Answer: First, we need to calculate the taxable income, which is the gross salary minus the tax-free threshold of $18,200:
Taxable income = Gross salary - Tax-free threshold
Taxable income = $18,700 - $18,200
Taxable income = $500
Since the taxable income falls within the range of $18,201-$37,000, we can use the tax rate of 19c for each $1 over $18,200 to calculate the amount of tax payable:
Tax on income = (Taxable income - $18,200) × 0.19
Tax on income = ($500 - $18,200) × 0.19
Tax on income = -$3,382 × 0.19
Tax on income = -$642.58 (rounded to the nearest cent)
However, the calculated tax is negative, which means that the person is entitled to a tax refund as they have paid more tax than they are required to. This can happen if they have been working for only part of the financial year, or if they have had tax withheld at a higher rate than necessary.
Explanation: