The Australian Taxation Office (ATO) is giving taxpayers some simple steps to help avoid an unexpected tax bill next tax time.
Assistant Commissioner Rob Thomson said there are many reasons that a taxpayer may end up with a bill at tax time.
‘There are a number of factors that impact your tax assessment. In simple terms, if you don’t receive a refund or bill, it means you’ve paid the correct amount of tax throughout the year. If you receive a bill, it may mean you didn’t pay enough – this can be for a number of reasons,’ Mr Thomson said.
There are simple steps you can take right now to ensure the correct amount of tax is being put aside throughout the year:
- Let your employer know if you have a study or training support loan, such as a HECS or HELP debt. Under the pay as you go (PAYG) withholding system, your employer will withhold an additional amount from your salary and wage income to cover your compulsory repayment.
- Check you are only claiming the tax-free threshold from one employer. Usually, you claim the tax-free threshold from the payer who pays you the highest salary or wage.
- Consider whether the Medicare Levy Surcharge may affect you this financial year. If you, your spouse and any dependent children (including newborns) don’t have an appropriate level of private patient hospital cover, and you earn above a certain income, you’ll have to pay a surcharge of up to 1.5% of your total taxable income. The Medicare Levy Surcharge is not covered in tax withheld by your employer.
- Check your income tier is correct for your private health insurance rebate. By updating your income with your private health insurer, you ensure you don’t receive too much rebate, which would need to be repaid when you lodge.
- If you earn business or investment income, consider voluntarily entering PAYG instalments and pre-paying tax throughout the year to avoid a large bill at tax time. If you’re earning regular income through multiple sources, including a ‘side hustle’, prepaying your tax through PAYG instalments will help you smooth out your cashflow and gives you the flexibility of spreading out the payments if you expect to owe tax on your income.
‘Remember that if you have multiple sources of income, you may end up with a tax bill as your combined income pushes you into a different tax or study loan repayment bracket,’ said Mr Thomson.
