Why do we pay tax?
Tax is money people and businesses pay to the government to provide services to the community such as health, education, defence, roads and railways, social security and welfare.
We collect Commonwealth taxes for the government such as income tax. However, state and local government organisations collect other taxes and rates for each Australian state or territory.
Tax rates for individuals.
These are the rates of income tax you have to pay if you’re:
- An Australian resident for the full 2009-10 income year (1 July 2009 – 30 June 2010), and
- Entitled to the $6,000 tax-free threshold.
If you’re an Australian resident for tax purposes, you must declare all income you earn both in Australia and internationally. To help work out if you’re a resident for tax purposes contact Taxwise on 9248 8124.
Tax file numbers.
A tax file number (TFN) is a unique number the ATO gives to individuals and organisations for identification and record-keeping purposes.
If you plan to earn money in Australia, we recommend you apply for a TFN, regardless of your age. If you don’t give your TFN to your employer within 28 days of starting your new job, your employer will have to pay 46.5% of the money you earn from them to the ATO.
Remember: You should only give your TFN to your employer after you start working for them. Never give your TFN when you fill out a job application or when you apply for work on the internet or over the phone.
Also, make sure your super fund has your TFN. If they don’t, they’ll have to pay extra tax on some of the super paid into your account and they won’t be able to accept some types of super contributions. This means they may take the extra tax out of your super account.
To find out whether your super fund has your TFN, check your statement from your fund or contact them.
How to apply for a TFN.
If you’re a secondary school student, you can apply for a TFN through your school if it participates in the ATO’s School Education Program. You can also obtain an application from:
- One of the ATO’s shopfronts
- The ATO website: http://www.ato.gov.au/youth/content.asp?doc=/content/40962.htm
- A Centrelink office.
When you apply, you need to provide original, unaltered documents proving your identity. The TFN application lists the types of documents that are accepted.
If you apply in person or by mail, it will take up to 28 days for the ATO to process your application and send your TFN to you.
Tax returns.
A tax return is a form you use to report your income to the ATO. Your income includes any of the following for an income year:
- capital gains
- tax withheld from payments your receive
- deductions and tax offsets.
- As an individual, you need to lodge an income tax return if:
- you pay tax during the income year
- your taxable income is more than
- $6,000, if you’re an Australian resident for tax purposes for the full year
- $3,000, if you’re under 18 years of age at 30 June 2010 and your income was not salary or wages
- $1, if you’re a non-resident and you have income taxable in Australia – excluding income that had non-resident withholding tax withheld from it
- $6,000, if you’re an Australian resident for tax purposes for the full year
- you receive a Centrelink allowance or payment (other than a pension or pension-type payment) and you receive other income, and your taxable income was more than $14,000.
Once the ATO receives and processes your tax return, they will send you a Notice of Assessment to let you know the outcome of the assessment.
When to lodge a tax return.
You only have from 1 July to 31 October to lodge your tax return unless Taxwise prepares and lodges it for you.
If, due to circumstances beyond your control, you cannot lodge your tax return by 31 October, phone Taxwise on 9248 8124 as soon as possible (before 31 October) to find out if we can lodge for you at a later date.
The ATO only considers your tax return to be lodged on the day they receive it if it’s complete. If it’s incomplete – for example, if you don’t sign it – they may send it back to you.
Remember, if you don’t lodge your tax return on time, you may incur a penalty.
Ways to lodge a tax return.
Contact Taxwise on 9248 8124 to organise a tax specialist to help you pay less tax.
Claiming work-related expenses.
You may be able to claim some of your work-related expenses as a deduction on your tax return. However, you can only do so if you can show:
- you incurred the expense in the course of earning your assessable income, and
- how you worked out the amount you’re claiming.
If you make a mistake on your tax return.
If you complete and lodge your tax return and then later find you made a mistake after the ATO sent you your Notice of assessment you can write to them and ask the ATO to amend your assessment. This usually takes a maximum of 56 days (about eight weeks) to process.
You can ask the ATO to amend your assessment if you:
- forgot to include some assessable income – for example Centrelink payments
- forgot to claim an allowable deduction
- filled out a question incorrectly
- forgot to fill out a question.
Record keeping.
You should keep all the records you used to prepare your tax return including:
- payment summaries from employers or organisations you receive money from, including Centrelink
- bank statements showing bank interest you received
- dividend statements.
If you claim deductions, you also need to keep written evidence to prove claims for those deductions.
You need to keep your records for five years from when you lodge your tax return.
More information.
Contact Taxwise on 9248 8124.
About the Author
Warren Kruger is an Australian Tax Specialist and Advisor.
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Warren Kruger is an Australian Tax Specialist and Advisor. For a FREE Report “7 Essential Strategies to Reduce Your Taxation NOW!”,enter your name and email address in the Opt In Box located on the top right hand side of this article.
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