Taxation questions with answers

Questions

1. Question 1Income tax from the chargeable income

   Chen Wei's chargeable income for the year is $66,400. The table shows the income tax rates. Calculate the income tax Chen Wei pays for the year.

   Chargeable income	Income tax rate (%)	Gross tax payable ($)
   On the first $20,000	0	0
   On the next $15,000	2.5	375
   On the first $35,000		375
   On the next $15,000	5	750
   On the first $50,000		1,125
   On the next $30,000	8	2,400
   On the first $80,000		3,525
   On the next $40,000	12	4,800
   On the first $120,000		8,325
   On the next $40,000	15	6,000
   On the first $160,000		14,325

   Show the worked solution

   1. Step 1: From the table: the income tax on the first part of the chargeable income (in dollars)$\text{Tax on the first } 50000 \rightarrow 1125$
   2. Step 2: The rest of the chargeable income is taxed at the next band's rate$\text{Rest} = 66400 - 50000$$\phantom{\text{Rest}} = 16400$$\dfrac{8}{100} \times 16400 = 1312$
   3. Step 3: Income tax = tax on the first part + tax on the rest$1125 + 1312 = 2437$The income tax is $2,437.
2. Question 2Take off the reliefs, then income tax

   Hui Min earns a monthly salary of $4,600 and receives a bonus of 2.5 months' salary in the year. Hui Min claims these tax reliefs: earned income relief of $1,000, CPF relief of $11,040 and qualifying child relief of $4,000. The table shows the income tax rates. Calculate the income tax Hui Min pays for the year.

   Chargeable income	Income tax rate (%)	Gross tax payable ($)
   On the first $20,000	0	0
   On the next $15,000	2.5	375
   On the first $35,000		375
   On the next $15,000	5	750
   On the first $50,000		1,125
   On the next $30,000	8	2,400
   On the first $80,000		3,525
   On the next $40,000	12	4,800
   On the first $120,000		8,325
   On the next $40,000	15	6,000
   On the first $160,000		14,325

   Show the worked solution

   1. Step 1: The year's income: 12 months' salary + the bonus (in dollars)$\text{Salary} = 12 \times 4600$$\phantom{\text{Salary}} = 55200$$\text{Bonus} = 2.5 \times 4600$$\phantom{\text{Bonus}} = 11500$$\text{Income} = 55200 + 11500$$\phantom{\text{Income}} = 66700$
   2. Step 2: Add up the reliefs$\text{Reliefs} = 1000 + 11040 + 4000$$\phantom{\text{Reliefs}} = 16040$
   3. Step 3: Chargeable income = income − reliefs$\text{Chargeable income} = 66700 - 16040$$\phantom{\text{Chargeable income}} = 50660$
   4. Step 4: From the table: the income tax on the first part of the chargeable income (in dollars)$\text{Tax on the first } 50000 \rightarrow 1125$
   5. Step 5: The rest of the chargeable income is taxed at the next band's rate$\text{Rest} = 50660 - 50000$$\phantom{\text{Rest}} = 660$$\dfrac{8}{100} \times 660 = 52.80$
   6. Step 6: Income tax = tax on the first part + tax on the rest$1125 + 52.80 = 1177.80$The income tax is $1,177.80.
3. Question 3Chargeable income from the tax paid

   The table shows the income tax rates. Farah pays $3,499.50 in income tax for the year. Find Farah's chargeable income.

   Chargeable income	Income tax rate (%)	Gross tax payable ($)
   On the first $20,000	0	0
   On the next $10,000	2	200
   On the first $30,000		200
   On the next $10,000	3.5	350
   On the first $40,000		550
   On the next $40,000	7	2,800
   On the first $80,000		3,350
   On the next $40,000	11.5	4,600
   On the first $120,000		7,950
   On the next $40,000	15	6,000
   On the first $160,000		13,950

   Show the worked solution

   1. Step 1: From the table: the largest 'first' amount whose tax is less than the tax paid (in dollars)$\text{Tax on the first } 80000 \rightarrow 3350$
   2. Step 2: The tax left over was charged on the rest of the income$3499.50 - 3350 = 149.50$
   3. Step 3: That tax is the next band's rate of the rest: undo the percentage$\text{Rest} = 149.50 \times \dfrac{100}{11.5}$$\phantom{\text{Rest}} = 1300$
   4. Step 4: Chargeable income = the first part + the rest$80000 + 1300 = 81300$Farah's chargeable income is $81,300.
4. Question 4Property tax from the annual value

   Ali's family lives in a flat with an annual value of $51,300. The table shows the property tax rates for owner-occupied homes. Find the property tax payable for the year.

   Annual value	Tax rate (%)	Property tax payable ($)
   On the first $12,000	0	0
   On the next $28,000	4	1,120
   On the first $40,000		1,120
   On the next $10,000	6	600
   On the first $50,000		1,720
   On the next $25,000	10	2,500
   On the first $75,000		4,220
   On the next $10,000	14	1,400
   On the first $85,000		5,620
   On the next $15,000	20	3,000
   On the first $100,000		8,620

   Show the worked solution

   1. Step 1: From the table: the property tax on the first part of the annual value (in dollars)$\text{Tax on the first } 50000 \rightarrow 1720$
   2. Step 2: The rest of the annual value is taxed at the next band's rate$\text{Rest} = 51300 - 50000$$\phantom{\text{Rest}} = 1300$$\dfrac{10}{100} \times 1300 = 130$
   3. Step 3: Property tax = tax on the first part + tax on the rest$1720 + 130 = 1850$The property tax is $1,850.
5. Question 5The GST included in a price

   The price of a sofa, including 9% GST, is $2,343.50. Find the amount of GST included in the price, correct to the nearest cent.

   Show the worked solution

   1. Step 1: The price with GST is the price before GST + 9% of it$100\% + 9\% = 109\%$
   2. Step 2: What fraction of the price with GST is the GST? (in dollars)$\text{GST} = \dfrac{9}{109} \times 2343.50$$\phantom{\text{GST}} = 193.50$The GST included is $193.50.
6. Question 6Road tax from a given formula

   The table shows the road tax rates for cars. Farah's car has an engine capacity of 1797 cc. Find the road tax Farah pays for 6 months, correct to the nearest cent.

   Engine capacity (EC) in cc	Road tax for 6 months ($)
   EC ≤ 600	$200 \times 0.782$
   600 < EC ≤ 1000	$[200 + 0.125(\text{EC} - 600)] \times 0.782$
   1000 < EC ≤ 1600	$[250 + 0.375(\text{EC} - 1000)] \times 0.782$
   1600 < EC ≤ 3000	$[475 + 0.75(\text{EC} - 1600)] \times 0.782$

   Show the worked solution

   1. Step 1: Find the row of the table for this engine capacity$1600 < 1797 \leq 3000$
   2. Step 2: Engine capacity above the row's lower limit$\text{EC} - 1600 = 1797 - 1600$$\phantom{\text{EC} - 1600} = 197$
   3. Step 3: Work out the square bracket$475 + 0.75(197) = 622.75$
   4. Step 4: Multiply by the factor in the table: road tax for 6 months (in dollars)$622.75 \times 0.782 = 486.9905$$\approx 486.99$ (to the nearest cent)The road tax for 6 months is $486.99.