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NewsIs it too early to be talking about tax returns?

Is it too early to be talking about tax returns?

Each year in July I diligently lodge my tax return through my accountant and eagerly await his call on how much he expects I will get back. It’s usually around $2000 which appears to be the average according to the Federal Government’s Money Smart website ($2,112 - Average tax refund 2 )

Imagine my surprise last year when I get a call saying I owe the ATO $4000! How did this happen? Surely it must be a mistake? Apparently not.

I have two jobs, one full-time and one part-time and there-in lies the problem. When you have more than one job, you must decide which income you will claim the “Tax-free Threshold”. The tax-free threshold is the first $18,200 of your income. You can earn up to $20,542 before any income tax is payable, when taking into account the Low Income Tax Offset. ... From the 2016/2017 year (from 1 July 2016), the 37% marginal tax rate takes effect when your taxable income exceeds $87,000.

Ticking the wrong box means no tax is deducted. The mistake was that the Tax-Free Threshold” box was ticked for both jobs so no tax was taken out of my part-time job income. You could argue (as my accountant did with me) that I had the benefit of that $4000 during the year but I would have much preferred to have paid the tax and not received a $4000 unexpectedly.

I don’t consider myself an overly smart person but I’m certainly not an idiot either and who wouldn’t tick a box that says “Do you want to claim the Tax-free Threshold”? For goodness sake it has the words “tax-free” in it so I’m ticking!!!

Anyway, I’ve worked some extra hours in my part time job to make up the $4000 and I won’t be making that mistake again. I was planning to use my tax refund last year to enjoy a few days off up the coast. Maybe this year……

Here are some stats from the MoneySmart website…..

 

  • 26% - People do their own tax 1
  • 82% - Taxpayers likely to get a refund this year

What MoneySmart users say they did with last year's tax refund:3

  • 29% - Paid bills
  • 21% - Saved it
  • 16% - Didn't get a refund
  • 13% - Loans or credit card payments
  • 9% - Home loan payments
  • 5% - Holiday
  • 5% - Other things (including engagement ring, education, car rego/tyres, party)
  • 2% - Household appliances

Make the most of your tax refund: Work out where you can make a difference. Reduce debt stress

  • Credit cards
  • Personal loans
  • Mortgage
  • Outstanding bills or fines

Stash it away

  • Emergencies or unexpected costs
  • Super
  • Home deposit

Reward yourself

  • Take a break
  • Home improvements
  • Pamper yourself just a little

Sources:

1 - Australian Taxation Office Annual Report 2013/14
2 - Australian Taxation Office Annual Report 2014/15
3 - MoneySmart poll, August 2015 (n-2124)

 

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Gertraud
Gertraud from ACT commented:

Surprise, surprise that the taxation law looks at a person's entire income from all sources! And it should not come as a surprise either, considering that the form you fill in when you provide your employer with tax number information clearly states that the tax-free threshold can only be applied to one job. As to whether it is too early to start thinking tax return, never. In fact, we should make sure that we keep our records up to date so that when taxation time comes around, we are prepared and have the information at our fingertips. 

Anonymous
Anonymous from QLD commented:

This has been the case since I can remember. It was introduced as a fair work to give everyone a job supposedly. Just another example of Government gouging in the case these days II am affraid, The extreme wealthy pay less than 3% and we are Taxed on having a second income trying to make ends meet, you look after your family as a sole earner and pay the price for working another job or overtime 

Gertraud
Gertraud from ACT commented:

I'm sorry, but as an accountant (retired) I have to say that what you are saying is nonsense. You are not being penalised for working more hours or a second job! 

RICHARD
RICHARD from WA commented:

UMM YA THIS IS WELL KNOWN BY MANY PEOPLE WHEN YOU HAVE 2 JOBS AND IF YOU OVER 50 LIKE ME YOU SHOULD KNOW THIS OR CALL THE ATO TO CHECK 

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