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
- Outstanding bills or fines
Stash it away
- Emergencies or unexpected costs
- Home deposit
- Take a break
- Home improvements
- Pamper yourself just a little
1 - Australian Taxation Office Annual Report 2013/14
2 - Australian Taxation Office Annual Report 2014/15
3 - MoneySmart poll, August 2015 (n-2124)