Tax season can be a daunting time for many people, but it can also be an opportunity to receive a tax refund. A tax refund is the difference between the amount of tax you’ve paid and the amount of tax you owe. In Australia, the financial year runs from July 1st to June 30th. In this article, we will provide a step-by-step guide on how to calculate your tax refund for the current financial year in Australia.
Step 1: Gather Your Financial Information
To calculate your tax refund, you’ll need to have all your financial information for the current financial year at hand. This includes:
- Payment summaries or income statements from your employer(s)
- Details of any other income, such as rental income, interest, or dividends
- Deductions you plan to claim, such as work-related expenses, charitable donations, or educational costs
- Your Tax File Number (TFN)
- Any relevant tax offsets or rebates you may be eligible for
Step 2: Determine Your Taxable Income
Your taxable income is the income you need to pay tax on. To determine your taxable income, follow these steps:
- Add up your total income from all sources, including salary, wages, bonuses, rental income, interest, and dividends.
- Subtract any deductions you plan to claim. These may include work-related expenses, charitable donations, and educational costs. Make sure you have records to support your deductions, as the Australian Taxation Office (ATO) may request proof of these expenses.
- The result is your taxable income.
Step 3: Calculate Your Tax Liability
Once you have determined your taxable income, you can calculate your tax liability. In Australia, the tax system operates on a progressive basis, meaning the more you earn, the higher the tax rate you pay. The tax rates for the current financial year are as follows:
- Up to $18,200: Tax-free threshold
- $18,201 – $45,000: 19% of each dollar over $18,200
- $45,001 – $120,000: $5,092 + 32.5% of each dollar over $45,000
- $120,001 – $180,000: $29,467 + 37% of each dollar over $120,000
- Over $180,000: $51,667 + 45% of each dollar over $180,000
To calculate your tax liability, apply the appropriate tax rate to your taxable income. For example, if your taxable income is $60,000, your tax liability will be $5,092 + (32.5% x ($60,000 – $45,000)) = $12,142.
Step 4: Determine Your Medicare Levy
The Medicare Levy is a tax that helps fund Australia’s public healthcare system. Most Australian taxpayers pay a Medicare Levy of 2% of their taxable income. To calculate your Medicare Levy, multiply your taxable income by 0.02. For example, if your taxable income is $60,000, your Medicare Levy will be $60,000 x 0.02 = $1,200.
Step 5: Calculate Your Tax Offsets and Rebates
Tax offsets and rebates can reduce the amount of tax you owe. Some common tax offsets and rebates include:
- Low and middle-income tax offset: If your taxable income is less than $126,000, you may be eligible for the low and middle-income tax offset. This offset is worth up to $1,080 for taxpayers earning between $48,000 and $90,000.
Step 6: Determine Your Residency Status
Your tax residency status in Australia significantly affects your tax obligations. Australian residents are subject to tax on their worldwide income, while non-residents are only taxed on their Australian-sourced income.
There’s quite a lot more to consider. These are the basics.
Engage The Experts!
If its all too complicated then contact Accountants Direct. For a very small fee (that is tax deductible) you’ll be assured to get the maximum refund at minimum fuss and stress.
Book here or give us a call on 1300 TAX SHOP (1300 829 746)
We also have a completely free tax calculator which can provide you with a list of items you can claim based on your occupation.
Stephen is the CEO of Accountants Direct and is a Professional Director, ASIC Agent, Startup Advisor & Investor & Capital Raising Specialist.
Contact Stephen or his team if you have any questions about this post or any business matter in general.
