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Tax Returns

Income tax returns for individuals

Tax time can be confusing, frustrating and just an overall a time-consuming experience. Luckily, we’ve got all the answers to your income tax returns questions right here. Read on for advice on the latest tax rate changes, what to do if you receive a tax bill, how to lodge your tax return and why you should use a registered tax agent to make your life easier!

Changes in tax rates

The recent Budget 2020–21 focused on things like coronavirus recovery, creating new jobs and tax cuts. Most importantly for everyday Australians, they brought forward the personal income tax cuts in advance. That means you get to enjoy reduced tax rates right now.

So, it’s time to wrap your head around the updated tax rate changes – especially if you’re a sole trader or a business owner who takes care of your employees’ tax. How much you and your staff end up saving on tax will depend on a few different factors. So to help get across what’s new, we’ve included a few helpful lists of different living scenarios.

NOTE: The first figure (e.g. $40,000) relates to an earner’s income. The second figure in bold (e.g. $1,209) refers to the new tax-cut savings for 2020–21:

Single earner with zero children

  • $40,000: $1,209
  • $60,000: $2,415
  • $80,000: $2,160
  • $100,000: $2,310
  • $125,000: $2,460
  • $150,000: $2,430
  • $200,000: $2,430
  • $250,000: $2,430

Double-income-earning couple with young kids (with their salary split 50/50)

  • $40,000: $0
  • $60,000: $1,210
  • $80,000: $2,418
  • $100,000: $4,830
  • $125,000: $4,830
  • $150,000: $4,320
  • $200,000: $4,620
  • $250,000: $4,920

Double-income-earning couple with older kids (with their salary split 67/33)

  • $40,000: $955
  • $60,000: $1,559
  • $80,000: $3,020
  • $100,000: $3,020
  • $125,000: $3,960
  • $150,000: $4,725
  • $200,000: $4,845
  • $250,000: $4,590

Single retiree with no dependents

  • $40,000: $1,209
  • $60,000: $2,415
  • $80,000: $2,160
  • $100,000: $2,310
  • $125,000: $2,460
  • $150,000: $2,430
  • $200,000: $2,430
  • $250,000: $2,430

Lodging with a registered tax agent

Anyone who’s used a registered tax agent before will tell you that it’s a smart decision. Not only does it mean you aren’t spending hours staring at a screen – entirely frustrated – trying to compile your tax return every year, but a registered tax agent will do everything within the laws of the ATO. That means you won’t have to worry about the big, bad taxman knocking down your front door because you lodged something incorrectly!

 

The trick is finding a tax agent or accountant who is experienced and understands your specific circumstances. The good news is that there are over 166,000 professional members of CPA Australia active right now. So you really shouldn’t have any trouble finding an expert registered tax agent to meet your tax needs.

 

Here are some of the pros of using an accountant or tax professional:

 

  • No more wasted time: Tax returns take hours to complete, and even more if you’re a business owner with staff. Shifting that work to a registered tax agent means you can get back to running your business sooner.
  • Everything done by the book: Compliance and disclosure needs are taken off your hands with a registered tax agent. Plus, you can trust that they will follow all the ATO’s rules.
  • Forget about those pesky deadlines: Never again spend the approaching tax deadline tearing out your hair because there aren’t enough hours in the day. Leave it to a tax professional to organise everything for you.
  • They can do more than just tax: Yes, you might decide to only use a registered tax agent because you’re busy, but they can do so much more than lodge your tax return. Wouldn’t it be nice to have a professional who can also manage your BAS, payroll, bookkeeping and more?

Do I need to lodge a tax return?

If you work in Australia and earn over the tax-free threshold ($18,200 as of December 2020), then you are required to pay tax. That goes for everyone, whether you’re a resident or a foreigner working in Australia.

There may be some circumstances in which you won’t have to lodge a tax return for the 2019–20 financial year. They are:

  • You only received government payments and allowances, and your taxable income is $20,542 or lower.
  • Tax wasn’t withheld from your payment.
  • Your adjusted taxable income is under $25,575.

So what type of rate can you expect to pay on your earnings? That depends, because the tax rate doesn’t always stay the same. For 2020–21, for example, the ATO has tweaked the taxable income brackets – this was mainly done to help people recover from the economic disruption of COVID-19.

Here’s what you can expect to pay in tax next financial year (2020–21):

  • 0 – $18,200: No tax paid
  • $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

NOTE: These figures are particularly important for business owners. You’ll need to ensure these changes are applied to your employees’ earnings for the upcoming financial year – or else risk drawing the ire of the ATO!

Why did I receive a tax bill?

There are lots of reasons why you may have received a tax bill! Here are some of the most common:

  • Your boss didn’t withhold enough tax from your wages for the previous financial year.
  • You’re a sole trader and you didn’t pay the ATO the right amount of tax during the past financial year. All business owners should know how to report and pay tax.
  • You have a side business and didn’t pay any tax from earnings during the past financial year. You’ll need to rectify that by paying your tax bill after lodgement.

Using a helpful service like pay as you go (PAYG) withholding can help you avoid receiving any nasty tax bills in the future.

So, what exactly do you need to pay attention to on your tax bill? First, figure out the exact amount that you owe to the ATO. This amount will differ depending on whether you are a business owner, individual employee or sole trader – the ATO has a helpful guide to walk you through the key steps.

Once you’ve lodged your tax return, a Notice of Assessment (NOA) will be sent to you that includes how much you owe, the payment deadline, as well as your unique payment reference number (PRN).

In terms of actually paying your tax bill, you can do it via BPAY, credit or debit card, the new EasyPay service, or by calling the ATO on your phone. For hefty bills that you can’t pay off in one go, reach out to the ATO and ask if they can put you on a payment plan.

Lodging previous years’ tax returns

Sometimes life just gets busy. From work to family and everything in between, it’s easy to leave tax at the bottom of your to-do list. Thankfully, the ATO understands that Australians have their own lives to lead. That being said, they still want you to stay up to date with your tax returns. So if you’ve let some lodgements slip well beyond their due dates, make sure you take care of them ASAP to avoid paying any fines.

It’s really simple to find out whether you have any overdue tax returns:

Whether it’s been a few days or several years since you last lodged a tax return, it’s important that you take care of your obligations immediately. You can make your life so much easier by following the ATO’s recommendation of using a registered tax agent. They have comprehensive knowledge of all the due dates, lodgement rules and more. In short, they are probably your best chance for not having to pay fees – if you do it yourself, it’ll no doubt be a time-consuming and highly frustrating experience!

Tax withheld for individuals calculator

Visit the ATO’s website and you’ll find two different calculators for tax withholding. Tax withheld for individuals calculator is the standard and what you’ll probably end up using – it’s for regular employees and working holidaymakers. The second calculator, the voluntary agreement calculator, is used for sub-contractors.

Before you start using the calculator, make sure you’ve collected the following from your staff (usually when they sign their employment contract):

Once you’re all set with the above, it’s time to start entering the relevant information into the tax calculator. According to the ATO, you’ll need to enter the following (as appropriate):

  • Income tax rate
  • Medicare levy
  • Study and training support loan contributions
  • Worker status:
    • Resident
    • Non-resident
    • Working holidaymaker
  • Registration of employers of working holidaymakers
  • Tax-free threshold
  • Tax offset entitlements

Not getting the hang of the calculator? The ATO’s how-to guide will explain everything in greater detail.

Gillet & Associates are your tax, BAS, payroll and bookkeeping experts. We do all the hard work so you don’t have to! We are small business taxation specialists well-known for being able to maximise our clients’ tax efficiency. So take a load off and let the professionals handle your tax affairs.

For more expert tax advice, contact Gillet & Associates today or call us on (03) 6431 8151.