How to obtain a tax refund

A tax refund is any money you have overpaid on your income tax during a financial year (1^st July to 30^th June), and which the government returns to you after you have submitted your tax return for that year. Of course, if you’ve underpaid your tax during the year, you won’t receive a refund, but will instead have to make an additional tax payment.

Because tax has become so complicated these days, most people seek the help of a professional adviser to ensure their tax return is accurate.

Do I have to submit a Tax Return?

Generally, you only have to submit a tax return if your taxable income in the last financial year was over $6,000. This figure is called the Tax Free Threshold. If your taxable income was less than $6,000, but you paid tax during the year because it was deducted from a wage or salary, you will need to lodge a tax return in order to receive a refund. Some students who received Youth Allowance, Austudy payment, Job Search, Newstart Allowance or a pension and had no other income may not have to lodge a return even if their income from all sources is over $6,000.

For more conditions and information visit the Australian Taxation Office (ATO) web site at www.ato.gov.au.

How do I calculate my taxable income?

Your taxable income is your gross (total) income for the financial year, minus any tax deductions. (Deductions are ATO-approved expenses that you made to produce, preserve, and protect your income, e.g. work uniforms, tax advice.) The resulting figure is what your tax will be assessed on at the applicable tax rate. This amount will also take into account tax rebates and offsets.

What counts as income?

Your income can include money from:

• employment
• ABSTUDY, AUSTUDY, Youth Allowance or many other Centrelink payments
• other income (e.g. bank interest, dividends, etc).

Note: An allowance from your parents is not counted as part of your assessable income unless you receive it from a family trust or as a salaried employee working for your parent(s).

Don't try to guess how much you earned. The amount will be shown on a Payment Summary or Statement of Benefit or Allowance from the organisation that paid you. Bank interest will be shown on your passbook or on a bank statement. These documents also show how much tax you have paid, so it’s important to keep them in a safe place. If you haven’t received them, or have lost them, contact the organisations to obtain a copy.

Under Australia’s ‘self-assessment system’, assessments of taxable income and tax payable are initially based on the information outlined in the taxpayer’s tax return. However, the ATO has wide ranging powers to amend assessments in the light of subsequent audits, and if you have supplied false information, the financial penalties can be steep.

Your questions answered What is PAYG withholding? PAYG stands for Pay As You Go. Payers, such as employers, are required to withhold tax from the payments they make to you and send them to the ATO. In other words, it’s a standard income tax. Your payer/employer works out how much tax to withhold based on information you provide in your Tax File Number declaration and Withholding Declaration. What is a Withholding Declaration? It informs your payer of changes to your residency status; any obligations under HECS and SFSS; a claim for the tax free threshold; and any entitlement to Family Tax Benefit or tax rebates. What are PAYG instalments? They are a system for reporting and paying income tax in instalments – generally paid four times per year (quarterly). They mostly apply to companies and individuals who have gross business or investment income of $2,000 or more (unless the tax payable on their most recent notice of assessment is less than $500). Other conditions also apply. What is GST? GST is a Goods and Services Tax of 10% on most goods and services. When you make a purchase, GST is included in the price you pay. If you operate a business you need to charge GST, but because GST is only paid by consumers, you can gain a full tax refund on any GST your business paid on any goods or services that were purchased to operate it. What are rebates? Rebates (or tax offsets) enable you to reduce the amount of tax you have to pay. Rebates include the 30% private health insurance rebate; any support for dependants, such as a wife or non-working de facto partner; and franking credits on dividends, which provide an offset for tax paid at the corporate level. What kind of tax deductions can I claim? Some claimable deductions include costs for laundry and dry cleaning of work uniforms, certain work-related education expenses, donations, tax account fees, and car expenses directly related to your work (but not general travel to and from work). For more information visit the Australian Taxation Office (ATO) website at www.ato.gov.au.