As Australia’s tax system is heavily reliant on personal income tax, it is important to understand what the tax office means when using the term ‘income’.
You can receive income as a result of personal exertion (this means by working) or from an investment. Income may NOT always be in the form of money – in some situations goods & services may be treated as income.
If you receive a gift or win a prize, these are not usually treated as income.
The three most common classifications of income are:
Assessable income – is income that can be taxed, provided you earn enough to exceed your tax-free threshold.
Some types of assessable income are:
- Salary and wages
- Interest from bank accounts
- Dividends and other income from investments
- Bonuses and overtime
Exempt Income – is income that cannot be taxed.
Some examples would be:
- Some government pensions and payments, including the invalid pension
- Some education payments
Taxable Income – is the income you receive during a financial year that you have to pay tax on. It is a term that is used for income that is left over after you have deducted all the expenses you are allowed from your assessable income.
Call 03 9044 8691 for any questions regarding income types.
When you spend money to directly help you earn your income, you may be entitled to claim that cost as a tax deduction. Tax deductions reduce the amount of income you have to pay income on. Deductions are based on the particular circumstances of the individual and the industry involved.
Deductions must be applied to the amount of income you pay tax on and are NOT applied to the amount of your tax-withheld amount.
Call 03 9044 8691 for any clarification on deductions.
From January 1, 2005 the Higher Education Loan Programme (HELP) was introduced, replacing the Higher Education Contribution Scheme (HECS).
HELP comprises of the following three schemes:
- HECS-HELP – for eligible students enrolled in Commonwealth supported places. A HECS-HELP loan will cover all or part of their student contribution.
- FEE-HELP – for eligible fee-paying students enrolled at an eligible higher education provider or Open Universities Australia. FEE-HELP provides students with a loan to cover up to the full amount of their tuition fees to a maximum of $50,950,00, over their lifetime (last indexed 2006).
- OS-HELP for eligible Commonwealth supported students who wish to study overseas. OS-HELP provided students with a cash loan to cover expenses such as accommodation and travel.
Call 03 9044 8691 for any further clarification regarding HELP.
The $900 is not taxable income and therefore will not need to be declared on your tax return.
You have an obligation to lodge your tax return annually. Call Tax Integrity immediately to complete and lodge your tax returns. This must be done before the tax office commences action to have you lodge your tax returns.
The tax office may charge you $110 for every 28 days that the return is outstanding. The maximum penalty is $550. The tax office will charge interest on any outstanding tax payable.
Yes. A tax return needs to be completed to the date of death, if a tax return had been lodged in previous years.
The tax-free threshold can only be claimed from one employer at a time. The best suggestion would be to claim it from your main employer. This will make you pay more tax on your second job, but will make sure the correct tax is paid on your overall wages. This means no nasty surprises at the end of the financial year (like additional tax).
You can proceed to complete your tax return without your PAYG summary, by using a copy of your employers PAYG payment summary. The other options would be to obtain a letter from your employer outlining your income details or reviewing your pay slips for that period.
If all of the above prove difficult, then a Statutory Declaration would need to be provided.
A mature age workers offset for the tax year in which you are to turn 55 and for and future years that you are working, may be available. The maximum offset is $500 and you may be entitled to this maximum amount if your net income from working is between $10,000and $53,000net. You may still get a reduced offset if your income from working does not exceed $63,000 net. Income derived from investments only, does not allow you to claim any offset.
If you fall into this category, please call Tax Integrity.
Usually once an application for a Tax File Number is made, a period of up to 28 days may lapse prior to your Tax File Number arriving.
Tax Integrity Group encourages all secondary school students to call our office so that may help you obtain your tax file and help get you in to good habits early.
Prior to attending the offices of Tax Integrity Group to obtain your Tax File Number, be sure to bring you with you:
1.Australian birth certificate
2.Australian citizenship, or
There are three ways in which to obtain a Tax File Number, depending on whether you are:
1.A secondary school student
2.An Australian citizen (or a resident without work rights) who is not at school
3.An overseas visitor or student and you have a visa permitting you to work.
To get a Tax File Number you need to provide evidence of your identity to the tax office. The documents proving your identity must be unaltered originals. When you collect your Tax File Number application from Tax Integrity Group on the back you will find a list of acceptable identity documents.
Tax returns cover the financial year, not the calendar year .The financial year begins 1st of July and ends on the 30th of June the following year.
You have from July 1 to 31st of October to lodge your tax return. In some circumstances you can lodge your tax return before the end of the financial year.
Call Tax Integrity to make a time to pay complete your tax return. Tax returns lodged late may incur a fine.
If you have a tax debt the earliest you will have to pay is by the 21st of November.
Call Tax Integrity immediately!
If your total income for the year is in the lowest income / tax bracket, you pay no tax. Once you move out of the lowest tax bracket and in to the next one, you have crossed the threshold from paying no tax to paying at least the very least tax.
So, when your taxable income exceeds your tax-free threshold you pay tax on the excess.
Call Tax Integrity to help you with your the tax free threshold questions.
Medicare is the scheme that gives Australian residents access to health care. To help fund this scheme, resident taxpayers pay a Medicare levy. The amount of levy that is paid depends on the level of income earned and is above and beyond the income tax. The Medicare levy is not reduced by any tax offsets unless they are refundable offsets.
At this time, your Medicare levy is based on 1.5% of your taxable income. This rate can and will vary based on various circumstances. In certain circumstances the levy can may reduced or you may even be exempt. A threshold amount below which you don’t pay the Medicare levy exists.
Individuals and families on higher incomes who not have private health insurance, may have to pay an additional surcharge. The surcharge is in addition to the Medicare levy and is calculated at the rate of 1% of tour taxable income. The Medicare levy is withheld from your pay by your employer along with the tax you need to pay.
People who are not Australian residents for tax purposes do not pay the Medicare levy, as they are not entitled to Medicare benefits
Call Tax Integrity to help you with any questions about the Medicare levy or to calculate your Medicare levy.
It could be considered unfair that a person supporting a family or other dependants should pay the same tax as a single person on the same income. To compensate people with dependants for the greater responsibilities they have, various tax offsets may be available to them so they pay less tax, for instance the spouse tax offset and the parent tax offset.
If the government wants to encourage people to do something, they may offer a tax offset. For example, the government encouraged people to take out private health insurance to reduce pressure on the public health system by offering a refundable tax offset.
Call Tax Integrity to assist you in establishing your tax offsets.
It is not compulsory to have a Tax File Number however, without a Tax File Number:
- Your employer must take 45% of your wages in tax.
- Financial institutions are required to tax your interest at 46.5%.
- Centrelink will generally not pay you your Youth Allowance, Newstart or Auststudy.
- You will be unable to defer your higher education fees.
- Your tax return and / or Australian Business Number application will take longer to process, and
- It is more difficult for the tax office to look up and discuss your tax matters.
Tax File Number declaration form is a document you use to declare your Tax File Number.
You must complete a Tax File Number declaration form when you:
- Start work for the first time.
- Change jobs, or
- Apply for certain benefits or allowances from Centrelink.
Your employer should provide you with the declaration. If they do not call Tax Integrity on 03 9044 8691 and will provide the form.
The first question on the declaration form is asking for your Tax File Number. You have 28 days from when you start your new job to give your Tax File Number to your employer. If you do not, your employer must by law withhold tax at the highest rate plus the Medicare levy.
If you have applied for a Tax File Number but have not received it, print X in the relevant box in question 1.
The remaining questions on the tax file declaration form cover your personal details and information that may determine how much tax you pay.
Please remember: The Tax File Number declaration form is not an application for a Tax File Number.
If you do not have a Tax File Number you can apply for one at any time.
Only certain people and organisations you for your Tax File Number, the most common are:
- The tax office
- Your bank or other financial institutions
- Your university
- Your super fund
Be aware: You do not have to give your Tax File Number to any of the above but there may be consequences, if you choose not to.
If you are asked for your Tax File Number you have the right to be told:
- What the legal basis is for that organisation asking for it.
- That you are not committing an offence if you do not provide it, and
- What will happen if you do not provide it.
Keep your Tax File Number and other personal details like your bank account passwords by:
- Not carrying them in you purse, wallet or mobile phone.
- Shredding documents containing identity details before disposing of them.
- Installing up to date anti virus software on your computer
- Only providing your identity details to trusted, reliable organisations, and
- Making sure that if you use a registered tax agent to lodge your tax return, that the agent is registered by checking with the tax agents board.
If you believe that someone other then you has used your Tax File Number contact the tax office.
Call Tax Integrity for any assistance on the topic of Tax File Numbers. Tax Integrity is a registered tax agent.
If you are born in Australia and live in Australia then you are a resident for tax purposes. It is also very possible for you not to be living in Australia but still be a resident for tax purposes.
If you are away from Australia for an extended period of time for example 18 months or more but you still maintain your bank accounts, cars property you may still be a resident for tax purposes. Your connection to Australia is still what may make you a resident for tax purposes.
If you have arrived in Australia and intend to stay for the foreseeable future and in the meantime you have set up connections with Australia, then you may be considered a resident for tax purposes.
Residency for tax purposes can be difficult to establish in some instances.
Australian residents for tax purposes must declare income earned from anywhere in the world in their tax returns. Non-residents only need to declare income earned in Australia.
If you are an Australian resident for tax purposes you:
Are entitled to the tax free threshold
Can claim tax offsets
Generally you have a lower tax rate then non residents
If you are a non-resident for tax purposes you:
You have a tax free threshold of $1.00
Cannot claim most tax offsets
Do not pay a Medicare levy
Call Tax Integrity to assist you with working out your residency for tax purposes.