Tax might be difficult and one of the most complex necessities grasp – unless you’re an accountant. The reason that makes these taxes so onerous is that it varies depending on your income and employment. Not only that, but the guidelines provided to assist you during tax season is not always sufficient. So, what are the essentials of tax filing in Australia?
All You Need to Know About Tax Filing in Australia
Individuals’ taxable income is subject to income tax, which is paid on all sorts of income. This comprises your employment pay, business profits, and investment returns, such as the interest you earn on your bank account.
Taxpayers who have multiple employment and various taxable income sources must declare all of their earnings.
Here are the 10 things you need to know before tax filing in Australia:
General Information:
- The Financial year in Australia runs from July 1st – June 30th.
- Your employer deducts tax from each pay and send it to ATO (Australian Tax Office)
- The timeline for tax season every year is July 1st to October 31st. Every person with a taxable income has to lodge a tax return with the ATO during this time period.
- You are entitled to tax filing in Australia through a taxation agency like Universal Business Group.
Tax File Number (TFN):
- If you have recently moved to Australia and wish to begin working, you are entitled to apply and register yourself for a Tax File Number (TFN).
- The Tax File Number is your identification with The ATO and other government agencies
- You are supposed to possess this number for the rest of your life so it is imperative you keep it private and secure.
- Tax File Declaration Form:
- Tax File Declaration Form is your guideline for the tax payment. You are supposed to receive this Form from your employer at the time of your hiring.
- Fill this form with the right details for compliance with the right amount of payable tax. Make sure you tick the box to claim the tax free threshold.
- The tax-free threshold is the amount of income you can earn each financial year that is not taxed. As of 2021 that threshold is $18,200 per year.
Taxable Income:
- According to the Australian Tax System, an individual is allowed to earn up to $18,200 in any financial year in order to be granted exemption from tax filing.
- The tax-free threshold in equal to $350 a week, $700 a fortnight, or $1,517 a month.
- However, if you earn above the threshold, you’ll need to pay tax. Here’s a breakdown for taxable income:
| Taxable Income | Tax Rate |
| $0 – $18,200 | Nil |
| $18,200 – $45,000 | 19% |
| $45,001 – $120,000 | 32.5% |
| $120,001 – $180,000 | 37% |
| $180,001 and over | 45% |
Medicare Levy:
- Australian residents get access to healthcare through Medicare which is partly funded by the proceeds of the Medicare Levy.
- All taxpayers pay a Medicare Levy each year in addition to their tax, which is 2% of their taxable income.
- In addition to the Medicare Levy, taxpayers need to pay a Medicare levy surcharge in case of not possessing private hospital insurance with an earning of above $90,000 as a single person or $180,000 as a family.
- The MLS is between 1% and 1.5% of the taxable income.
Declaring an Income:
- Taxpayers need to keep a record of income statement. It is the record of all the income that ATO received from your employer during the financial year.
- Furthermore, it is important that all the records of sources of income you receive each year are declared and supplied. These include:
- interest on savings
- Income from any activity in the gig economy.
- Income from freelance
- Received rent from a private room.
- Any other form of income that you received.
Procedure to Lodge a Tax Return:
- If you’re going to lodge your return yourself, you can do so online by using “myTax.”
- For this process, you’ll need a myGov account linked to the ATO to lodge directly with the taxation office.
- This procedure could be risky as even a simple mistake could make your safe returns crumble. That is why people make use of tax experts like Universal Business Group.
Tax Refund:
- When you overpay your taxes, ATO is obligated to return it to you in the form of Tax Refund.
- Most people get a tax refund once they’ve lodged a tax return. The average tax refund in Australia is around $2,500.
- The ATO pays your refund directly into your nominated bank account. It is important for you to ensure your bank account details are entered correctly.
- It usually takes around 10 – 14 days to receive your tax refund, though it can be faster.
Tax Payable:
- When your employer does not withhold enough tax throughout the year, you may owe tax to the ATO
- If you receive additional income not taxed prior to when you receive it, this also shows as money owed.
- If you’re unable to pay it straight away, a tax agent can negotiate an affordable payment plan directly with the ATO on your behalf.
Use of a Taxation Agency:
- Using a tax agent for tax filing in Australia could be beneficial since the system is complex and you’re prone to making a mistake.
- A tax agent always keeps you in check with the deductions and attainable tax credits that has a substantial impact on the tax return.
- A tax agent helps in compliance and declaring all assets justly and wisely.
- A tax agent makes sure you don’t overpay your taxes or get in trouble with the ATO, which can often be the case without expert supervision.