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Earning an income

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Earning an income ...

    Victoria Module 1 Earning an income

Contents .........................................................................................................................2

    Introduction .....................................................................................................................3

    Module 1: Earning an income .........................................................................................4

    Background scenario ..............................................................................................4

    Teacher notes .........................................................................................................4

    Key terms and definitions ........................................................................................4

    Task 1: Income, employment contracts and tax requirements ................................6

    Teacher notes, Scenario, Student activities & Learning standards ............6

    Task 2: Why pay income tax? ................................................................................8

    Teacher notes, Scenario, Student activities & Learning standards ............8 Stimulus material ............................................................................................................9

    H.1.1 Sources of income .........................................................................................9

    H.1.2 Sample payslip ............................................................................................10

    H.1.3 Sample payment summary ..........................................................................11

    H.1.4 Opinions about tax ......................................................................................12

    ? 2005 CommFoundation Pty Ltd

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    ? 2005 CommFoundation Pty Ltd - Financial Literacy Curriculum Resource 2

Victoria Module 1 Earning an income

    The Commonwealth Bank has been supporting education for more than 70 years, since the introduction of school banking in 1931. In 2003, we strengthened our commitment to education through the establishment of the Commonwealth Bank Foundation.

    The Foundation seeks to encourage developments in education, particularly the financial literacy skills of young Australians, and aims to create awareness, skill and understanding of the benefits of a more financially literate community.

    By helping our young people to understand money management, we will empower them to take effective decisions to achieve their financial goals.

    With this in mind, I am pleased to announce the availability of a national financial literacy curriculum resource which has been developed to support the teaching of financial literacy in the classroom.

    Developed by a National Steering Committee comprising representatives across a broad range of state and territory education departments, sectors and professional teachers’ associations, the

    curriculum materials have been designed to support the teaching of financial literacy in Years 7 to 10.

    This practical and relevant curriculum resource has been designed to be easily incorporated into a number of subject areas and has been mapped to the curriculum in each state and territory.

There are twelve modules covering:

    ? Earning an income

    ? Spending and saving

    ? Consumer decisions

    ? Consumer protection

    ? Buying a car

    ? Financial services

    ? Managing finances

    ? Consumer awareness

    ? Personal investment

    ? Planning and running a business

    ? Impact of technology

    ? Economics of everyday finance

    The resource materials can be easily downloaded via the Commonwealth Bank Foundation’s website www.commbank.com.au/foundation

We hope you find this resource a valuable tool to use in your classroom.

The Commonwealth Bank Foundation Team

? 2005 CommFoundation Pty Ltd - Financial Literacy Curriculum Resource 3

Victoria Module 1 Earning an income

The case studies are developed around two families: the Drivers and their relatives the Fullbricks; as

    well as their friends and workmates. The Drivers, Ilse and Laurie, have two teenagers: Elizabeth,

    aged 15, and Nathan, aged 17. Both work part-time. Ilse has ongoing medical problems and Laurie

    works for a small trucking company. Grandmother Josefina lives with the family. The second family is

    the Fullbrick family, to whom they are related through Uncle Frank, Ilse’s wealthy brother. Frank

    Fullbrick runs a construction company, and his partner Sella is a marketing manager. Mark is their

    teenage son.

    Royce lives next door to the Drivers and is good friends with Nathan and Elizabeth.

    This topic addresses the following issues:

    ? sources and types of income;

    ? financial issues associated with earning an income and types of employment; and

    ? reasons for taxes.

Stimulus material provided:

    ? H.1.1 Sources of income.

    ? H.1.2 Sample payslip.

    ? H.1.3 Sample payment summary.

    ? H.1.4 Opinions about tax.

    There are also general teacher notes available at the beginning of each unit.

Australian Business Number An identifying number that every Australian business must

    (ABN) have.

    Award Employment contract based on a court decision outlining

    minimum pay and conditions. Employment Contract An agreement about wages and conditions of work.

    Goods and Services Tax A broad-based tax, currently at 10 per cent, on most goods

    (GST) and services in Australia. Some essential items are exempt,

    e.g. fresh fruit and vegetables. Income Money obtained from working, interest, dividends, selling

    assets and other sources. Income tax Money paid from earnings to the Australian Government at a

    progressive rate, i.e. when you earn more money, you pay a

    higher rate of tax. Current tax rates can be found at

    http://www.ato.gov.au Occupation A job.

    ? 2005 CommFoundation Pty Ltd - Financial Literacy Curriculum Resource 4

    Victoria Module 1 Earning an income Tax file number (TFN) An identifying number received after registration with the

    Australian Taxation Office. This is needed for employment. Tax threshold A level of income above which the proportion of tax you pay

    increases. Current tax rates can be found at

    http://www.ato.gov.au

    ? 2005 CommFoundation Pty Ltd - Financial Literacy Curriculum Resource 5

Victoria Module 1 Earning an income

    This task provides opportunities to expand discussions to include issues such as: part-time versus casual employment, including issues related to the casualisation of the workforce; pay rates, such

    as age-related minimum wage; career choices; and other sources of income. These issues are beyond the scope of the personal financial literacy focus of these units, but you may find that

    there are good opportunities to link to other state/territory specific syllabus/curriculum outcomes.

In Task 1A, students will be asked to locate information regarding award conditions for

    employment related to the scenario from a Federal Government website. This information is

    state/territory specific and will be differently accessed through this site depending on where you

    are. It may be advisable for you to visit the website prior to undertaking the activity in class to

    ensure the information can be quickly located. If it is not possible to have internet access during

    the class, the information can be printed and distributed to the class.

For Task 1B it will be helpful if you are able to seek out a range of payslips to compare

    information held therein, deleting personal information where appropriate.

    Elizabeth is very excited about her new part-time job at Foodworld, the local supermarket, working at the check-out. She investigates her award and related matters including hourly rate,

    penalty rates, tax, and tax-free threshold. Nathan says he'd rather be a casual employee because

    the hourly rate is higher.

    Level 5 Students make 1. Use the stimulus H.1.1 Sources of income, to make a list of informed economic and all the likely sources of earned and unearned income that consumer decisions, appear in the script. demonstrating the development of personal 2. Visit the website http://jobsearch.gov.au/joboutlook/ and financial literacy. investigate the list of occupations (alphabetical). Investigate Level 6 Students explain the the key features of Elizabeth's new occupation as a check-role and significance of saving out operator and cashier. Record the following information and investment for individuals in a table: and for the economy, and ? weekly earnings full-time demonstrate the skills required ? job prospects to successfully plan and ? gender breakdown manage personal finances. ? main age group

    ? % working full-time

    ? typical role and working conditions Level 5 Students form and Now repeat this exercise for an occupation of your choice. express opinions on economic issues that interest and/or 3. Visit http://www.wagenet.gov.au and select the appropriate impact on them personally. state/territory.

    ? 2005 CommFoundation Pty Ltd - Financial Literacy Curriculum Resource 6

Victoria Module 1 Earning an income

    a. List the types of agreements under which Elizabeth

    could be covered.

    b. Go to the specific award for retail workers in your state

    or territory and look up her award pay and conditions.

    c. Make a list of 5 key points about her wages and

    conditions (e.g. hourly rate of pay as a part-time

    employee).

Examine the stimulus H.1.2 Sample payslip.

1. Identify the major information included on a payslip and

    label the components (parts) of the payslip provided. (One

    has been completed for you.)

    Note: employers must give you a payslip within one day of

    paying you.

2. Compare other payslips, looking for the information you

    have identified that is necessary on a payslip.

    Elizabeth may choose between part-time or casual employment.

Discuss with the class:

    ? the advantages and disadvantages of each (think about

    issues related to pay, hours worked, termination of

    employment and flow-on effects such as signing finance-

    related contracts, e.g. obtaining a credit card)

    ? what type of employment Elizabeth should choose

    (giving reasons)

    ? what Elizabeth could do if her employer offers her cash

    but no payslip.

    Examine the stimulus H.1.3 Sample payment summary.

    Visit http://www.ato.gov.au and look up the section "Individual". 1. Outline five reasons why you need a tax file number. 2. Describe how you get a tax file number.

    3. Identify the amount of tax Elizabeth paid on H.1.3 Sample

    payment summary. Calculate the proportion of her income

    that she paid in tax.

    4. Find the tax calculator on the website and find out how

    much tax Elizabeth will pay on her annual income if she

    earns (i) $8,000, (ii) $22,000 this year.

    5. Explain the tax-free threshold in one paragraph.

? 2005 CommFoundation Pty Ltd - Financial Literacy Curriculum Resource 7

Victoria Module 1 Earning an income

    Teachers may like to use H.1.4 Opinions about tax, to stimulate debate and discussion on this task, which may be undertaken in groups.

Elizabeth is shocked at the amount of tax deducted from her payslip. She accepts reluctantly that

    she needs to pay income tax. Laurie tells her that without her contribution to income tax revenue,

    people like Ilse could not get disability allowances or pensions. They discuss the reasons why we should all pay tax and how it can improve their lives and those of others around them.

1. Read the information provided on H.1.4 Opinions about Students describe the purpose tax and discuss with the class. Address the following of laws and processes of questions: creating and changing them. a. where do different levels of government get their Students identify and question money from (e.g. different taxes go to different levels the features and values of of government)? Australia’s political and legal b. what services do you expect governments to provide systems. and how can they pay for these?

    In groups, prepare a poster, multimedia presentation or video for the class on income tax. You should:

    ? explain what income tax means

    ? draw up a list of reasons why people should pay tax

    ? describe the services governments (Local, State,

    Federal) provide from taxes they collect

    ? explain how greater government spending could

    improve your school, hospital or local library

    ? describe community views about tax. To obtain

    community views you will need to interview your parent

    or other adults about why people should pay tax, and

    what they think of Australia's tax system. If it is not

    possible to conduct the survey in the community,

    teachers in the school may be the subject of your

    investigation.

Your presentation should be creative and informative and

    target a youth audience. To gather information, you can use

    your notebook, textbook or relevant Internet sites.

? 2005 CommFoundation Pty Ltd - Financial Literacy Curriculum Resource 8

Victoria Module 1 Earning an income

    Elizabeth: Hey Nathan, I just got my pay! Beat $500 for a fortnight’s work! Nathan: Hey Elizabeth, I just made $200 from my eBay sale: remember the

    autographed football I won?

    Ilse: Well, I’d better start thinking then! Perhaps I could set up a stall at the

    markets on Saturday to sell those dog collars I made. Maybe I could sell

    that Russell painting I’ve been storing. I need to do something to help me

    while I’m on sick leave. Thank goodness for those Centrelink payments.

    They help a lot with your books and uniforms! Laurie: Buy a lottery ticket instead, or go to the races on Saturday. It will be more

    fun!

    Elizabeth: Since when did you win anything that way Dad? Laurie: Well I did win $100 on NoGo four years ago! Elizabeth: Four years ago Dad! I rest my case!

    Nathan: There have to be easier ways to make money! Ilse: Yes, well while you are thinking about that, how about cleaning your

    revolting room, washing the dog, taking out the garbage, and making us all

    a sandwich for lunch while I hang out the washing! You get $50 a week in

    pocket money, I think now it’s time for a bit of effort! Nathan: When I’m older, I’m going to run my own business like Frank, and make

    sure I make a good profit. I want to get rich, and be an entrepreneur. I’m

    not interested in working for other people!

    Ilse: You’ll need to convince other people to invest in your business, Nathan, so

    I hope you've got some good ideas!

    Josefina: I think Elizabeth has good ideas! She’s been saving carefully, and hasn’t

    spent the cheque I gave both of them. She’s smart: she's reading the

    paper every day to work out which companies she can invest in for the

    best long-term growth. She even realises that if she invests in a growing

    company, which is not paying big dividends now, she has a good chance

    of the shares going up a lot in value over the next few years as it starts to

    make money. I wish I had thought this way when I was young! Nathan: Wait and see guys. I did a business plan at high school. I’m going to

    develop an entertainment centre for dogs! There are more dogs than boys

    in our state now! People love their dogs and are spending more and more

    on them today!

    Ilse: Well maybe I’ll write a novel about how hard it is to bring up teenagers

    today. I’ll call it: “The Cost of Being the Boss”. Then I can live off the

    royalties for the next ten years; and the interest on what I save.

? 2005 CommFoundation Pty Ltd - Financial Literacy Curriculum Resource 9

    Victoria Module 1 Earning an income

     5.

    FOODWORLD LIMITED 1.

    Employer’s ABN: 88 000 014 675

    details

    Employee’s name: E. Driver Date: 9/8/04 6.

    Classification: Shop Assistant Pay Period: 1/8/04-8/8/04

    Superannuation fund: AMP 2.

    Ordinary wages/hourly No. of hours $ @ (rate) 15 100.95 rate 7. $6.73

    Overtime $ No. of hours @ (rate) 3. $ Allowances Purpose Laundry Allowance 3.09

     $ 8.

    $ Gross wages 104.04

    $ Less tax 12.60

    $ 4. Less deductions Purpose Details: AMP Super 9.00

     $ Purpose Details: SDA 7.00 9.

    Net wages $ 75.44

    H.1.3 ? 2005 CommFoundation Pty Ltd - Financial Literacy Curriculum Resource 10

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