# Tax Rates

Sometimes you are not looking for an exact match when you use the VLOOKUP function in **Excel**. For example, when you want to calculate the tax on an income.

The following **tax rates** apply to individuals who are residents of Australia.

Taxable income |
Tax on this income |
---|---|

0 - $18,200 |
Nil |

$18,201 - $37,000 |
19c for each $1 over $18,200 |

$37,001 - $87,000 |
$3,572 plus 32.5c for each $1 over $37,000 |

$87,001 - $180,000 |
$19,822 plus 37c for each $1 over $87,000 |

$180,001 and over |
$54,232 plus 45c for each $1 over $180,000 |

Example: if income is 39000, tax equals 3572 + 0.325 * (39000 - 37000) = 3572 + 650 = $4222

To automatically calculate the tax on an income, execute the following steps.

1. On the second sheet, create the following range and name it Rates.

2. We already know how the VLOOKUP function can return an exact match or a #N/A error if not found, by setting the fourth argument to FALSE. However, when you set this argument to TRUE, it returns an exact match or if not found, it returns the largest value smaller than lookup_value (A2). That's exactly what we want!

Explanation: Excel cannot find 39000 in the first column of Rates. However, it can find 37000 (the largest value smaller than 39000). As a result, it returns 3572 (col_index_num, the third argument, is set to 2).

3. Now, what's left is the remainder of the equation, + 0.325 * (39000 - 37000). This is easy. We can return 0.325 by setting col_index_num to 3 and return 37000 by setting col_index_num to 1. The complete formula below does the trick.

Note: when you set the fourth argument of the VLOOKUP function to TRUE, the first column of the table must be sorted in ascending order.