Tax (Income Tax)


Why do we pay tax?

Tax is essential for our community. The government uses the money we pay in tax to invest back into the community. For example, the government uses our tax to build and maintain roads, parks and other public facilities.

Who has to pay tax?

Any person who earns an income has to pay tax. However, if that income is at or below $18,200 per year, the individual does not have to pay tax.

What are the different taxation rates?

Tax rates for the year 1 July 2012 to 1 July 2013

Taxable income Tax rate which applies to this income
$1 – $18,200 Nil
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $80,000 $3,572 plus 32.5c for each $1 over $37,000
$80,001 – $180,000 $17,547 plus 37c for each $1 over $80,000
$180,001 and over $54,547 plus 45c for each $1 over $180,000

  

Why do we have different taxation rates?

We have different tax rates to make sure tax is fair. The more money you earn, the higher the rate of tax you have to pay.

Example

For example, if you have a job and in the year 2012-13 you earn $12,000, you will pay no tax whatsoever; if you earn $20,000, you will pay:

Taxable income Tax rate which applies to this income How much tax you actually pay
$1 – $18,200 Nil Nil
$18,201 – $20,000 19c for each $1 over $18,200 $342
 

What is a tax file number?

The Australian Taxation Office assigns individuals with an income a unique number, to identify them and make sure they are paying tax.

What are PAYE and PAYG?

PAYE (pay as you earn) and PAYG (pay as you go) are systems of tax collection that are used in Australia. Under these systems, employers take tax from an individual’s weekly or fortnightly earnings on behalf of the Australian Taxation Office.

PAYE is for wage and salary earners, whereas PAYG is for non-wage and salary earners.

Tax returns

What is a tax return?

You have to fill out a tax return every year during which you earn money. A tax return is a form on which you write how much money you have earned during that year. The Australian Tax Office will then calculate whether you have paid too much tax (in which case they will return some to you), or too little tax (in which case they will ask you to pay more).

Who must lodge a return?

  • Individuals who earn less that $18,200 in the year must lodge a tax return to reclaim the money that was automatically taxed from their income.
  • This only applies to those 18 years or older.
  • People under 18 years of age must lodge a return if their total taxable income is over $416 per year.

Deductions

Certain expenses may be deducted from an individual’s tax.  You should check with the Australian Taxation Office before you claim deductions.  Their website can be found here.

Examples of such expenses include:

  • Car expenses – require detailed records in order to be deducted
  • Accident insurance premiums
  • Self-education expenses over $250
  • Computers (subject to depreciation rates)
  • Books and journals
  • Software
  • Home office expenses
  • Tools of trade
  • Traveling expenses between two jobs or in the course of employment
Last updated 05 July 2012