4E. Understanding tax

Your tax file number (TFN) is your personal reference number for tax and superannuation systems. Without a tax file number, you can’t collect government benefits, lodge your tax return electronically or get an Australian business number (ABN). You may also pay more taxes.

If you don’t know what your TFN is, you can find it:

• on income tax notice of assessment or other letters from the Australian Taxation Office
• on payment summaries (provided by your employer) or your superannuation statement
• through myGov if it’s linked to the ATO
• ask your tax agent
• contact the ATO on 13 61 28, 8 am-6 pm, Monday to Friday

For further information on applying for Tax File Number, see the Australian Taxation Office.

For further information on if you need to lodge a tax return for the current and prior income years, see the ATO’s Do I need to lodge a tax return tool? There are some exceptions, but generally, you must lodge a tax return if any of the following apply:

• tax was deducted from any payments (such as wages) made to you during the financial year
• you are an Australian resident, and your taxable income was more than the tax-free threshold
• you are a foreign resident, and earned more than $1 in Australia during the financial year
• you are leaving Australia permanently or for more than one financial year

You can lodge your annual tax return via:

• myTax – if it’s linked to your myGov account – instructions for setting up a myGov account and linking it to the Tax Office can be found on the ATO website
• Lodging a paper tax return
• a registered tax agent – they are the only people allowed to charge a fee to prepare and lodge your tax return. You can claim the cost of paying registered tax agents as a tax-deductible expense

You may be eligible for free help from the ATO to complete your tax return under the Tax Help Program.

If you fail to lodge your tax return by the due date (typically 31 October of the following year), the ATO has the right to issue you with a failure to lodge on-time penalty and charge interest for late payment of your income tax liability. To avoid the Tax Office issuing a penalty, you should inform the Tax Office in advance if:

• you are unable to lodge your tax return on time
• you have a tax liability and do not have sufficient funds to pay

Where you have engaged a registered tax agent to prepare your tax return, the lodgement due date will be later in the financial year.

For more information on penalties and interest charges that the Tax Office may apply, see the ATO website.

Curtin university offers a free tax clinic. Accounting and taxation students can assist with tax advice and tax assessments. For more information, visit the Curtin Tax clinic.

The amount of tax you pay depends on how much you earn. Australia uses a sliding scale of tax. To see the level of tax you need to pay based on your annual income, refer to the ATO’s Individual income tax rates guide.

Further information on the types of income that you need to pay tax on and what expenses and other deductions you can claim, can be found on the ATO website.

Normally, if you sell an asset for more than you paid for it, you will have to pay capital gains tax on the profit. However, there are exceptions, including if you are selling:

• your main residence
• a car or motorbike
• any asset acquired before 20 September 1985
• the gain is as a result of a relationship breakup – capital gains tax is not paid on transfer of assets as a result of relationship breakup. More information on the tax implications of changes in assets ownership following a relationship breakup can be found on the ATO website

If you sell an investment for less than it cost, you make a capital loss. This capital loss can be offset against any capital gain made in the current tax year or it can be used to offset any capital gains in future years.

More information about capital gains tax, including exemptions, can be found at the ATO website.