4.3 I multiplied $72,500 by 0.02 (not by the tax figure) to get $1,450.

For 4.4 I multiplied $108,000 by 0.02 (not by 2) to get $2,160 — not $216,000.

How did this worksheet feel?

Got it Partly Lost

What I'll revisit before next class:

Answers — Do not peek before attempting

Q1.1 — Bracket

$63,000 is in the $45,001 – $120,000 bracket. Base = $5,092.

Q1.2 — Medicare formula

Medicare levy = Taxable income × 0.02 (i.e. 2%).

Q1.3 — Reconciliation outcome

PAYG > liability → refund. PAYG < liability → tax debt.

Q3 — Faded example (Lucas, $96,800)

Step 1: $96,800 is in the $45,001 – $120,000 bracket. Base = $5,092.
Step 2: Income tax = $5,092 + 0.325 × ($96,800 − $45,000) = $5,092 + 0.325 × $51,800 = $5,092 + $16,835 = $21,927.
Step 3: Medicare = $96,800 × 0.02 = $1,936.
Step 4: Total liability = $21,927 + $1,936 = $23,863.
Step 5: $22,100 < $23,863 → tax debt of $1,763.

Q4.1 — Bracket

$18,201 – $45,000.

Q4.2 — Bracket

$120,001 – $180,000.

Q4.3 — Medicare on $72,500

$72,500 × 0.02 = $1,450.00.

Q4.4 — Medicare on $108,000

$108,000 × 0.02 = $2,160.00.

Q4.5 — Income tax on $35,400

$35,400 is in the $18,201 – $45,000 bracket.
Income tax = 0.19 × ($35,400 − $18,200) = 0.19 × $17,200 = $3,268.00.

Q4.6 — Income tax on $62,800

$62,800 is in the $45,001 – $120,000 bracket.
Income tax = $5,092 + 0.325 × ($62,800 − $45,000) = $5,092 + $5,785 = $10,877.00.

Q4.7 — Income tax on $128,400

$128,400 is in the $120,001 – $180,000 bracket.
Income tax = $29,467 + 0.37 × ($128,400 − $120,000) = $29,467 + $3,108 = $32,575.00.

Q4.8 — Total liability on $74,200

Income tax = $5,092 + 0.325 × ($74,200 − $45,000) = $5,092 + $9,490 = $14,582.
Medicare = $74,200 × 0.02 = $1,484.
Total liability = $14,582 + $1,484 = $16,066.00.

Q4.9 — Refund or debt on $51,600 with PAYG $8,400

Income tax = $5,092 + 0.325 × ($51,600 − $45,000) = $5,092 + $2,145 = $7,237.
Medicare = $51,600 × 0.02 = $1,032. Total liability = $8,269.
$8,400 > $8,269 → refund of $131.00.

Q4.10 — Refund or debt on $89,400 with PAYG $19,100

Income tax = $5,092 + 0.325 × ($89,400 − $45,000) = $5,092 + $14,430 = $19,522.
Medicare = $89,400 × 0.02 = $1,788. Total liability = $21,310.
$19,100 < $21,310 → tax debt of $2,210.00.

Q4.11 — Total liability and effective rate on $145,200

$145,200 is in the $120,001 – $180,000 bracket.
Income tax = $29,467 + 0.37 × ($145,200 − $120,000) = $29,467 + 0.37 × $25,200 = $29,467 + $9,324 = $38,791.
Medicare = $145,200 × 0.02 = $2,904.
Total liability = $38,791 + $2,904 = $41,695.
Effective rate = $41,695 ÷ $145,200 × 100 ≈ 28.7% per annum.

Q4.12 — Sienna's refund/debt

Gross = $78,600 + $1,420 = $80,020. Taxable income = $80,020 − $2,860 = $77,160.
Income tax = $5,092 + 0.325 × ($77,160 − $45,000) = $5,092 + $10,452 = $15,544.
Medicare = $77,160 × 0.02 = $1,543.20. Total liability = $17,087.20.
PAYG $16,400 < $17,087.20 → tax debt of $687.20. (Common error: applying the brackets to gross $80,020 instead of taxable $77,160.)