Mathematics Standard • Year 11 • Module 3 • Lesson 7
Taxable Income and Allowable Deductions
Build fluency in sorting deductible from non-deductible expenses, calculating gross and taxable income, and reversing the formula to find the deductions total.
1. Quick recall
Answer each question in the space provided. 1 mark each
Q1.1 Complete the formula: Taxable income = ____________ − ____________.
Q1.2 List three examples of assessable income that go into gross income.
(i) ____________________ (ii) ____________________ (iii) ____________________
Q1.3 Tick (✓) the items below that are usually allowable deductions and cross (×) those that are not.
____ Union fees ____ Daily train to your regular workplace ____ Conventional business clothes ____ Donation to a registered charity ____ PAYG tax withheld
2. Worked example, taxable income with a mixed expense list
Follow each line of working. Every step has a reason on the right.
Problem. Hamish, a registered nurse, earns a salary of $74,800 and $290 in bank interest. His expenses for the year include: $420 union fees, $680 nursing textbooks and professional resources, $260 conventional business clothes, $1,140 train travel home-to-hospital, and a $180 donation to a registered DGR. Calculate his taxable income.
Step 1, Gross income (sum all assessable income).
Gross income = $74,800 + $290 = $75,090
Reason: salary plus bank interest, both are assessable income.
Step 2, Sort each expense (✓ or ×).
Union fees $420 ✓ Textbooks $680 ✓ DGR donation $180 ✓
Conventional clothes $260 × Home-to-work train $1,140 ×
Reason: ordinary commuting and conventional clothing are NOT deductible. Mark each one before adding.
Step 3, Sum only the allowable deductions.
Total allowable = $420 + $680 + $180 = $1,280
Reason: ignore the crossed-out items completely.
Step 4, Subtract for taxable income.
Taxable income = $75,090 − $1,280 = $73,810
Reason: apply the formula on its own line so a marker can see it.
Conclusion. Hamish's taxable income is $73,810.
3. Faded example, fill in the missing steps
Tahlia is a high-school teacher. She earned $86,200 in salary and $410 in bank interest. Her expenses were: $390 professional registration, $520 work-related textbooks, $290 conventional work clothes, $940 commuting costs to her usual school, $150 donation to a registered charity. Fill each blank. 4 marks
Step 1, Gross income:
Gross income = $86,200 + $410 = $ ____________
Step 2, Tick or cross each expense (write ✓ or ×):
Professional registration $390 ____ Textbooks $520 ____ Donation $150 ____
Conventional clothes $290 ____ Commuting $940 ____
Step 3, Total allowable deductions:
Total = $ ________ + $ ________ + $ ________ = $ ____________
Step 4, Taxable income:
Taxable income = $ ____________ − $ ____________ = $ ____________
Conclusion. Tahlia's taxable income = $ ____________
4. Graduated practice, Taxable income calculations
Show your working in the space below each part. Keep all dollar amounts to the nearest cent.
Foundation, single-step recall and identification (4 questions)
| Q | Problem | Answer |
|---|---|---|
| 4.1 1 | Salary is $58,400 and bank interest is $360. Calculate gross income. | |
| 4.2 1 | Gross income is $72,500 and allowable deductions total $2,140. Calculate taxable income. | |
| 4.3 1 | Circle the allowable deduction: (a) gym membership, (b) gift to a friend's fundraiser, (c) union fees, (d) commute to office. | |
| 4.4 1 | Circle the item that is NOT an allowable deduction: (a) work boots, (b) PAYG tax withheld, (c) donation to a registered DGR, (d) safety glasses. |
Standard, typical HSC difficulty (6 questions)
Show at least one line of substitution and clearly label your final answer.
4.5 A worker earns $61,300 salary and $480 in bank interest. Allowable deductions total $1,820. Calculate the taxable income. 2 marks
4.6 A teacher earns $79,400 salary. Their expenses are: $410 union fees, $620 professional development course, $290 conventional business clothes. Calculate the taxable income. 2 marks
4.7 A consultant earns $94,600 salary and $1,720 in rental income. Allowable deductions total $3,540. Calculate the taxable income. 2 marks
4.8 A worker's taxable income is $54,200. Their gross salary is $56,800 and bank interest is $290. Calculate the total allowable deductions. 2 marks
4.9 A tradesperson earns $68,400 salary and $185 in interest. Expenses are: $580 work tools, $360 protective clothing, $240 train fare home-to-yard (regular workplace), $120 donation to a registered DGR. Calculate the taxable income. 2 marks
4.10 A worker has a gross income of $82,500 and PAYG tax withheld of $16,200. Their allowable deductions total $2,300. Calculate the taxable income. 2 marks
Extension, combine multiple steps (2 questions)
4.11 A registered nurse earns $76,200 salary, $620 in bank interest, and $1,840 in rental income from a granny flat. Her expenses are: $510 union fees, $720 work-related textbooks, $940 conventional uniform laundering at home, $300 donation to a registered DGR, and $1,180 home-to-hospital train fare. Calculate her taxable income. 3 marks
4.12 A worker's taxable income is $67,890. Their salary is $69,400, they received $310 in bank interest, and $1,260 in rental income. Calculate the total allowable deductions, then state the percentage of gross income that the deductions represent (round to 1 d.p.). 3 marks
5. Self-check the easy 3
Tick the first three once you've checked your method works.
How did this worksheet feel?
What I'll revisit before next class:
Q1.1, Formula
Taxable income = Gross income − Allowable deductions.
Q1.2, Assessable income examples
Any three of: salary or wages; bank interest; rental income; certain government payments; investment dividends.
Q1.3, Tick/cross
Union fees ✓ Daily train to regular workplace × Conventional business clothes × Donation to registered charity ✓ PAYG tax withheld × (it's a prepayment of tax, not an expense in earning income).
Q3, Faded example (Tahlia)
Step 1: Gross = $86,200 + $410 = $86,610.
Step 2: Prof. registration ✓, textbooks ✓, donation ✓, conventional clothes ×, commuting ×.
Step 3: Total allowable = $390 + $520 + $150 = $1,060.
Step 4: Taxable income = $86,610 − $1,060 = $85,550.
Q4.1, Gross income
Gross = $58,400 + $360 = $58,760.
Q4.2, Taxable income
Taxable income = $72,500 − $2,140 = $70,360.
Q4.3, Allowable
(c) Union fees. Gym membership, gifts to friends' fundraisers, and ordinary commuting are not deductible.
Q4.4, Not allowable
(b) PAYG tax withheld. It's a prepayment of tax. Work boots, DGR donations and safety glasses are deductible.
Q4.5, Taxable income with bank interest
Gross = $61,300 + $480 = $61,780. Taxable income = $61,780 − $1,820 = $59,960.
Q4.6, Teacher with mixed expenses
Allowable: union fees $410 + PD course $620 = $1,030. Conventional clothes $290 not allowable. Taxable income = $79,400 − $1,030 = $78,370.
Q4.7, Consultant with rental income
Gross = $94,600 + $1,720 = $96,320. Taxable income = $96,320 − $3,540 = $92,780.
Q4.8, Reverse the formula
Gross = $56,800 + $290 = $57,090. Deductions = $57,090 − $54,200 = $2,890.
Q4.9, Tradesperson
Gross = $68,400 + $185 = $68,585. Allowable: tools $580 + protective clothing $360 + DGR donation $120 = $1,060. Train fare to regular workplace not allowable. Taxable income = $68,585 − $1,060 = $67,525.
Q4.10, PAYG trap
PAYG tax withheld is NOT a deduction from income. Taxable income = $82,500 − $2,300 = $80,200. (Common error: subtracting the $16,200 PAYG as if it were a deduction.)
Q4.11, Nurse, multi-source
Gross = $76,200 + $620 + $1,840 = $78,660.
Allowable: union fees $510 + textbooks $720 + DGR donation $300 = $1,530.
Not allowable: conventional uniform laundering $940; commuting $1,180.
Taxable income = $78,660 − $1,530 = $77,130.
Q4.12, Reverse + percentage
Gross = $69,400 + $310 + $1,260 = $70,970. Deductions = $70,970 − $67,890 = $3,080.
Percentage = $3,080 ÷ $70,970 × 100 ≈ 4.3% of gross income.