Moving to Australia is pretty awesome, I know first hand because I did it myself some years ago. But once I’d explored some of the cool stuff and sipped a couple of beers with my toes in the sand, it was time to get back to work. And work meant getting my head around Australian tax!
Here’s all 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. In 2023 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 2023-24 tax year is:
|Taxable Income||Tax rate|
|$0 – $18,200||Nil|
|$18,201 – $45,000||19 cents for each $1 over $18,200|
|$45,001 – $120,000||$5,092 plus 32.5 cents for each $1 over $45,000|
|$120,001 – $180,000||$29,467 plus 37 cents for each $1 over $120,000|
|$180,001 and over||$51,667 plus 45 cents for each $1 over $180,000|
You can find earlier year tax rates here.
If you’re young or have just started work for the first time, check out our ‘How do I do my tax return?’ blog.
- 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 which 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 the Medicare Levy here and the Medicare Levy Surcharge here.
Declaring your income
- A record of all the income that you received during the financial year is provided directly to the ATO by your employer each year. This is called an Income Statement. It includes any allowances and Superannuation payments you received as well as your salary. Until recently, you needed a copy of this document to do your tax return, this is no longer the case.
- You 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 around 70% of people use a tax agent.
- “Traditional” tax agent Generally, you need to make an appointment during business hours. You need to take all your supporting documents with you so the tax agent can enter them all into their system. Make sure you have a little free time, as you will usually need to sit with them while they process your tax return. Traditional tax agents charge a fee for their time and these fees can vary quite broadly.
- Online tax agent like Etax. Etax provides a fast, simple, online form with live support and advice. You can save documents and receipts directly into your account, and once you’ve entered everything, 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 a lot 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 70% 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 investment expenses, or 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 money that 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. When it 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 is known as having a ‘Tax Payable’ amount, which is usually a consequence of:
- your employer not withholding enough tax throughout the year.
- receiving additional income that is not taxed prior to you receiving it.
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!