I really don’t think young people know enough about how tax works (actually not just young people – nobody knows enough aboiut how it works).
I suppose for a lot of people it might not matter too much. A bit like how I think about my car. I just take my car to the mechanic when it is due for a service and let the mechanics do their stuff.
But If I knew about what goes on under the hood – I think I would probably make the car last longer and make my servicing costs lower.
I suppose it depends on the car too – my current car is 5 years old. But I am sure my old car (13 years old) would have lasted longer if I knew what I was doing. And I might not have blown a head gasket…
I don’t think the following questions will help you get a bigger tax refund this year. But understanding how tax works (and possibly how to legally reduce your tax) can help you in the long run.
All the questions are true or false.
1. If you earn A income you get B refund of your tax.
2. If you earn X taxable income you pay Y tax.
3. If you are in the 30% tax bracket you pay 30% tax on your taxable income
4. You can earn $10,000 and not have any net tax (*Net tax meaning tax less tax offsets)
5. If you have a deduction of X your tax refund will increase by X
6. If you buy a computer for $2,000 you can claim it as a deduction this year
7. If you make a loss on your rental property (i.e. negative gearing)– you get a lower tax refund if you are on a lower tax bracket
8. You only pay Medicare if you earn over a certain amount and don’t have private health insurance.
The full answers will be posted up next Tuesday but for those who need to know here are the True/Falses). Check back on Tuesday for the full reasons.
(1. F, 2. T, 3. F, 4. T, 5. F, 6. F, 7. T, 8. F)