If you’re new to Australia, it won’t be long before you need to know your obligations regarding tax in Australia.
Once you’ve been awestruck by the landscape, the animals, the colourful language and the completely different meaning for ‘thong’ than you’re used to, it’s usually time to think about recuperating some money and start work!
As with everywhere around the world, tax is something most people don’t want to think about, so in this post we deliver you the basics of tax in Australia, simply.
If you’re young or have just started work for the first time, check out our ‘How do I do my tax return?’ blog.
New to Australia? This is what you need to know about tax in Australia:
What and when
- The financial year runs from 1 July – 30 June.
- Tax is generally deducted from your income, by your employer
- Every working person has to lodge a tax return with the Australian Tax Office (ATO) between 1 July and 31 October. Most people do that via a tax agent like Etax.
- If you haven’t worked that year, you still need to lodge a Non Lodgment Advice (NLA). Find out more about a Non-Lodgement Advice here.
- Before you start work you need to apply for a Tax File Number (TFN). This is an identifying number used by the ATO and other government bodies. You keep this number your whole life and should keep it private and safe. You can apply for a TFN here.
- When you start work, your employer will give you a Tax File Declaration form. Read and fill in this form carefully, to ensure you pay the right amount of tax. Make sure you tick the claim the tax free threshold box. The tax-free threshold is the amount of income you can earn each financial year that is not taxed. As of 2018 that threshold is $18,200 per year.
How much tax do I pay?
- The amount of tax you pay each year depends on the amount you earn. The current breakdown for the 2018-19 tax year is:
|Taxable income||Tax on this income|
|0 – $18,200||Nil|
|$18,201 – $37,000||19c for each $1 over $18,200|
|$37,001 – $90,000||$3,572 plus 32.5c for each $1 over $37,000|
|$90,001 – $180,000||$20,797 plus 37c for each $1 over $90,000|
|$180,001 and over||$54,097 plus 45c for each $1 over $180,000|
- All taxpayers pay a Medicare Levy each year in addition to their tax, which is 2% of your taxable income. Medicare gives Australian residents access to health care and is partly funded by the proceeds of the Medicare Levy.
- If you do not have private hospital insurance and earn above $90,000 as a single person or $180,000 as a family, In addition the Medicare Levy, you need to pay a Medicare levy surcharge (MLS). The MLS is between 1% and 1.5% of your taxable income. Read more about Medicare Levy vs Medicare Levy Surcharge.
Declaring your income
- Your employer must supply you and the ATO with a Payment Summary/PAYG by 15 July. This is a record of all the income you received during the financial year. It includes any allowances and Superannuation payments you received as well as your salary.
- All employees receive a Payment Summary from every employer they work for each year. You need to supply your payment summaries when lodge your tax in Australia.
- You also need to declare and supply records for all other sources of income you receive each year, including:
- interest on savings
- income from any activity in the sharing community (Uber, AirBnB)
- any freelance income
- rent you received from renting out a room privately
- rental income on any investment properties you own or have a share in
- any other form of income that you received.
How to lodge your tax return
When you’re new to Australia, it’s a good idea to become familiar with the 3 ways to lodge your tax in Australia.
- ATO myTax/myGov. You’ll need to create a myGov account first. You then enter your details into myTax and lodge directly with the ATO. There is no charge for this service but there is also no help or checks before you submit it. If you do something wrong, nobody is helping. And nobody will help increase your tax refund – that’s why more people use a tax agent.
- “Traditional” tax agent by making an appointment and sitting with them while they prepare your tax return for you. You need to bring all your supporting documents with you to the appointment. Traditional tax agents charge a fee for their time.
- Online tax agent like Etax. Etax provides a fast, simple, online form with live support and advice. You can save documents and receipts, and your tax return is checked before it’s lodged with the ATO. Etax fees are generally lower than traditional tax agents. The process is usually faster too. With no need for appointments, you can do your tax return any time. Compare tax return lodgement options here to see what is best for you.
Why use a tax agent?
- About ¾ of all Australians use a tax agent to lodge their tax return. Lodging directly with the ATO’s system can be complicated. Plus, if you make a mistake, you don’t known until it’s too late. Using a tax agent brings peace of mind for millions of Australian taxpayers. It’s easy to miss out on tax deductions or not declare everything you should when you go it alone, especially when you need to include investments, lots of deductions or you’re new to Australian and aren’t familiar with the tax system.
- Tax agents help make sure you claim all the tax deductions you’re entitled to and declare everything you need to so you don’t pay too much tax or get in trouble with the ATO, which can happen if you get things wrong.
Important points to remember:
- It’s important to note that a tax agent must be registered with the Tax Practioners Board (TPB). You can check the register here.
- Avoid any tax agent that requests you send them personal information or supporting documents by email. Email is NOT secure and your personal information should never be shared this way.
A tax refund is the cash the ATO refund you when you have overpaid tax. You receive a Notice of Assessment once the ATO has finalised the amount owed to you.
- Most people get a tax refund once they’ve lodged a tax return. The average tax refund in Australia is around $2,500.
- The ATO pay your refund directly into your nominated bank accountant. It’s crucial that whatever way you choose to do your tax return, you ensure your bank account details are entered correctly. It is very difficult recoup funds that have been paid into the wrong bank account. In the majority of cases, it’s not possible at all and where is is possible it is a very lengthy process.
- It usually takes around 10 – 14 days to receive your tax refund, though it can be faster. Occasionally a refund will take longer, usually during very busy periods or if the ATO decide to flag your tax return for a closer examination. Your tax agent can check the status of your return for you but the ATO won’t accept queries until 30 days after the return was lodged.
Beware of instant refunds, these are not refunds from the ATO but a ‘prepayment’ that you can end up having to pay back. Read more about instant refunds here.
There may be times when you will owe tax to the ATO, this can be a consequence of your employer not withholding enough tax throughout the year. If you receive additional income not taxed prior to you receive it this also shows as money owed. The ATO send you a Notice of Assessment telling you how much you owe. If you can’t afford to pay it straight away, a tax agent can negotiate an affordable payment plan directly with the ATO on your behalf.
Deductions for tax in Australia
Much like other countries, there are some expenses that you claim as tax deductions. Work-related costs like travel, personal car use, training courses and uniforms, as well as phone expenses and equipment costs, commonly make up most deductible expenses. You offset these against your taxable income on your tax return. When you’re new to Australia it’s a good idea to familiarise yourself with deductible expenses. Keep a record of ALL expenses for tax time. You can’t claim anything unless you have proof of purchase.
Etax provide job specific and general tax checklists, these are a big help when you’re new to Australia.
As well as your tax agent fees, other claimable expenses include, interest and investment costs and charity donations more details read our tax deductions post.
When you’re new to Australia, it’s likely you’ll need to chat to someone about your tax in Australia.
Our friendly accountants are always happy to advise you so get in touch any time. Simply register your details at etax.com.au and private message or live chat directly.
Now there’s only one more thing left to say –
G’day and welcome to Australia!