July 27, 2016

HOW TO ADULT, Joely Mitchell

Income tax return form with computer keyboard calculator and notebook

‘It’s that time of year again.’

I bet you’ve heard the above statement countless times in the past few weeks – on TV, social media, from friends and family, even from colleagues.

‘It’s tax time.’

But for many of us, it’s not that time of year again, it’s actually the first time we’ve ever had the delight of having to submit a tax return.

Okay, so tax time doesn’t really compare to Christmas time or summer time, hey it barely even compares to dinner time, but lodging your tax return is extremely important, and could even mean you get some money back.

So here’s a beginner’s guide to getting your tax return sorted (without the help of mum or dad).

Do you need to lodge a tax return?

The simple answer: If you paid tax this financial year, yes.

The more complicated answer: This is dependent on a few factors. If you earned above the taxable income threshold for the year, you definitely need to submit a tax return. This amount varies year by year. For 2016, the individual tax free threshold is $18,200.

If you earned below the tax free threshold, but still paid tax (I’ll show you how to figure this out below), you will need to submit a tax return. Chances are you wouldn’t have been taxed much, and you will get the majority, if not all of it back.

If you earned below the tax free threshold, and did not pay tax, you will not need to submit a tax return.

If you earned below or above the tax free threshold, and have items you you want to claim in tax, you will need to submit a tax return.

The easiest way to figure out whether you need to submit a tax return is to use the tax calculator on the Australian Tax Office (ATO) website. You’ve just got to answer a few simple questions and it will let you know your eligibility. Click here to have a go.

How do I find out my yearly income?

You’ll need what’s called a ‘PAYG Payment Summary’ – this should be available from your employer. The distribution of Payment Summaries is different from workplace to workplace, so if you’re unsure how to access yours, you should speak to your employer.

The two important sections on the Payment Summary are ‘Gross Payments’ and ‘Total Tax Withheld’. Your Gross Payments is the total amount of money you earned that financial year, including the money you were taxed. Total Tax Withheld is the amount of money the government has deducted from your pay that year.

So if I’m eligible and I’ve got my PAYG, what do I do next?

You lodge your tax return!

There are two easy ways you can do this – either online, or through an accountant. There are pros and cons to each process.

If you submit your tax return with an accountant, they will do the bulk of the work for you. You’ll need to provide your Tax File Number (TFN); if you don’t know your TFN, you can find it online. If you haven’t got a TFN (if you’ve got a job, you should have one), you can apply for one online too. You’ll also need to bring along your PAYG and any receipts of items you’d like to claim. This is one of the benefits of getting your tax return done through an accountant, they are able to claim items for you. You can claim lots of things – uniforms, laundry expenses, travel expenses, electronics, etc. You’ll need to prove that purchasing the item was necessary for your workplace, but if you can, you should be able to claim it. Only negative of getting your tax done by an accountant is that you have to pay them for their services. This costs around $100, however the cost is tax deductible, so you will be able to eventually get it back. So if you’re not going to be getting more than the net fee in tax back, or you’ve got no receipts that need claiming, you’re probably better off submitting your tax return online. It will normally take about two weeks to receive your money after you have met up with your accountant.

If you submit your tax return online (I will show you how below), your tax return will not only be free of charge, but will also be in your full control. You will need a MyGov account to do this; if you don’t have one of these, please see instructions to register below.

How do I register for a MyGov account?

Just follow this link and select ‘Create a MyGov account’. You will be asked to enter and confirm your email address, as well as select and answer a few security questions. They will email you your unique username which you can then use to login.

Once you have logged in, you will then be able to link other services to your MyGov account. Click on the big green ‘Services’ button, and it will take you to a list of services. You can link your account with Centrelink, Medicare, etc, but for the purpose of lodging your tax return, you will need to link your account with the ‘Australian Taxation Office’. To do this, click on the green link button next to ‘Australian Taxation Office’.

If you already have an ATO account, you can just enter your username or TFN and it will log you in and link your accounts automatically. If you don’t (which if you haven’t lodged a tax return before, you probably won’t), you’ll need to confirm your identity by providing a few details (TFN, full name and birthday). Once you’ve done that, you’ll then need to provide information from two of the following sources:

  • Notice of Assessment from the last five years
  • PAYG Payment Summary from the last two years
  • Super Account Statement from the last five years
  • Dividend Statement from the last two years
  • Centrelink Payment Summary from the last two years
  • Bank account details

If you are a first time lodger, you may need to call the ATO to get a reference number. If you are having any issues, follow the ‘help’ links on the site. Once you’ve done this, you’re accounts will be linked and you’ll be able to lodge your tax return online.

How to lodge online

Now that you’ve linked your accounts, you’ll be able to click on ‘Australian Taxation Office’ on the services page. This will take you to your ATO account page. Click on ‘Lodge myTax’. This is a four-step process; you will need to confirm your contact details, then your financial institution details. It will then ask you some questions about your Australian residency, marital status, and the sort of income you earn. If you’re confused by any of these questions, click ‘Help’ on the far right of the window. Once you’ve done all of that, it will take you to the ‘Prepare Return’ page.

If you have lodged online before, it will prefill your ‘Gross Payments’ and ‘Total Tax Withheld’ (the numbers from your PAYG Payment Summary that I mentioned earlier). If it prefills for you, check that all of the information is correct, including any income you’ve earned from anywhere else. If it doesn’t prefill for you, you will need to enter those numbers from your PAYG yourself. Once you’ve done that, click on ‘Calculate Return’ and it will work out how much you are entitled to get back. Once it gives you the amount, scroll down and read and agree to the declaration and then click ‘Lodge’.

And you’re done! This should take about two weeks to process, and will be automatically transferred into your account.

Then the fun begins – spending it all!

If you have any queries, please direct them to the ATO or your local tax accountant. There are some great resources on the ATO website that can help answer any of your questions. This article was written with the help of a representative from H&R Block.

– Joely Mitchell

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