Moving down under can be a massive culture shock. On top of all the changes in your environment, culture, and neighbours, you’ll also have to familiarise yourself with our tax process. After all, every country has its own unique rules governing the taxation systems. The good news is that, although income tax in Australia will present some new challenges, at the core of it, many things will be familiar.
To help you get your bearings and feel a little more comfortable with the Australian taxation system, ITP’s certified accountants have developed this easy-to-follow guide. Read on for a walkthrough of our country’s income tax process.
Income Tax in Australia: A Quick Overview
If you’re looking to file your personal income tax, one of the first things you need to know is when it’s due. Australia’s financial year is a little different from countries like the US. Rather than aligning with the calendar year, Australia’s tax year spans from July 1st to June 30th each year.
When is tax season in Australia?
Working people can generally lodge a tax return for the previous financial year any time between July 1st and October 31st. If you did earn an income that financial year, you’d still need to ensure you have a Tax File Number (TFN) and file a Non-Lodgement Advice.
Pro tax tip: Not sure what a Tax File Number is? Check out our handy guide to TFNs where you can learn everything you need to know, including how to apply for one.
How is income taxed in Australia?
The amount of tax you pay is dependent on your level of income. Below, we’ve provided the tax rates for Australian residents for the 2023-24 financial year. However, for a more precise picture of your tax obligations, you can use a tax calculator. For an even more precise understanding, consult tax accountants or reliable sources to compute how much you owe.
| Taxable income | Tax on this income |
|---|---|
| 0 – $18,200 | Nil |
| $18,201 – $45,000 | 19c for each $1 over $18,200 |
| $45,001 – $120,000 | $5,092 plus 32.5c for each $1 over $45,000 |
| $120,001 – $180,000 | $29,467 plus 37c for each $1 over $120,000 |
| $180,001 and over | $51,667 plus 45c for each $1 over $180,000 |
If you have an employer, they will generally deduct your personal income tax from your pay and send it directly to the ATO on your behalf. You should then receive a Payment Summary from your employer that reflects your pre and post-tax income, allowances and superannuation payments. This is important as you will need to declare your income in your individual tax return. You need to supply these summaries (either paper or electronic) to the ATO when lodging your tax. You’ll also need to provide records of any other sources of income.
How to Lodge a Tax Return in Australia
There are three ways to lodge your tax return:
- Through an online tax agent
- Via a traditional tax agent in Australia
- Directly through the ATO’s myTax platform
Online tax agents in Australia
Online agents are often cheaper than traditional ones, as they don’t have to pay for a commercial space. They also generally don’t require appointments, making them a convenient option. However, they vary greatly in skill and reliability. So if you opt for this route, it’s important to select an online agent that can offer a fast, secure and user-friendly service.
The ATO’s myTax platform
The myTax platform allows you to lodge a tax return online for free. To do so, you’ll need to create a myGov account, enter your details into the platform, and lodge your tax return directly yourself. While there’s no fee for this service, you won’t have the guidance of an experienced tax professional. You also won’t be able to have your details checked before submitting. This can leave you with a far larger tax bill than you would have had if you’d worked with a professional. Worse still, it means you’re at more risk of making errors that could lead to an audit and penalties. So if you take this route, be sure you have relatively straightforward tax requirements and a strong understanding of income tax in Australia.
Working with a certified tax agent
Making an appointment with a tax agent ensures that all your details and supporting documents are checked properly. This helps reduce the chances of having to re-file your tax returns because of a missed detail. Lodging your tax return directly can be quite complicated, even for experienced workers. It’s devilishly easy to miss out on deductions or tax credits when you’re going it alone. However, a skilled tax agent knows just what questions to ask and what deductions they can use to get you the best possible result. While traditional tax agents charge a fee for their service, they can give you complete peace of mind that you’ve received a great result minus any risk of issues with the ATO.
Tax Deductions and Tax Refunds
After you’ve lodged your tax return, you may find that you overpaid tax through your PAYG withholdings. When this happens, the ATO generates a refund covering the excess amount. The ATO will send your tax refund directly to your Australian bank account. So you must check carefully that you’ve entered your account details correctly. It’s difficult (sometimes even impossible) to recoup funds that have gone to the wrong account, so please make sure all your details are correct!
How long does an ATO tax refund take?
Once processed, you can expect to receive your tax refund within 10-14 days. Refunds can take longer during very busy periods. You may also experience delays if the ATO flags your tax return for an audit. If you’re worried about your tax return, you can ask your tax agent to check its status. However, please keep in mind that the ATO won’t accept queries until 30 days after the lodgement date.
How to Maximise Your Tax Individual Return in Australia
Aside from recording your income, your tax return allows you to claim deductions on work-related expenses you incurred within the financial year. These can reduce your taxable income, improving your chances of getting a healthy tax refund. Not all expenses are claimable. However, it’s still worth keeping all receipts so you can check with your tax accountant and ensure you don’t miss out on anything.
The most common deductions relate to money spent on uniforms, stationery, travel, and work-from-home costs not reimbursed by your employer. To avoid getting in trouble with the ATO, it’s important to claim only what you are entitled to. If you are unsure of what you can and cannot claim, ask your tax agent for guidance.
With the right advice from a certified tax accountant, you will soon find that filing your taxes is far less troublesome than it seems. ITP’s Income Tax Professionals have been serving Australians for more than 50+ years. With small local offices spread all over the country, our aim is to give you friendly, personalised service and a maximised tax return. year after year. So if you’ve recently moved to Australia, please feel welcome to give us a call or drop by our nearest office. We’ll help you get your bearings and ensure your taxes are perfectly in order.
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