In 2022 Tax Tips

Australian Taxation Basics

The Australian tax system can be quite complex, particularly if you’re new to it. In this post, we’ll provide a basic overview of the system, as well as some tips on how to stay on top of your taxes. So, whether you’re an Australian resident or just visiting for a while, make sure you read on for all the need-to-know information!

In Australia, we have a progressive tax system. This means that the more you earn, the more tax you pay. This article will look at how our tax system works and what you need to know about paying taxes in Australia. We’ll also cover some common deductions and allowances that you may be able to claim.

If you’re an Australian tax resident, there are a few things you need to know about the tax system. Firstly, you’re required to lodge an income tax return each year, even if you don’t earn any income. 

Secondly, your income is taxed at different rates depending on how much you earn. And finally, there is a range of deductions and exemptions that can lower your taxable income. So if you want to know more about Australian taxation, keep reading!

Do you know your tax residency status? What about the types of income you need to declare on your Australian tax return? If any of these questions leave you scratching your head, don’t worry – we’re here to help! 

In this blog post, we’ll give you a rundown of the basics of Australian taxation. We’ll explain what tax residency is, what types of income need to be declared, and how to file your Australian tax return.

Almost everyone in Australia has to pay taxes on the income they earn. In this blog post, we’ll take a closer look at Australian taxation basics – including who has to pay taxes, how much tax you have to pay, and what kind of income is taxed. 

We’ll also discuss some common tax deductions and exemptions that may be available to you. If you’re looking for more information about Australian tax laws, or need help filing your tax return, don’t hesitate to contact an experienced accountant or tax lawyer.

Do you know your taxable income from your assessable income? What’s the difference, and how do they both impact how much tax you pay? In this post, we look at Australian taxation basics – what you need to know to file your tax return. 

We’ll go over the different types of income that are taxed in Australia, as well as some important deductions and credits that can reduce your tax bill. So whether you’re a first-time filer or want to make sure you’re taking advantage of all the tax breaks available to you, read on for everything you need to know about Australian taxation!

When it comes to paying taxes, most Australians have many questions. For example, what’s the difference between payroll tax and income tax? How do capital gains work? This blog post is designed to provide an overview of the basics of Australian taxation so that you can understand what you need to pay and when. 

We’ll cover topics like income tax, capital gains, GST, and more. So whether you’re just starting out in your working life or you’re preparing for your annual tax return, read on for an introduction to Australian taxation basics!

Did you know that Australia has some of the most complex tax laws in the world? If you’re not familiar with them, it’s important to get up to speed before you start filing your taxes. In this post, we’ll walk you through the basics of Australian taxation, including who is required to pay taxes and what kinds of income are taxable. 

We’ll also explain how to file your tax return and take advantage of deductions and credits available to Australian taxpayers. So whether you’re a new resident or just looking for a refresher on the rules, read on for all the information you need about Australian taxation.

Let’s get started!

How To Prepare, Lodge And Maximise Your Tax Return

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Many things can affect your tax return, including sources of income from work, investments and government assistance, including any JobSeeker payments you may have received during the financial year.

Other factors that can play a part include whether you have work-related expenses, such as travel, equipment, clothing or what you might’ve forked out if you’ve been working from home.

1. Who needs to prepare and lodge a tax return?

There will be some people who won’t need to lodge a tax return. This usually includes those with lower levels of income and some older Australians.

Those who will have to lodge a tax return will typically have received income above certain thresholds or certain types of income.

If you’re unsure if you have to lodge a tax return, the ATO’s online questionnaire can help you figure it out.

2. What documents do you need to lodge your tax return?

Some of the things you may need when lodging your tax return might include, but won’t necessarily be limited to:

  • Your tax file number
  • Your bank account details, so the ATO knows where to deposit any return you may be eligible for
  • Any payment summaries or income statements from your employers
  • Payment info from Centrelink (Services Australia) relating to assistance and relief packages
  • Details regarding any other sources of income (from business, property, investments or shares)
  • Receipts or statements for the expenses you’re claiming as deductions
  • Any private health insurance information you may have
  • Receipts from charitable donations if you’ve made any.

Note, if you lodge your tax return yourself using myTax, which is available through the myGov website and ATO app, most information from your employers, banks, government agencies, health funds and other third parties will generally be pre-filled for you by late July.

3. What tax deductions could you claim when you lodge your tax return?

Most tax deductions will be work-related. However, a work-related expense will only be deductible if your employer doesn’t reimburse you. This is because it directly relates to earning an income, and you have a record, such as a receipt (unless the amount you’re claiming is $300 or less, in some instances).

Work-related tax deductions may include:

  • Vehicle and travel expenses
  • Uniforms, as well as occupation-specific and protective work clothing, including footwear
  • Working-from-home expenses, including electricity, phone and internet costs. Note, a shortcut method for claiming these deductions will apply again this year (more info on this below)
  • Education costs relevant to your jobs, such as course fees, textbooks, memberships and subscriptions
  • Tools and equipment, such as sunscreen and sunglasses if you work outside, or laptop and relevant software if you work in an office or home office.

See the ATO’s occupation and industry-specific deduction guides for more information on deductible items related to your specific industry.

Meanwhile, if your expenses are for both work and personal use, you can only claim a deduction for the work-related portion, which could, for instance, be 50% of your phone and internet bundle.

Another example might be if you go on an interstate study trip or conference but are taking a holiday at the same time, you wouldn’t be able to claim the entire trip as a work-related expense.

4. Additional deductions you may be able to claim:

  • Certain personal super contributions if you’ve made any
  • Interest, dividend and other investment-related expenses
  • Gifts and donations to deductible gift recipients, such as charities
  • Last year’s tax return fee, if you engaged a tax agent.

If you’re having trouble keeping track of all your receipts, checkout the myDeductions tool in the ATO app. This allows you to save a record of your deductions throughout the financial year, which you can then upload at lodgement time.

5. Extra info if you’re claiming working from home deductions this year

The ATO has announced that a ‘shortcut’ method will again apply as an option for calculating relevant tax deductions for anyone who has worked from home during the financial year (1 July 2020 to 30 June 2021).

What this means is you can claim 80 cents for each hour you worked from home to cover any eligible tax deductions (noting, you may need proof such as a timesheet) rather than doing calculations for specific items.

As the shortcut is ‘all-inclusive’, you can’t claim the shortcut and then claim for personal expenses, such as phone and internet bundles. However, you can still claim under the existing arrangements if you wish to.

Aside from the shortcut method, a fixed rate method (52 cents per hour you work from home) may allow you to claim other deductions, or the actual cost method can be used. Check out the ATO‘s home office expenses page for details, as further research may be required if you’re considering an existing method.

6. Should you lodge your tax return yourself or use a tax agent?

You can lodge your tax return yourself free of charge via MyTax, accessible through the myGov website and ATO app, or you can complete a paper tax return or engage a registered tax agent to do it for you, which will incur a fee that’s typically tax-deductible.

Lodging your tax return yourself

If your finances are relatively simple, you might consider lodging your own tax return (which you’ll need to do by 31 October). As mentioned above, a lot of information will also be pre-filled for you by late July.

Engaging a registered tax agent

If you do want to use a registered tax agent to prepare and lodge your tax return, it’s important to note you will pay a fee for their service, but it’ll typically be deductible next financial year.

You should make sure your tax agent is registered with the Tax Practitioners Board (TPB). You can find a registered tax agent or check whether a person is registered by visiting the TPB website.

If your finances are more complex, using a tax agent may provide you with peace of mind, as it could save you time, highlight deductions you didn’t know about while making sure all your claims are legitimate.

On top of that, most registered tax agents have a special lodgement program, which means they can often lodge returns for their clients after the usual 31 October deadline. Still, you’ll need to contact them beforehand.

How Do I Find My Tax File Number (TFN)?

A tax file number (TFN) is your reference number for Australia’s tax and superannuation systems.

You are only ever allocated one TFN, regardless of whether you change your employment, residential address, or even your name, and it is an important part of your tax records.

There are a few different ways you can find your TFN:

  • if you have a myGov account linked to the ATO, log in and go to ‘My Profile’ then ‘Personal details’.
  • look at documents like last year’s notice of assessment, your most recent super statement or the payment summary provided by your employer.
  • ask your registered tax agent if you use one.
  • for a business or organisation, log in to the Business Portal and see the entity TFN displayed in the screen header on most portal screens.
  • if you still cannot find it, you can phone the ATO on 13 28 61 from 8 am–8 pm on weekdays and 10 am–4 pm on weekends.

Fringe Benefits Tax (FBT)

1. What are fringe benefits?

A fringe benefit is something extra you get from your employer, in addition to your wage or salary or in return for preceding some of your salary under a salary sacrifice arrangement.

It’s generally not actual salary, wages or cash, and the benefit can be something for you, your spouse or your children.

Your employer is liable for the tax (FBT) that may apply to the benefits that you and your family may receive – not you.

2. Why do companies offer fringe benefits?

Fringe benefits can help employers attract, retain and motivate employees. Employers are becoming increasingly competitive with what they offer their employees – and fringe benefits are one way they can gain a competitive edge.

Perks like free food, coffee bars, discounted gym memberships, and entertainment can make employees feel valued and create a happier workplace. Of course, not all of these perks attract FBT, but some do.

3. How can fringe benefits reduce my tax?

Often, fringe benefits are offered to you through salary sacrifice as part of a salary packaging arrangement. Depending on your circumstances, this might push you down into a lower tax bracket – a great plus if you’re a higher income earner.

4. What’s considered a fringe benefit?

A wide range of perks is classed as fringe benefits. The most common ones are:

  • A leased vehicle for your personal use (under a ‘novated lease’ arrangement)
  • Personal use of a company car
  • Discounted loans
  • Gym/health memberships
  • Entertainment expenses – free/discounted food, cinema tickets, accommodation
  • Private health insurance
  • Living-away-from-home allowance (LAFHA)
  • Real Property – land and buildings
  • Right to Property – shares, bonds
  • Childcare costs and school fees

Items you need to do your job – e.g. mobile phones and occupational-specific clothing – aren’t generally taxed as fringe benefits if they’re provided to you by your employer. 

However, if you pay for these items out of your pocket, you might be able to claim a tax deduction. However, it’s important to remember that you can’t claim a tax deduction for a work expense if you’re later reimbursed for the expense.

Concessional contributions you make to your super are exempt from fringe benefits. They can therefore be a tax-effective way of boosting your retirement savings.

5. What is fringe benefits tax (FBT)?

Your employer is liable for any applicable FBT on fringe benefits they provide to you and your family.

FBT is separate from income tax. Instead, it’s calculated on the taxable value of a fringe benefit.

The taxable value is generally the cost to your employer of providing the benefit to you. However, for some benefits, the taxable value is calculated using a statutory formula (e.g. car benefits), which doesn’t necessarily reflect the actual cost to your employer (it’s used to work out FBT and any reportable fringe benefits amount).  

Unlike the financial tax year (1 July – 30 June), the FBT year is 1 April – 31 March.

6. What is a Reportable Fringe Benefits Amount (RFBA)?

Suppose the total taxable value of the fringe benefits provided to you and your family in an FBT year exceeds $2,000. In that case, you’ll have a reportable fringe benefits amount in your end of financial year income statement (formerly called a payment summary). 

Some fringe benefits, like meals, entertainment and employer-provided car parking, aren’t included in the reportable amount.

While an RFBA isn’t deemed taxable income, depending on your personal circumstances, it will be used to determine whether you’re entitled to or liable for several benefits and obligations. 

These include Family Tax Benefits, Medicare levy surcharge, private health insurance rebate, child support payments, superannuation co-contributions, Higher Education Loan Program (HELP), tax offsets and Financial Supplement repayments.

You can find out more about what your reportable fringe benefits amount is used for on the ATO website.

Common Tax Mistakes

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Most mistakes made by Australians lodging tax returns, according to the ATO, are simple errors made by people lodging early or failing to include all of their income.

Income from a taxpayer’s job, bank interest, share dividends and health fund information is automatically included in myTax by the end of July, so people trying to submit their returns early are more prone to being required to go back and amend their claim.

Australians making large purchases at the end of the financial year sales expecting to claim the full amount have also been flagged as big mistake-makers by the ATO.

“Deductions for items purchased for work should be apportioned for days held in that financial year,” an ATO spokesperson said.

“Purchases above the $300 limit must also be depreciated across several years (effective life).”

10 Things You Didn’t Know You Could Claim On Tax

1. Your Laundry

Anyone tasked with keeping a uniform clean and presentable gets to claim those expenses back. You can claim $1 per load (keep track of how many times you do laundry), and it also covers dry cleaning costs. If the costs are under $300, then this is something you can claim on tax without receipts. Anything over that amount will require evidence.

2. Entertainment

Creating a pleasant environment at work is high on many employers’ agenda. Many offices provide a chill-out and fun space filled with games, pool tables and the like. Your investment in employee entertainment is tax-deductible—another good reason to inject some fun into the office.

3. Charity donations

Making donations throughout the year does well not only for charities but for your tax bill too. This includes any partnerships with non-profits and even those local charity runs. Keep track and add it to your claim at the end of the tax year.

4. Sun protection

Does your job take you outdoors? Sunscreen is an example of an ATO tax deduction by the occupation because it completely relies on whether or not you must work outdoors (it doesn’t count if you only choose to work outside). It may seem an unlikely thing to claim for, but it’s an expense that can add up fast if you’re trying to protect yourself from the Australian sun.

5. Working from home expenses

Many have been working from home over the last twelve months, which naturally incurs expenses. The ATO has introduced a shortcut method so you can claim tax for working from home, with minimal record-keeping requirements. 

The expenses you can claim include electricity, internet access, home office equipment and much more. For detailed information, visit the working from home page.

6. A four-legged employee

Purchasing a dog isn’t tax-deductible, but when it comes to dogs that provide security or are needed on a farm, you can claim on tax for the cost of their upkeep. This includes food, vet bills, and any other equipment you might need.

7. Seminars and courses

No matter your industry, there are probably countless courses, seminars, webinars and other opportunities for learning new skills or updating yourself on industry standards. So long as the course helps you advance in your career or skills (or that of your employees), it counts as self-education expenses, and you can claim it. 

8. Cleaners

If you pay for someone to come to your office or workplace to clean, this is a work-related cost and can, therefore, be claimed. This also includes the cost of cleaning tools (such as a vacuum cleaner), so be sure to keep those receipts as well.

9. Your income

Any premiums you pay for your income protection insurance fall under claimable expenses and are tax-deductible. Be sure to include them when filing your taxes. 

10. Subscriptions

Whether it’s the New York Times or your local newspaper, if you use your subscriptions for work, you may also be able to claim tax for them. Anyone working in media can also claim back all those TV subscriptions.

When you’re using the ASIC tax calculator to find a rough estimate of your tax owed, remember that this tool (and others like it) don’t usually include these deductions, so your final bill might not be as much as you expect!

And, of course, when it comes time to do your online tax return in Australia, you can claim all your usual business expenses, including any digital marketing you’ve done throughout the year.

This is a good thing to keep in mind when working out a return on investment for your marketing activity.

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