Understanding Tax

Tax is the amount of your income that the government collects (whether you like it or not) to help pay for things like roads, schools and hospitals

where to start

You need to know about tax as soon as you start earning

But that doesn’t mean you’ll need to pay anything right away. The tax-free threshold (currently set at $18,200 in January 2019) means you won’t need to pay tax until you earn more than that amount in a financial year.

The $18,200 tax-free threshold is equivalent to:

$350 a week
$700 a fortnight
$1,517 a month

And when you earn more than that amount you only pay tax on the extra (not the whole amount).


How tax works

If you’re an employee, then your employer should take care of paying your tax directly to the ATO (Australian Taxation Office) on your behalf. If you run a business, or work as a sole trader, then you’ll need to take care of your own tax and ensure it’s paid as part of your business reporting requirements.

At the end of each financial year, you’ll need to check if you’re required to lodge a tax return. If you need to lodge a return, it’s easy to do online. Your employer should take care of paying your tax on your behalf throughout the year, and you can sometimes claim for a refund, depending on what you’ve earnt and how much you’ve paid.

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Your first tax return

The ATO has put together a great guide to walk you through filing your first tax return. If this is your first time earning an income then check out the page, even if you’re under the tax-free threshold.

Lodge your first tax return here.

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The ATO App

The ATO app puts tax and super help in your hand, making it easier for you to conduct your tax and super affairs on the go.

If you’re an individual taxpayer, small business owner or self-managed super fund trustee, you can access relevant tax and super information and tools in one place.

Find the app here

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Your Tax File Number

It’s your personal reference number throughout the tax and superannuation systems. It’s a unique number that you’ll have for life, even if you move, change your name, or change jobs.

You don’t legally have to have one, but without one you’ll pay more tax, plus you won’t be able to run a business or apply for any government benefits. It costs nothing to apply for a TFN, and it’s easy to apply online, then confirm your details at your local post office.

Apply for a TFN here

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