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Summary
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Tax is complex and for beginners it can be a painful and time-consuming experience. The more financially complex your portfolio the more daunting the tax procedures can become. In this week’s edition, we dive into some of the basics with the Australian Taxation Office.
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Many of the tax words used below have definitions provided in our previous blogs – check them out for a quick guide!
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Salary & Wages
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Like most employees, we’re paid a wage on either a weekly, fortnightly or monthly basis. These payments are subject to tax, superannuation and other various deductions depending on your circumstance which leaves you with your net pay. In most cases, your employer is in charge of withholding these amounts to the Australian Taxation Office, super fund and other departments. The tax amount withheld from your employer is one of several key factors we look into when considering whether you’re entitled a refund.
Your tax return is then calculated by the amount of total income earned during the entire financial year. If your employer has withheld the correct amount of tax for the entire financial year, you would have no tax payable of refundable. Majority of the time this doesn’t occur due to taxpayers claiming expenses that can help reduce your income.
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Refunds and Payables
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If your employer has not withheld enough tax during the year, your tax return would result in a tax payable. Other payables can result from many different factors one example being HECS. Vice versa, if you’re employer has withheld too much tax from you during the year, you will be due a refund.
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Medicare & Other Levies
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A Medicare levy is calculated based on 2% of your taxable income. This is used to help partially fund our public Medicare system. A further 1% – 1.5% is levied (added) if your income reaches a certain threshold.
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Obligation Dates
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Tax returns are due on the 31st October in the same year financial year. By registering with a tax agent your due date is granted an extension. This can help many taxpayers with time to organise their documents. Remember, the more organised you are, the better outcome for your tax return.
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Deductions
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The ATO allow taxpayers to claim expenses incurred by the taxpayer where it relates directly to work-related expenses. These include deductions like motor vehicle expenses, laundry, donations and accounting fees. Deductible expenses are looked at more closely by the ATO with individual taxpayers than it is for those running businesses through companies, trusts etc. Therefore, there are specific rules and methods in claiming these types of expenses including distinguishing those from personal and business use.
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Amendments – Is it too late?
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The ATO accepts amendments for your tax returns if they are made within two years of the Notice of Assessment. There are however, exceptions to this rule which can help you amend previous errors made in your tax returns. Please speak to your trusted tax agent who can oversee all your tax return needs and make changes if necessary to help you maximise your financial position.
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