Vision’s Tax Time Guide: 5 Ways to Prepare
It’s almost that time of the year when Australians begin the process of lodging their tax returns. Doing this fulfils a citizen’s obligations as a taxpayer, ensuring compliance with tax laws, and providing the tax authority with the necessary information to assess tax liability or entitlements correctly.
While this is necessary under law, many dread tax time, especially those who are first-time lodgers who are inexperienced. Being unfamiliar with the process, it can seem like completing a jigsaw puzzle – complicated and tedious. But that’s not always the case. This article will be your complete guide to tax time in Australia.
Is it necessary to lodge a tax return?
Lodging a return is the process of submitting your annual tax information and financial details to the Australian Taxation Office (ATO). When you go through the process, you provide the necessary information about your income, deductions, and other financial transactions for the financial year.
The purpose of lodging a tax return is to report your earnings and claim any eligible deductions or offsets, allowing the tax authority to assess your tax liability or refund. The tax return form typically includes sections where you disclose your sources of income, such as employment, investments, or business activities, and declare any deductions or expenses you’re entitled to claim.
By lodging your tax return, you fulfil your legal obligation to report your income and ensure that you’re paying the correct amount of tax or receiving any entitled refunds. It’s important to accurately report your financial information to avoid penalties or legal issues and to ensure compliance with the tax laws of your country or jurisdiction.
Criteria for Lodging
Everyone who has tax deducted from their income throughout the year or if their earnings exceed $18,200 in the income year, it is necessary and mandated by law to file a tax return. There are however special cases where one is exempt from filing. Here’s a summary of the criteria for filing and the exemptions:
You are required to lodge a tax return if any of the following conditions apply to you:
- You had taxes withheld from any payments (wages received during the income year).
- You are an Australian resident and your taxable income exceeded the tax-free threshold of $18,200.
- You are a foreign resident and earned more than $1 in Australia during the income year.
- You are permanently leaving Australia or will be absent for more than one income year.
- You wish to claim tax deductions.
- You are a foreign resident with a study or training support loan.
- You are a liable or recipient parent under a child support assessment for the entire income year, and your income was $27,063 or higher.
You are not required to lodge an Australian tax return if:
- You are a foreign resident, and your only Australian-sourced income is comprised of interest, dividends, or royalties, and you paid the appropriate amount of non-resident withholding tax.
- You are a working holiday maker (417 or 462 visa holders), and your taxable income for the year is below $45,001.
When is the best time to do a tax return?
In Australia, tax time is the period when individuals and businesses lodge their tax returns for the previous financial year. Typically, tax time in Australia runs from 1 July to 31 October each year.
This means that for the financial year ending on June 30th, the tax return must generally be lodged by October 31st of the same calendar year. This deadline applies to individuals who lodge their tax returns themselves without the assistance of a registered tax agent.
Tax Time Tip: Although there is a standard tax time in Australia, you can lodge your tax return outside of the tax time period if you’re ready.
How do I lodge a tax return?
If you need to lodge a tax return, you have three lodgement options to choose from. It’s ideal to choose the option that’s easiest for you:
- Submit your tax return electronically using myTax, an online platform. Filing your tax return online through myTax is a fast, secure, and reliable method. Most returns are processed within 2 weeks. Read more: Lodge your tax return online with myTax.
- Engage a registered tax agent to lodge your tax return. A registered tax agent is the only authorised professional to charge a fee for preparing and lodging your tax return. Read more: Lodge with a registered tax agent.
- File a paper tax return. You have the option to submit a paper tax return via mail. Refunds are typically issued within 50 business days. Read more: Lodge a paper tax return.
How do I prepare to lodge a tax return?
Now that you understand the essentials, what you need to do next is prepare to lodge a tax return with the following tax time tips:
Be aware of due dates
Be proactive and get in early. Generally, the deadline is October 31 each year but if this date falls on a weekend, the due date will be moved on the next business day after October 31. For more information about due dates, visit the ATO website.
Gather relevant documents
Collect all necessary documents, such as payment summaries from your employers, income records, deduction receipts, bank statements, investment statements, property records, private health insurance statements, and any other supporting documentation related to your income and expenses.
Find out what you’re eligible to claim
You must do your research to ensure you are following guidelines as to what can and can’t be claimed on your taxable income. The ATO website has helpful resources you can check to understand:
Shop around to see where you could be saving money or have a better tax return next year
This is an opportunity to revisit your expenses from the year and see where you can save more next year. That might be by finding a better deal or finding areas in your life where you can cut expenses from. You could even look into salary sacrificing into your super or other areas and the benefits associated with that.
Find a registered accountant or tax agent
Vision has built a community of trusted referral sources. So if you’re not sure where to go, we can help you find a registered accountant or tax agent. Contact Vision today to ask for referrals.
Conclusion: Lodging Your Tax Returns
The process of lodging a tax return can be an easy and manageable process for many individuals thanks to self-lodging tools like myTax. But it’s important to note that tax laws and regulations can change, and each person’s financial circumstances are unique. It’s always a good idea to stay informed and seek guidance when needed. If you’re uncertain about any aspect of your tax return, it’s best to consider professional assistance from a registered accountant or tax agent.
Definition of Terms Summary
Australian Taxation Office (ATO)
The Australian Taxation Office (ATO) is the principal revenue collection agency of the Australian government. It is responsible for administering the tax system and ensuring compliance with tax laws and regulations in Australia.
End of the financial year (EOFY)
The End of the Financial Year (EOFY) refers to the completion of the financial year for taxation and accounting purposes. In Australia, the financial year runs from July 1st (of last year) to June 30th (of the current year). The end of the financial year marks the cutoff point for reporting and finalising financial transactions and activities for the preceding year.
Deductible and Taxable Income
A deductible refers to certain expenses that individuals or businesses can subtract from their total income. The result is known as taxable income, which is the income on which taxes are calculated. Deductible expenses reduce the taxable income, thereby reducing the tax liability.
Common examples of deductible expenses for individuals can include work-related expenses, self-education expenses, charitable donations, and certain medical expenses. For businesses, deductible expenses can include employee wages, business-related travel expenses, office rent, and costs associated with running the business.
A full financial year begins on 1 July last year and ends on 30 June of the current year.
Tax liability refers to the amount of tax that an individual or entity is legally obligated to pay to the government based on their taxable income or other relevant factors. It represents the total tax obligation that arises from the application of tax laws and regulations.
A tax agent, also known as a tax professional or tax practitioner, is an individual or firm that provides professional services relating to taxation matters. Tax agents are trained and knowledgeable in tax laws and regulations and provide assistance and advice to individuals and businesses in meeting their tax obligations.
A tax refund refers to the amount of money returned or reimbursed to an individual or business by the tax authority when their tax payments or withholdings exceed their actual tax liability. It represents the surplus of taxes paid or withheld during the tax year.