The Beginners’ Guide to Australia’s Income Tax Return System

Income tax is always applied to the taxable income of all individuals and paid on all sorts of income. This includes your job wages, profits from businesses and even returns you derive from investments. Income tax can be applied to all assets especially when your house or stock shares are sold, as per the tax system in Australia.Taxpayers with multiple jobs and different taxable income sources should declare their income from all sources; else they run the danger of being caught in an unintentional tax trap that exceeds their tax-free threshold.

Australian Income Tax Rates

Australia has a very progressive tax system, which implies that the more you earn, the higher tax you pay.

As per tax system in Australia, every individual can earn up to $18,200 in any financial year, and would not have to pay taxes since it is the tax-free threshold. The Australian income tax rates kick in after one’s income exceeds the threshold.

Taxable Income $ Tax Payable $
0 – 18,200 Nill
18,201 – 37,000 Nill + 19% of excess over 18,200
37,001 – 87,000 3,572 + 32.5% excess over 37,000
87,001 – 180,000 19,822 + 37% excess over 87,000
180,001+ 54,232 + 45% excess over 180,000

Source

Tax rates for foreign residents on other hand are steeper, with a 32.5% tax rate for those earning up to $87,000 while those earning till $180,000 are required to pay $28,275 + 37% of the amount they earn over $87,000. Those earning over $180,001 would have to pay taxes to the worth of $62,685 + 45% of the amount earned over $180,000.

Working holiday makers, on the other hand, need to pay 15% on all income of up to $37,000 then pay similar rates as other residents from $37,001 onwards.

How Does a Tax Return Work?

One can lodge tax returns any time after June 30 with the deadline set for 31st October.

It is preferable to go with tax agents and tax return filing agencies to ensure everything is correctly stated and declared for your best interests.

To ensure the process is smooth,

  1. Make sure you have important documents together before lodging online
  2. File important receipts, invoices and documents regularly to save a lot of time in completing returns.
  3. Ensure all details are up to date with the ATO. Minor errors can hold your return for weeks or even lead to heavy fines.
  4. If you have access to the super fund, you need to be fully aware of tax obligations. People of different ages are required to fulfil different tax obligations on superannuation withdrawals.

Getting a Tax File Number

If you work or get a Centrelink benefit, a Tax File Number (TFN) is essential and given by the Australian Taxation Office (ATO) for tax management. (Contact our Accountants to get YOUR TFN Number). Simple rules about allowable deductions based on tax system in Australia:

  1. You must claim deductions in the same financial year of purchase
  2. You can’t claim expenses you are reimbursed for.
  3. You should have recorded or written evidence of purchase, including a receipt

Tax offsets reduce the tax amount to be paid. For example, part-time workers can get offset of $445 if income is below $37,000 and part of the original offset if it is below $66,667.

Lodging Your Tax Returns in Australia

tax return last date

You can lodge your return through a Tax Accountant, online or through paper forms.

The deadline for lodging your tax is 31st October. File your taxes before the date or you could face penalty according to the rules for personal income tax in Australia.

Simple rules about allowable deductions based on tax system in Australia:

  1. You must claim deductions in the same financial year of purchase
  2. You can’t claim expenses you are reimbursed for.
  3. You should have recorded or written evidence of purchase, including a receipt
  4. Tax offsets reduce the tax amount to be paid. For example, part-time workers can get offset of $445 if income is below $37,000 and part of the original offset if it is below $66,667.

Getting Your Tax Refunds

Once you lodge tax returns to the ATO, they will send you an assessment notice, informing you if you have tax refunds and the tax you need pay. Here are some steps that you can use to get your tax refunds:

1. Claim all Tax Deductions you can claim

Claim deductions for every expense that you are entitled to, in legal terms. Make sure that you keep receipts and even document your office purchases. A diary can also make it easy to help remember what project or job the purchase related to. It is important to remember here that you can claim items only if you have receipts for the same and you are not reimbursed for the expenses.

2. Keep Records and Receipts

Do not waste time in tracking down receipts for purchases at the last minute. People miss out on hundreds and thousands of dollars since they do not store them or forget receipts.

3. Sweat the Small Stuff to boost Tax Refund

Each and every small purchase across 12 months can boost up expenses and claims for deductions to improve tax refund. One needs to get organized with receipts for small purchases since it helps at the end of the year.

4. Use a Tax Agent Service

About three-fourths of Australians lodge tax return through a tax agent since most of them can help increase tax refund and also help you avoid any unnecessary ATO trouble. Choosing the right tax agent service is important since not every agency checks the return before filing them.

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