They say that only two things are certain in life: death and taxes. Your funeral probably isn’t worth thinking about just yet (you’re in your prime) but taxes are something you’ll have to get your head round sooner or later. You may as well start here and now.
Taxes are a portion of your income that is taken out and given to the Government to provide funding for a number of things, like education, defence, health, welfare and some other government-y stuff. Tax is compulsory for most workers and is usually taken straight out of your pay each time you get a pay slip from your employer. If you are self-employed or earning investment income, you’ll have to keep putting money aside and prepare to pay your taxes at the end of the financial year, or potentially pay through PAYG (Pay As You Go) instalments.
While the tax that comes out of your personal income is called income tax (go figure), there are a bunch of other kinds of taxes like company tax, GST (goods and services tax), fringe benefits tax… you get the deal, there’s a lot of taxes out there. But for the purpose of this article, we’ll just be looking at personal income tax, which is the one you’re most likely going to be dealing with.
A normal calendar year runs from January to December, but the fiscal year, more commonly referred to as the financial year, starts on July 1 and ends on June 30 in Australia. This is probably because no one wants to do their tax return in the midst of Christmas and New Year’s Eve celebrations… or something. Anyway, the long and short of it is this: if you have a job, you’ve got to lodge a tax return by October 31 each year.
You could get an accountant to handle your taxes for you, which might be a good option if you run your own business, you’re a sole trader or your tax is somehow complicated. The thing is though, accountants cost money and you can probably do your tax by yourself pretty easily – especially if you’re the kind of person that knows how to handle important documents which ones to hold on to. If you have a regular job, we reckon it’s probably best to follow these steps and do your tax return online.
It’s pretty simple and these days you can do it all online through mytax. The first step is to get your payment summary (aka group certificate) from your employer. This is a simple summary of everything you have been paid by your employer that year, and how much you have paid in taxes. You’re going to need this to fill out your tax return.
Next, you’ll need to find your tax file number (TFN). If you’re employed, you probably already have one of these, and it should be listed on your payment summary. If you think you have a TFN but can’t remember what it is, you can see what to do here.
Finally, you’re going to need a myGov account, which you have to verify by calling 13 28 61. After that you can log in and follow the prompts for declaring your income.
It depends how much of a baller you are. In Australia we pay tax on a sliding scale, meaning if you didn’t earn very much money, you won’t have to pay much tax. In fact, if you earn less than the ‘tax threshold’ (currently sitting at $18,200 per year), you don’t pay any tax at all – if this is you, you can expect to receive a refund from the Tax Department when you lodge your return. If you earned between $18,200 and $37,000, you’ll pay 19c out of each dollar you earn over $18,200. This means for every dollar you earned above the $18,200 threshold, you only get to keep 81 cents of it. It doesn’t sound like much, but it adds up and increases exponentially. The more money you earn, the more tax you pay – but it’s good to remember this money is taken out by your employer before they deposit your wages into your account!
Below is the official scale. Note that these amounts can change from year to year!
Your employer usually deducts your tax from your income each time you get paid. The amount that is deducted is based on how much money you could potentially earn in the year (this is why some weeks you get taxed more than others).
If you earn less than the amount projected, it’s likely that you’ll get some money back when you lodge your tax return. Once you complete your tax return, you’ll receive an estimate of how much money you should get back and in a few week’s time, you should see that nice lump sum dropped into your bank account. If you only work part-time while at school or studying, you probably earned less than $18,200 over the course of the year, which means you could get ALL your tax back, which is a pretty sweet pay day for most. It kinda feels like getting free money, even though it was taken from your income in the first place.
However, sometimes throughout the year you have actually been taxed less than what you should have been, and you actually owe the government money. This is often because other financial assets are taken into account, and can still happen if you’re under the tax threshold. Don’t worry too much though – the majority of people will receive tax back!
There are certain things that you may need for work, such as your uniform (including shoes), tools and equipment, union fees or protective items such as sunscreen and sunglasses. If you bought some of these items, or others for work, make sure you keep the receipts as you may be able to claim them as tax deductions (although if your employer provides these items for you, or repays you for the cost, then you can’t claim the cost on your tax return). “Tax deduction” basically means you’re allowed to recognise the cost against your income when you work out your tax bill. Not everything is tax-deductable, so it’s important to do your research. Check here for a list of things you can usually claim
Lodging your tax return is also something you want to figure out early and get into the habit of doing on time. Lodging your tax return late can increase your chance of ATO fines and interest charges if you ever have to pay back money – so it could save you money in the long run.
This information is intended to be general in nature only and might not apply to your personal circumstances. It does not constitute tax advice and cannot be relied upon as such. When it doubt, always seek professional guidance.
Information updated as of 2 Aug 2017