What is Income Tax? | Why pay tax?

Income Tax in Australia

Tax is what keeps our country moving – it's money paid by Australians to the Government to pay for things like roads, railways, Centrelink and the defense force.

Each pay, depending on your income, you or employer (depending on your circumstances) need to send tax money off to the tax office, this is collected over the financial year (1 July - 30 June).

For the purpose of this article, we will focus on the basic Individual who works for an employer and needs to complete their individual tax obligations for the year.

So, what are my tax obligations?

Each year from 1 July, everyone in Australia (or overseas - depending on your residency for tax purposes) either needs to lodge a tax return with the Australian Taxation Office or they need to tell the ATO that they don’t need to lodge an Individual tax return.

Within the deep realms of the tax return the taxpayer will be faced with a multitude of questions that would frazzle even the smartest of humans. This is where they declare any income received and claim back any work-related expenses during the year. The final result of the Income Tax Return then depends on the Individual. 

What could these results be?

There are generally two ways that your tax return could go.

1. You'll receive a refund of overpaid tax, or 
2. You'll get a tax bill

For the basic Individuals, a tax refund is any overpaid money plus a small percentage of your work-related expenses reimbursed to you.

A tax bill is generally a result of yourself or your employer not withholding enough tax from your income throughout the year. Therefore, you will need to pay the ATO extra tax money.

Will I get into trouble if I don’t lodge?

Yes. If you don’t lodge your tax return, the ATO will contact you to lodge any outstanding tax returns. Failing to follow the ATO’s instructions will result in expensive penalties starting at $210 every 28 days.

The best thing to do is to get your Tax Return done and out of the way for the year, and if you and your employer have done the right thing, you may just get a nice refund transferred into your bank account!

Lodge with GoTax Online – the fastest way to complete your own individual tax return in your own time. 

Note that the information provided is general in nature and subject to change, please contact one of our professionals who can evaluate your circumstances and provide more accurate advice to your current situation.