Your first job can be exciting... until your first payslip arrives. Instead of receiving a hefty sum for all your hard work, you notice some has been taken right outta there for tax. But what does this actually frickin’ mean?
To put it bluntly, it’s money we must pay to the government. We pay it to fund various public services: health, transport, education and what not.
The good news is that you may be able to get some of that moolah back, and lo’ and behold, that time of year has crept up once again. Yep, it’s the infamous tax time. For some, it’s the time of year when we receive a nice cash injection into our accounts. But for most of us out there, it’s more of a what the hell is going on? kinda vibe.
Don’t worry if you have no idea what tax time is or how tax works. I’m 21-years-old and I’m only just starting to learn the ropes. But I’m going to try my gosh darn hardest to fill you in (albeit, broadly) on what high school failed to teach us so you’re not left scratching your head (and I’ll also try not to bore you to death).
1. Earning money equals paying taxes
Tax isn’t a thing that suddenly kicks in when you turn 18. It all depends on your situation related to the income you earn from work. If you earn money, you’ll usually pay tax on that money (unless you're working cash-in-hand). But there is always the chance you can get some of that money back, which brings me to the next point.
2. Tax thresholds exist and they’re very important
When you start working for the man and paying taxes, you’ll also need to start lodging tax returns at the end of the financial year (June 30). But you don’t need to pay any taxes until your income is more than the tax-free threshold of $18,200 per year (that means if you earn less than this amount, you will get ALL the tax you paid over the year back when you do your tax return).
After that, you’re taxed at different levels. If you earn between $18,201 and $37,000, you will be taxed 19c for each dollar you make over $18,201. If you earn between $37,001 and $90,000, you'll be taxed 32.5c for every dollar. And so it goes; the more you earn the more tax you pay.
3. You should always lodge a tax return
Even if you earn less than the tax-free threshold but had tax withheld, you should lodge a tax return. Why? Well, you get that damn cash back that I’ve been talking about!
If you've paid more tax then you've needed to over the year, you'll get the amount you overpaid back in a nice lump sum in your bank account. Think of it like an early Christmas present. Or even better a second birthday!
4. Any expense related to work can be deducted
Any expense made for work-related or business reasons can be deducted from your tax. Some expenses can include travel, backpacks or handbags, uniforms and even techy like laptops or phones. There's rules around this that you can suss out over here.
Just remember one thing: Hold. Onto. Your. Damn. Receipts.
5. File your return by the 31 October deadline
Surprise, surprise, if you don’t lodge a tax return then you could get fined (although this is only partially true because if you’re owed a refund from the Government, then it’s most likely that you won’t get fined. In fact, it’s likely you won’t be chased up about it either).
If it ends up that you haven't paid enough in tax over the year and you actually owe money to the gov, you’ll get fined and your tax amount will be charged interest. It can add up very quickly, so in the end it’s better to be safe than sorry and lodge your damn return.