Transcript Financial Decisions

Earning Money
Goods and Services Tax
Content
Practice Exercises
Goods and Services Tax (GST)
Practice - GST 1
GST Calculations
Practice - GST 2
VAT - overseas
Practice - GST 3
Practice - VAT 1
Practice - VAT 2
Goods and Services Tax (GST)
The Australian government charges a Goods and Services Tax (GST) on most items
purchased. GST is 10% of the purchase price of the item, but this percentage is subject
to change at any time the government decides to do so. Some items (fresh food, some
educational costs and some medical costs) are exempt from the tax.
GST = Price (ex GST) × 10%
= Price (ex GST) ÷ 10
Price (incGST) = Price (ex GST) + GST
= Price (ex GST) × 1.1
When you buy an item the GST is included, to calculate the pre-tax price of the item we
need to reverse the above process.
GST = Price (inc GST) ÷ 110 × 10%
= Price (inc GST) ÷ 11
Price (ex GST) = Price (inc GST) - GST
= Price (inc GST) ÷ 1.1
GST is collected by the supplier or service provider and paid to the ATO using a
Business Activity Statement (BAS). GST is identified on an Invoice by *GST.
When paying by credit card, the exact amount is charged, rather than an amount rounded
to the nearest 5c.
GST Calculations
A CD player has a pre-GST price of $289.
Calculate the GST payable on the
purchase of the player.
GST = Price (ex GST) × 10%
GST payable = 10% of $289
= 0.1 × $289
= $28.90
Calculate the pre-tax price of a car that
costs $21 945, including GST.
Price (ex GST) = Price (inc GST) ÷ 1.1
Total cost is 110% of the price.
The pre-tax price is total cost divided by 1.1.
Price = $21 945 ÷ 1.1
= $19 950
The Campbell family has a plumber fix a
tap. The cost of fixing the tap is $32.80 not
including the GST. How much will the tap
repair cost, including the GST?
Calculate the GST in a purchase of $20 of
petrol, including GST.
Price (inc GST) = Price (ex GST) × 1.1
Total cost is 110% of the price.
The pre-tax price is total cost divided by 1.1.
GST = $20 ÷ 11
= $1.82
Total cost = 110% of $32.80
= 1.1 × $32.80
= $36.08
rounding your answer to the nearest 5c.
The cost of the tap repair will be $36.10.
GST = Price (inc GST) ÷ 11
Practice - GST 1
1) Calculate the GST payable on a CD that
has a pre-tax price of $21.90. Round your
answer to the nearest 5c.
GST = Price (ex GST) × 10%
GST payable = 10% of $21.90
= 0.1 × $21.90
= $2.19
or $2.20
2) Calculate the GST payable on each of the
following items (prices are pre-tax):
a) a bottle of cordial at $1.80
GST = $0.18
b) a bike at $145.50
GST = $14.55
c) a pair of shoes at $39.95
GST = $3.96
d) a plane fare at $495
GST = $49.50
e) a restaurant meal where the bill is $245.30.
GST = $24.53
3) Calculate the GST payable on each of the
following items correct to the nearest cent:
(ALL pre tax prices)
a)a pizza with a pre-tax price of $4.99
GST
= $0.50
(49.9c rounded up to 50c)
b) a tin of baked beans with a price of $1.21
GST
= $0.12
c) a tin of peaches with a price of $1.35
GST
= $0.14
(13.5c rounded up to 14c)
d) a pack of licorice with a price of $2.95
GST
= $0.30
(29.5c rounded up to 30c)
e) a pack of frozen ice-creams with a price of
$6.95.
GST
= $0.70
(69.5c rounded up to 70c)
GST - move decimal 1 place L
$45.20
Practice - GST 2
4) A pair of track shoes that cost $145.95
has the 10% GST added to its cost. Calculate
the total cost of the sports shoes.
Price (inc GST) = Price (ex GST) × 1.1
Total cost
= 110% of $145.95
= 1.1 × $145.95
= $160.55
5) Calculate the total cost of each of the
following items after the 10% GST has been
added (prices given are pre-tax):
a) a rugby jersey priced at $195
Total cost = 1.1 × $195
= $214.50
b) a CD priced at $24.95
Total cost = 1.1 × $24.95
= $27.45
c) a rose plant priced at $21.30
Total cost = 1.1 × $21.30
= $23.43
d) a pack of cards priced at $9.95
Total cost = 1.1 × $9.95
= $10.95
e) a jar of honey priced at $2.65.
Total cost = 1.1 × $2.65
= $2.92
Practice - GST 3
7) A restaurant bill totals $184.70, including
the 10% GST. Calculate the actual price of
the meal before the GST was added.
Price (ex GST) = Price (inc GST) ÷ 1.1
Price
= $184.70 ÷ 1.1
= $167.90
8) A taxi fare was $18.60 inc10% GST.
Calculate:
a) the taxi fare without the GST
Price
= $18.60 ÷ 1.1
= $16.91
b) how much GST was paid.
GST = Price (inc GST) ÷ 11
GST
= $18.60 ÷ 11
= $1.69
VAT - overseas
Most countries have Value Added Tax (VAT) which is similar to our GST; the VAT %
varies, and may be more or less than in Australia.
• Original price 100% + VAT% = Selling Price (inc VAT)
6) Liam travels to New Zealand where the VAT
is set at 12.5%. Calculate the amount of tax
payable on each of the following items:
a) a video camera priced at $2400
VAT = 0.125 × $2400
= $300
b) a chocolate bar for $3.50
VAT = $3.50 ÷ 8
12% = 
= $0.44
c) a hiking tour costing $3760
VAT = $470
d) a helicopter ride costing $185
VAT = $23.13
e) a pair of shoes priced at $42.50.
VAT = $5.31
9) George travels to the USA. In the state of
Utah the VAT is levied at 11%. Calculate what
George will pay for four nights
accommodation in a hotel that charges $125
per night.
Total cost is 111% of the price (1.11).
= 1.11 × 4 × 125
= $555
Practice - VAT 1
10 Sally travels to the USA. In California, the
VAT is 7.5% of the price of the item. Calculate
what Sally will pay for each of the following
items:
Price (inc VAT) = Price (ex VAT) × (1 + VAT%)
100% + 7.5%
= 107.5%
= 1.075 (multiplier)
a) a card which has a ticketed price of $2.80
Price = $2.80 × 1.075
= $3.01
b) Disneyland entry which is $105
Price = $105 × 1.075
= $112.88
c) two nights accommodation at a hotel
for $102.50 per night
Price = $102.50 × 2 × 1.075
= $220.38
d) a restaurant meal for which the bill totals
$67.45
Price = $67.45 × 1.075
= $72.51
e) a bus fare which costs $8.45.
Price = $8.45 × 1.075
= $9.08
Practice - VAT 2
11) Kim decides to purchase a new car. The
pre-tax cost for the basic model of the car is
$27 800. It is an extra $2000 for an automatic
car, an extra $1500 for airconditioning, $1000
for power steering, $800 for a CD player and
$550 for alloy wheels. Calculate the cost of
each of the following cars, after the 10% GST
has been added:
Price (inc GST) = Price (ex GST) × 1.1
a) the basic model car
Total cost = $27 800 × 1.1
= $30 580
b) an automatic car with air-conditioning
Total cost = $(27 800 + $2000 + $1 500) × 1.1
= $31 300 × 1.1
= $34 430
# all extras must be included in the price to be
taxed – you can’t just add the $3500 to the
previous answer
c) a car with a CD player and alloy wheels
Total cost = $(27 800 + $800 + $550) × 1.1
= $29 150 × 1.1
= $32 065
d) a car with all of the above added
extras.
Total cost = $(27 800 + $2000 + $1500 +
$800 + $550) × 1.1
= $32 650 × 1.1
= $35 915