Spending Money - Budgets and GST
Take control of your money. Learn how to plan a budget that works, and understand how GST affects every purchase you make in Australia.
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Worksheet
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Q1 · If you earn $800 per month, how would you divide it between needs, wants and savings?
Q2 · A price tag says $110 including GST. How much of that total do you think is tax?
Learning Intentions
Know
- The components of a personal budget: income, expenses, savings.
- How GST is calculated and applied to Australian goods and services.
Understand
- The difference between essential and discretionary spending.
- Why budgeting helps prevent financial stress.
Can Do
- Create a simple budget allocating income to expenses and savings.
- Calculate GST-inclusive and GST-exclusive prices.
Success Criteria
- I can create a monthly budget showing income, essential expenses, discretionary expenses and savings.
- I can calculate the GST amount from a GST-inclusive price using the division by 11 method.
- I can add 10% GST to a pre-tax price to find the total cost.
Key Terms
Common Mistakes to Avoid
Wrong: “To find GST from a total price, multiply by 0.10.” This gives 10% of the total, but the total already includes GST. The GST component is actually 1/11 of the total, not 1/10.
Right: GST amount = $\dfrac{\text{GST-inclusive price}}{11}$. Pre-GST price = $\dfrac{\text{GST-inclusive price}}{1.1}$ or $\text{Total} - \text{GST}$.
Wrong: “A budget is only for people who are struggling financially.” Budgeting is for everyone. It helps you reach goals, avoid debt and build savings regardless of income level.
Right: A budget is a forward plan, not a restriction. It ensures your money goes where you want it to go.
A budget is simply a plan for your money. It makes sure your spending matches your priorities and helps you avoid the stress of running out of money before payday.
A basic budget has three parts:
- Income - money coming in (wages, salary, allowance, investments)
- Expenses - money going out (rent, food, transport, bills, entertainment)
- Savings - money set aside for future goals or emergencies
Expenses can be split into two categories:
- Essential (needs): Rent, groceries, utilities, transport, phone, insurance
- Discretionary (wants): Streaming services, dining out, hobbies, new clothes, holidays
Real-World Anchor: The Australian Securities and Investments Commission (ASIC) recommends the 50/30/20 rule as a simple guide: 50% of income on needs, 30% on wants, and 20% on savings or debt repayment. For a weekly income of $800, that means $400 for needs, $240 for wants, and $160 for savings.
What to write in your book
- A budget has three parts: income, expenses, and savings.
- Essential expenses are needs (rent, food, utilities); discretionary expenses are wants (entertainment, dining out).
- Use the 50/30/20 rule as a guide: 50% needs, 30% wants, 20% savings.
- If total expenses exceed income, savings will be negative.
Almost everything you buy in Australia includes a 10% Goods and Services Tax. Understanding how it works helps you know what you are really paying.
In Australia, GST is 10% of the pre-tax price. When you see a price on a shelf, it almost always includes GST.
Why divide by 11? Because the total price is 110% of the original (100% + 10% GST). The GST portion is $\dfrac{10}{110} = \dfrac{1}{11}$ of the total.
Important: Some items are GST-free in Australia, including fresh food, education, health services and exports. Most other goods and services include GST.
What to write in your book
- GST in Australia is 10% of the pre-tax price.
- To find the GST amount from a total price, divide by 11.
- To add GST to a pre-tax price, multiply by 1.10.
- Some items are GST-free, including fresh food, education, and health services.
Interactive: Budget Builder
Your Turn
Question 1: A restaurant bill is $88 including GST. How much GST was charged?
Question 2: Tahlia earns $3,200 per month. Her essential expenses are $1,950 and discretionary expenses are $850. Calculate her monthly savings and savings percentage.
Revisit Your Thinking
Look back at your Think First budget for $800 monthly income. Using the 50/30/20 rule, how much should you allocate to needs, wants and savings? Does your original plan match this guideline? What would you change?
Earlier you were asked: What was your first thought on this topic?
Now that you've worked through the lesson, write a fuller answer. What changed in your thinking?
A monthly budget shows income of $2,800 and total expenses of $2,100. What is the monthly savings?
An item costs $121 including GST. What is the GST amount?
GST = Total ÷ 11
Using the 50/30/20 rule, a person earning $4,000 per month should aim to save approximately:
A plumber quotes $550 plus GST for a job. How much does the customer pay in total?
Which of the following is an example of a discretionary expense?
Jake earns $3,500 per month. He allocates 45% to essential expenses, 30% to discretionary expenses, and saves the remainder. Calculate his savings amount and savings percentage.
A business sells a product for $275 including GST. They want to increase the pre-GST price by $20.
(a) Find the original pre-GST price. (2 marks)
(b) Find the new total price including GST. (2 marks)
Create a monthly budget for Priya, who earns $2,600 per month from her part-time job and receives $400 in government assistance. She pays $900 in rent, $150 for utilities, $300 for groceries, $200 for transport, $100 for phone and internet, and wants to allocate the remainder between discretionary spending ($400) and savings.
(a) Calculate Priya’s total income. (1 mark)
(b) Calculate her total essential expenses. (1 mark)
(c) Calculate her savings amount. (1 mark)
(d) Calculate her savings as a percentage of income, correct to one decimal place. (1 mark)
(e) If Priya receives a $200 pay rise, recalculate her new savings percentage. (1 mark)
Budget
A plan allocating income to expenses and savings.
Essential expenses
Necessary costs: rent, food, utilities, transport.
GST
10% tax added to most goods and services in Australia.
Find GST
GST amount = Total price ÷ 11
Add GST
Total = Pre-GST price × 1.10
50/30/20 rule
50% needs, 30% wants, 20% savings.
Real-Life Link
Every time you buy something in Australia, GST is included in the price. A $5.50 coffee includes $0.50 GST. A $55 pair of shoes includes $5 GST. Understanding how GST works helps you make sense of business quotes, tax invoices and price comparisons. Budgeting apps like Pocketbook and Frollo use the same principles you learned today to help Australians track their spending automatically.
Game Time!
Test your budget and GST skills in an interactive challenge.
Play Budget & GST Challenge