As tax time 2022 rolls around, June is a great month to organise your income tax refund. If this is your first time lodging a tax return, there are a few things you’ll need to be aware of so you can maximise the amount you’ll get back in your tax refund.
Do You Need To Lodge A Tax Return?
Most people who earn an income will need to lodge a tax return. If you earn more than $18,200 per annum, you’ll need to pay tax. Tax is normally automatically taken from your wage in each pay period by your employer and is known as Pay-As-You-Go (PAYG). If you have paid tax, then you’ll be able to claim back some out-of-pocket work-expenses, known as tax deductions which will be paid to you from the Australian Taxation Office (ATO) as your tax refund.
If you’ve earned more than $18,200 and haven’t paid any tax, a tax agent will help you work out what your obligations will be, and what tax deductions you can claim when you lodge your tax return.
Tax rates for Australian Residents 2020-21 and 2021-22 financial years
|Income thresholds||Rate||Tax payable on this income|
|$0 – $18,200||0%||Nil|
|$18,201 – $45,000||19%||19c for each $1 over $18,200|
|$45,001 – $120,000||32.5%||$5,092 plus 32.5c for each $1 over $45,000|
|$120,001 – $180,000||37%||$29,467 plus 37c for each $1 over $120,000|
|$180,001 and over||45%||$51,667 plus 45c for each $1 over $180,000|
Pro Tax Tip: Income tax rates and thresholds will change in the 2024-25 financial year
Australian Government Payments and Allowances
Some government payments and pensions will be counted towards your taxable income, while others are not. These payments must be declared when you lodge your tax return. Most will be pre-filled, but your tax agent will run through them during your appointment do double check everything has been included. Always check this information with your own records to make sure what you declare is true. The ATO holds you personally liable for the information that you sent them being correct.
Pro Tax Tip: Some covid-19 support payments and disaster assistance payments are taxable, and might have been automatically paid into your bank account.
Some taxable payments and pensions include:
- the age pension
- carer payment
- Austudy payment
- JobSeeker payment
- Youth allowance
- Defence Force income support allowance (DFISA) where the pension, payment or allowance to which it relates is taxable
- veteran payment
- invalidity service pension, if you have reached age-pension age
- disability support pension, if you have reached age-pension age
- income support supplement
- sickness allowance
- parenting payment (partnered)
- disaster recovery allowance (but not in relation to 2019–20 bushfires)
The payments and pensions that are not tax deductible should still be declared when lodging your tax return. This enables government departments to work out if you’re eligible for other government benefits, concessions or tax offsets.
Tax-free pensions include:
- carer payments
- disability support pad by Centrelink
- invalidity service pension
- partner service pension
Pro Tax Tip: Your tax agent will be able to let you know what documents you’ll need to organise and give them, so a quick chat a few weeks before your appointment will give you time to get your paperwork together.
When Do You Need To Lodge Your Tax Return?
‘Tax season’ runs between the 1 July and finishes on the 31 October each year. The best time to lodge your tax return is from late July. This is because certain payments don’t need to be finalised until the 14 July through their automatic payment systems that are directly linked to the ATO. Your income statements will need to be marked as Tax Ready before you should lodge. If you use a tax agent to lodge your tax return, you’ll have until the 15 May, but only if you made an appointment with them before the 31 October.
All of your information from your employer, government services, banks and financial institutions and health insurance companies are needed. It pays to double check that the ATO has your up to date bank details, so that there are no issues with your tax refund.
Pro Tax Tip: If you lodge too early and your information changes, you will need to amend your tax return and this may result in paying back tax.
Your Tax File Number
As well as making sure your bank details are up to date and correct, you’ll need a tax file number (TFN) to lodge your tax return and for superannuation purposes.
Pro Tax Tip: Your TFN is a nine digit personal identifier for the tax system for life. Keep your TFN confidential and safe. Only give your TFN to your employer, your bank, superannuation fund, Centrelink and tax agent
Applying for a TFN is free. Beware of scams. There are many scams, especially at tax time, where scammers ‘help’ you register to claim your tax file number, or charge a fee for providing a ‘service’. Read our blog ‘What Is A Tax File Number’ for detailed information about not apply for your TFN and what to do if you lose your TFN: https://itp.com.au/what-is-a-tax-file-number-tfn/
Mistakes are made when failing to declare all income information. Your income may be more than earnings from your wage or salary. There are many ways an income can be earned. This includes income from:
- your wage or salary
- cash payments
- government payments and pensions
- investments and shares
- property sold or rented
- ride share
- side hustles
Tax deductions are work-expenses you’ve incurred during the course of earning an income. A tax deduction reduces the amount of tax you have to pay. You don’t get the full amount back, but you will get some. Reducing your taxable income will reduce your marginal tax rate and the tax you’re obligated to pay.
Pro Tax Tip: to claim a tax deduction, you must be out of pocket, the expense must be work-related and you must be able to prove your expense.
There are a range of tax deductions that can be made:
- vehicle expenses
- travel expenses
- clothing, laundry and uniforms
- working from home
- the cost of tools
- charities and donations
- income protection insurance
- the cost of managing your tax affairs
The above is only an overview of the type of expenses that are eligible. Some deductions are job or career specific, while other are more broad. You’ll need to keep your receipts, bank statements, contracts, and any financial documentation to prove your claims. If you’re not good at keeping your paperwork up to date, you might be missing out on deductions.
What Happens After Your Lodge Your Tax Return?
When you lodge your tax return, the ATO will work out if you’re entitled to the tax deductions you’ve claimed or if you didn’t pay enough tax. When the ATO refunds money, it’s known as a tax refund. If you have to pay more, it’s known as a tax debt.
There are many reasons why you’ll need to lodge a tax return:
- you have had PAYG tax taken from your wage or salary
- you earn over $18,200 per annum
- You wish to claim tax deductions
- you have $1 or more of foreign income
- you are a liable or recipient parent under a child support assessment and your income was $26,319 or more
- you have had business or investment income
- you are leaving Australia and have a study or training support loan
Tax can get tricky. Even Albert Einstein stated that there’s nothing more confusing than tax. If you’re unsure, reach out for the help of a tax accountant, who knows and understands exactly what you’ll need to do. Even better, their fees are 100% tax deductible! You can get expert help and claim their fee stress-free.