Unless you’re experienced in accounting, tax can be hard to understand, particularly as it changes between income levels and jobs. Not only this, but there’s often minimal instructions given to help you out during tax time. So, what do you need to know about lodging a tax return?
Australia has a progressive tax system, which means that the more you earn, the more tax you pay. The tax you pay goes towards public goods and services, such as health and community services, national defence, public education, and infrastructure like roads and railways.
Income tax is incurred on the taxable income of all individuals, and is paid on all types of income. This includes your job wages, profits from business, and returns you get from any investments such as the interest you earn on your bank account. Taxpayers with multiple jobs and different taxable income sources must declare income from all sources.
Tax-free threshold
The Australian tax system allows individuals to earn up to $18,200 in any financial year (July to June) without having to pay tax. This is what’s referred to as the “tax-free threshold” and it’s equivalent to:
- $350 a week.
- $700 a fortnight.
- $1,517 a month.
If you earn below the threshold you most likely don’t have to lodge a tax return. However, if you earn above it, you’ll need to pay tax. As a guide, if you earn:
- From $18,201 to $45,000, your tax payable is 16 cents for each $1 earned over $18,200.
- From $45,001 to $135,000, your tax payable is $4,288 plus 30 cents for each $1 earned over $45,000.
- From $135,001 to $190,000, your tax payable is $31,288 plus 37c for each $1 earned over $135,000.
- $190,001 and over, your tax payable is $51,638 plus 45c for each $1 earned over $190,000.
Note: The above rates are relevant for the 2024-2025 financial year and do not include the Medicare Levy of 2%.
If you’re receiving income from more than one payer, you can claim the tax-free threshold from the payer that’s paying you the highest amount. But if your total annual income from all payers is going to be less than $18,200 in the financial year, you can claim the threshold from all payers.
How income tax works
In general, your employer will deduct tax from each pay and send it to the Australian Taxation Office (ATO) on your behalf. This is known as Pay As You Go (PAYG) withholding. This is good news for you, as it means you won’t be lumped with a giant tax bill at the end of the year if the information you’ve provided is correct.
When you lodge your end of year tax return, the ATO calculates how much you’ve paid through PAYG against how much you owe. If you’ve paid less than what you owe, you’ll need to pay the difference, and if you’ve paid more than you owe, you’ll be given a tax refund.
The bottom line is that all you need to do is provide the ATO with the information they need. The ATO’s online tools will calculate your tax for you.
Lodging a tax return
You can lodge a tax return any time after June 30, with the deadline set for 31st October. If the tax return process confuses you, it’s a good idea to check out the ATO resources such as the ATO community. If you’re still confused you could also organise to have an appointment with a tax agent and have the agency file on your behalf. This way, you can ensure everything is correctly stated and declared with your best interests. You can also sometimes get an extension on the due date through a tax agent.
If you’re going to lodge your return yourself, you can do so online by using myTax. To begin this process, you’ll need a myGov account linked to the ATO. Watch the video below to see how to create a myGov account and link it to the ATO.
To ensure a smooth process, get together all your important documents. This includes your tax file number (TFN), Centrelink benefits, receipts and invoices. Click here to see income you must declare.
The ATO allows you to claim certain deductions that are subtracted from your assessable income. Deductions reduce the amount of money the tax rates are applied to, which ultimately reduces the amount of tax you pay. Allowable deductions may include:
- Self-education expenses.
- Uniform and laundry expenses.
- Gifts and donations of $2 or more to an approved charity.
The rules simply state that you must:
- Declare the deduction in the same financial year as you made the purchase.
- Not declare expenses you’ve been reimbursed for.
- Provide a receipt for proof of expense.
Click here to see a list of deductions you can claim. A diary or folder will help you keep track of what projects or jobs your expense was related to.
Tax offsets
Another way to reduce the amount of tax you need to pay is through tax offsets, such as that of part time and casual workers earning below $66,667 a year. The ATO will automatically work out this offset for you when you lodge your return, but as a guide, if you earn less than $37,000 you should get the full offset of $445.
Can I do this online?
If you feel comfortable doing so, lodging online makes the process simpler. This is because as you fill out the ATO form, your tax is automatically calculated. To lodge this way, make sure you have a myGov account.
Remember, you need to lodge before 31 October, and if you miss the deadline, you may be liable to pay a Failure to lodge (FTL) on time penalty. So if you’ve already missed the deadline and want to minimise any potential penalties, it might be worth visiting a tax agent for expert advice.
Tracking your progress
Tax returns lodged online using myTax or a registered tax agent are usually processed within two weeks. You can check the progress of your return via your myGov account. Once processed, the ATO will issue you with a Notice of Assessment confirming your lodgement and notify you of any outstanding payment. If you’re entitled to a tax refund, it will be paid directly into your chosen bank account.
Getting help
If you need help lodging your tax return, you may be eligible for the ATO’s Tax Help Program - a network of trained, accredited community volunteers who provide a free and confidential service to help people complete their tax returns online. Tax Help is available from July to October in all capital cities and some regional areas.
