If you earn money from your work or from investments (such as interest, dividends or rent), you will usually pay tax on that money. The Australian income (or financial) year runs from 1st July to 30th June. In your tax return you must declare all of your income for the financial year.
Income tax is often paid throughout the year as you earn the income. For example, if you work for an employer, your employer will deduct tax from each pay and send it to the Australian Tax Office (ATO) on your behalf.
How much tax do I need to pay?TOP
The amount of tax you pay will depend on how much you earn. Australia uses a sliding scale of tax. To see the level of tax you need to pay based on your annual income, refer to the ATO’s Individual income tax rates guide.
Further information on the types of income that you need to pay tax on and what expenses and other deductions you can claim, can be found on the ATO website.
Tax File NumberTOP
Your tax file number (TFN) is your personal reference number in the tax and superannuation systems. You don’t have to have a TFN, but without one you may pay more tax. You also won’t be able to apply for government benefits, lodge your tax return electronically or get an Australian business number (ABN).
If you don’t know what your TFN is, you should be able to find your Tax File Number in one of the following ways:
- Look on your income tax notice of assessment or other letters from Australian Taxation Office to locate the Tax File Number (TFN);
- Look on a payment summary (provided by your employer) or your superannuation statement;
- If you have a myGov account linked to the ATO, you can access your TFN online. myGov also allows you to lodge your own tax returns, rather than paying a tax agent to prepare and lodge it for you. For help on setting up a myGov account refer to: 1f. Centrelink online and setting up myGov;
- Ask your tax agent (if you have one); or
- If you still can’t find it, contact the ATO on 13 61 28, 8.00 am to 6.00 pm, Monday to Friday.
If you do not have a Tax File Number you can find out how to apply for a TFN at the ATO website.
To help you work out if you need to lodge a tax return for the current and prior income years, you can use: Do I need to lodge a tax return tool? published by the Tax Office. There are some exceptions, but generally you must lodge a tax return if any of the following apply:
- Tax was deducted from any payments (such as wages) made to you during the financial year;
- You are an Australian resident and your taxable income was more than the tax-free threshold;
- You are a foreign resident and you earned more than $1 in Australia during the financial year; or
- You are leaving Australia permanently or for more than one financial year.
There are various ways in which you can lodge your annual tax return. You can:
- Lodge online via myTax. You need to have a myGov account to be able to use myTax. Instructions for setting up a myGov account and linking it to the Tax Office can be found at the ATO website;
- Lodge a paper tax return;
- Use a registered tax agent to prepare and lodge your tax return for you. Registered tax agents are the only people allowed to charge a fee to prepare and lodge your tax return. You can claim the cost of paying registered tax agents as a tax deductible expense.
You may be eligible for free help from the ATO to complete your tax return under the Tax Help Program.
If you fail to lodge your tax return by the due date (typically 31st October of the following year), the ATO has the right to issue you a failure to lodge on time penalty and charge interest for late payment of your income tax liability. To avoid the Tax Office issuing a penalty to you, you should inform the Tax Office in advance if:
- you are unable to lodge your tax return on time;
- you have a tax liability but you do not have sufficient funds to pay.
Where you have engaged a registered tax agent to prepare your tax return, the lodgement due date will be later in the financial year.
For more information on penalties and interest charges that the Tax Office may apply, see the ATO website.
Capital Gains taxTOP
Normally, if you sell an asset for more than you paid for it, you will have to pay capital gains tax on the profit. However there are exceptions including:
- your main residence;
- a car or motorbike;
- any asset acquired before 20 September 1985;
- as a result of a relationship breakup – capital gains tax is not paid on transfer of assets as a result of splitting with your partner. More information on the tax implications of changes in assets ownership following a relationship breakup can be found on the ATO website.
If you sell an investment for less than it cost, you make a capital loss. This capital loss can be offset against any capital gain made in the year or it can be used to offset any capital gains in future years.
[Article last updated: 5/12/21]