It’s tax time! With the end of the financial year fast approaching many teens who have a job will have to lodge an Income Tax Return for the first time. Our friends at BDO Australia have taken the time to help explain some important terms the Australian Tax Office (ATO) uses:
What is Income Tax? Income Tax is a financial charge or contribution levied by the government on workers’ income. Income tax is paid throughout the year as you earn income.
What is a Tax Return? A tax return is a simple form that you fill in with details about your income and personal situation. The ATO uses this to determine if you are due to receive a refund or you need to make a further payment.
You will be required to lodge an Income Tax Return if you are entitled to receive a refund of tax paid during the year. If you have a Higher Education Loan Program (HELP) or Trade Support Loan (TSL) debt you should also lodge an Income tax return.
What is a tax refund? A tax refund is a refund on the tax paid by an individual when a tax return is assessed by the ATO and it is found that the actual tax liability is less than the amount already paid.
Employment Income - if you have had a part time (or full time) job your employer will provide you with a Payment Summary. The Payment Summary will show your gross income, the tax deducted, any allowances, and your employer’s details. If you have had multiple employers you will need a Payment Summary from each employer.
Interest income – if you have had savings in bank accounts, you may have accumulated interest. This counts as income and should be included in your Income Tax Return.
Work related expenses –you can claim certain work related expenses as deductions. The basic test is that the deduction must relate to your employment income. Some common examples are:
a. Tools of trade – if you are required to supply specific items to carry out your employment, e.g. for a hairdresser combs, razors; for an apprentice builder work tools.
b. Trade union fees.
c. Laundry of uniforms – but only in relation to laundering occupation specific clothing.
d. Cost of uniforms if your employer does not supply them but does not extend to conventional clothing.
e. Protective footwear and clothing – if prescribed for your employment.
There are a number of conditions and requirements to prove work expenses.
Taxpayers who claim work expenses must be able to prove their purpose by holding (and providing to the ATO if requested) written evidence of the expense – e.g. a receipt and/or other record of the expense which must be kept for at least 5 years.
For more information about what you’re entitled to claim and the records you need to keep, go to: https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/
How do I lodge a Tax Return? – the ATO offer online services called “MyTax” for preparing and lodging Tax Returns.
Lodging online with myTax is the quick, easy, safe and secure way for you to prepare and lodge your own tax return. The deadline to lodge your tax return is 31 October. One of the advantages of using myTax is most information from your employer, bank and government agencies will be pre-filled by late August, so you’ll have a quicker and easier experience at this time.
Paper Tax Returns can still be prepared and lodged. They are available from your local Post Office.
Superannuation – if you have had employment income during the year, your employer may have been required to contribute to a regulated superannuation fund. While this does not usually impact on your Income Tax Returns you should check that the contributions have been made. You can do this by checking and comparing the details of your superannuation contributions on your payslip to the information provided by your Nominated Superannuation Fund. After June 30 you will receive a Members Statement noting superannuation contributions received and credited to your account.
Lodging a Tax return for the first time can be daunting but there are plenty of people who can help teens. Financial Basics Foundation has resources that you can use in the classroom to talk about tax. Also most local tax agents usually offer a discount for students and are happy to help you through the process.
This information was provided by our corporate sponsor BDO Australia who provides financial services support to businesses across Australia. You can read more about BDO on their website: www.BDO.com.au