Computing your tax return in Australia involves several steps, which include declaring your income, calculating allowable deductions, applying tax offsets, and determining your tax payable. Here’s a step-by-step guide on how to compute your tax return:
How to Compute Tax Return in Australia
Table of Contents
1. Gather Your Income Information
First, you need to gather all sources of income for the financial year:
| Income Source | Documents to Gather |
|---|---|
| Employment Income | Pay slips, annual payment summary (or Income Statement from your employer). |
| Investment Income | Bank statements, dividend statements, rental income records. |
| Self-Employment Income | Profit and loss statement, invoices, and receipts for business income. |
| Government Benefits | Centrelink payment summary (if applicable). |
| Other Income | Taxable superannuation income, capital gains, etc. |
2. Identify Your Taxable Income
Add up all your sources of income to calculate your total taxable income. This includes:
| Income Type | Details |
|---|---|
| Salary and Wages | Add up all earnings from employment. |
| Interest Income | Add up interest earned from banks or financial institutions. |
| Investment Income | Include dividends, rental income, etc. |
| Other Income | Include any other income such as business income, superannuation, etc. |
3. Calculate Allowable Deductions
Deductions reduce your taxable income. These may include:
| Deduction Type | Examples |
|---|---|
| Work-Related Expenses | Uniforms, home office costs, travel expenses, tools, and equipment. |
| Investment Expenses | Costs associated with earning investment income, like interest payments. |
| Charitable Donations | Donations to registered charities. |
| Self-Education Expenses | Expenses related to courses that help improve your job skills. |
| Tax Agent Fees | Fees paid for preparing your tax return. |
4. Apply Tax Offsets
Tax offsets can reduce the amount of tax payable. Some common offsets are:
| Offset Type | Details |
|---|---|
| Low and Middle Income Tax Offset (LMITO) | For individuals earning between $37,000 and $126,000. |
| Senior Australians and Pensioners Tax Offset (SAPTO) | Available to pensioners and senior Australians. |
| Private Health Insurance Offset | Reduces tax for individuals with private health insurance. |
5. Calculate Your Tax Payable
Once your taxable income and deductions are calculated, apply the relevant tax rates based on your income:
| Taxable Income | Tax Rate |
|---|---|
| $0 – $18,200 | 0% (tax-free threshold) |
| $18,201 – $45,000 | 19% of income over $18,200 |
| $45,001 – $120,000 | $5,092 + 32.5% of income over $45,000 |
| $120,001 – $180,000 | $29,467 + 37% of income over $120,000 |
| $180,001 and above | $51,667 + 45% of income over $180,000 |
After applying the tax rates, you’ll have your total tax payable. If you are eligible for tax offsets (e.g., LMITO or SAPTO), these can be applied to reduce your total tax liability.
6. Determine Your Tax Refund or Amount Owed
After calculating your total tax payable, compare it to the tax already paid (through PAYG withholding, for example). If more tax has been paid than you owe, you’ll receive a tax refund. If you owe more, you’ll need to pay the balance.
| Scenario | What Happens |
|---|---|
| Tax Payable < Tax Paid | You will receive a tax refund. |
| Tax Payable > Tax Paid | You will need to pay the difference to the Australian Tax Office (ATO). |
7. Submit Your Tax Return
Once all the calculations are done, you can submit your tax return:
| Method | How to Submit |
|---|---|
| Online (via myTax) | For individuals, log in to your ATO account and submit your return electronically. |
| Paper Return | Download the form from the ATO website, fill it out, and mail it to the ATO. |
8. Important Deadlines
- The tax year runs from July 1 to June 30.
- Your tax return is generally due by October 31 of the following financial year if you’re filing yourself. If you use a tax agent, the deadline may be extended.
9. How to Compute Tax Return in Australia FAQs
- How do I know if I need to file a tax return?
If your total taxable income exceeds the tax-free threshold or you’ve received PAYG withholding, you need to file a tax return. - Can I claim a deduction for home office expenses?
Yes, you can claim deductions for expenses directly related to working from home, such as electricity, internet, and office supplies. - What if I made a mistake in my tax return?
If you realize there’s an error, you can lodge an amendment with the ATO. - How do I track my tax refund?
You can track the progress of your tax return through your myGov account linked to the ATO. - What if I can’t pay the tax owed?
If you’re unable to pay the amount due, contact the ATO to arrange a payment plan.
By following these steps, you can accurately compute your tax return, claim appropriate deductions, and ensure you’re in compliance with Australian tax law.