As Australians we enjoy access to a good health system, quality education and a variety of community facilities that are supported through tax collections.
Tax is money people and businesses pay to the Australian Government to provide services, including:
roads and railways
social security and other payments from Centrelink – Services Australia.
The Taxation Statistics released by the ATO for the year 2016-2017 presented an overview of 16.5 million 2017 income tax returns for 13.9 million individuals, 970,000 companies, as well as super funds, partnerships and trusts.
All of the taxes from these individuals and companies make up the funding we as a nation spend to maintain a certain standard of living.
For individual taxpayers in Australia, lodging a tax return may mean getting some money back from the government.
Although what if you find out you have to pay tax to the government at the end of the year? Especially when your friends and family are talking about their tax refund.
But why would you be paying money on your tax return?
The bottom line is that you haven’t paid enough tax during the year, so you must pay tax at the end. It makes more sense if you understand how the tax system works.
The tax system in Australia is a “pay-as-you-go” (PAYG) system.
As much as possible, the ATO collects tax from taxpayers throughout the year, rather than in an annual tax assessment. This way, tax is deducted from your wages before you get paid.
So, at the end of the year, you should have enough PAYG credits to cover your tax assessment.
The PAYG system is designed so that you break even on tax at the end of the year. The system is not designed to provide big refunds or create big debts.
During the year, your employer will deduct tax based on a formula. For example, a salary of $62,400 is $1200 per week. The tax per week on this amount is $252, which makes the total tax for the year: $13,104.
If for some reason you paid more or less than this, then you may have either a tax refund or a tax bill. Another possibility for paying extra tax is that you may have additional income that is taxable, such as investment income.
In fact, the only ways to get a big tax refund are:
you have a lot of deductions (which means it costs you a lot of money for the privilege of doing your job)
you have deductible investment losses (e.g. negative gearing on shares or property)
you overpaid tax during the year
But there are many tax deductions that you can legally claim. That’s why using our highly skilled tax agents to help you complete your tax return is important. We know what to claim and how to claim it.
Remember, a tax refund is your own money, paid back to you. It is not reward, and it’s not a handout.
Contact us now to book an appointment to lodge your tax return.