What is a tax return?
So you’ve started your first job and you’re making your own money. After the initial excitement of seeing money land in your bank account, there’s some general house-keeping to take care of. Set up a budget, open a savings account and, when the new financial year rolls around, you can file your first tax return.
If you earn money in Australia, you must lodge a tax return with the Australian Taxation Office (ATO) every financial year. When 1 July hits, it’s time to declare the money you’ve earned. Plus, you can claim deductions (this isn’t the same as a refund – see below).
Most workers in Australia pay tax on a Pay As You Go (PAYG) basis. This means your employer (the company you work for) automatically deducts tax from each payslip so you don’t have to pay a big tax bill each year. If you keep track of your payslips, which we recommend you do, you’ll see the amount withheld as tax. When you lodge your tax return, if you’re found to have paid more tax than you owed throughout the year, you’ll receive a tax refund. If you’ve earned more than has already been declared, this is your chance to let the ATO know and pay the outstanding tax bill.
But how do you lodge a tax return? Here’s our simple guide to make lodging your first tax return stress-free.
Lodging your first tax return
Before you sit down to file your tax return, you should consider having the below info ready:
How to lodge your tax return
For most people new to the workforce, lodging a tax return can be a simple process. You can lodge your tax return each year from 1 July until 31 October. If you have an investment property, own shares or you a run business, it can be a little more complex.
The quickest way to lodge your return is through the ATO’s myTax, opens in new window. To do this you’ll need to set up a myGov, opens in new window account if you don’t already have one. myTax has a prefill function that means lots of your information might already be in the system when you lodge your return.
You can also have a registered tax agent do your tax return for you. If you have a complicated financial situation, or are unsure about Australian tax laws and requirements, this could be a good option. You’ll need to pay the tax agent to complete your return, but you can claim that fee as a deduction on next year’s tax return. If you do use a tax agent, you may be able to lodge your return after the 31 October deadline.
It’s important to make sure all the information on your tax return is correct. If you realise you’ve made a mistake after you file your return, you can lodge an amendment, opens in new window to correct it.
Understanding tax deductions
A tax deduction is an expense you claim that can reduce your taxable income. For example, you can claim work-related expenses like uniforms, training and education costs, and tools or other equipment. Check the ATO’s website to learn exactly what types of deductions you can claim, opens in new window.
It’s important to note that when you claim a tax deduction, you’re not getting a refund for the cost of the item. Instead, a deduction lowers the amount of income that you pay tax on. For example, if you earned $30,000 last year and spent $500 on training materials for work, you can claim the cost of those training materials as a deduction. This would mean your taxable income for last year would be $29,500, so you’d only pay tax on that amount. To claim any deduction, you must be able to prove that you paid for what you’re claiming and show how you calculated your claim. Make sure you keep receipts for any item you want to claim as a tax deduction. You can use the myDeductions tool, opens in new window in the ATO app to keep a record of everything you want to claim on your next tax return.
What happens after you lodge your tax return
The ATO will process your tax return and send you a Notice of Assessment. The Notice of Assessment will let you know if you owe the ATO money, or if you’re entitled to a tax refund.
Make sure you keep your Notice of Assessment and all the information you used to lodge your refund. It’s possible the ATO will ask you questions about your return, or that you’ll need the information for a future tax return.
Learn more about lodging your first tax return, opens in new window.
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The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial and taxation advice before acting on any information in this article.