Your first tax return
If you earn income you will probably pay tax. Understanding how
income tax works and how to do your tax return can help you sort
out your finances at tax time.
What is tax?
Tax is the money we pay to the governments; the federal
government, state and territory governments and local
The governments use tax revenue to pay for public goods and
services we use every day including health and community services,
national defence and public education, as well as infrastructure
like roads and railways. These contribute to the wellbeing of all
How to get a tax file
If you work or receive a Centrelink
benefit you will need a Tax File Number
(TFN). A TFN is given to you by the Australian Taxation Office
(ATO) to manage your tax and super. Everyone gets their own TFN and
it's yours for life.
If you need to get a TFN or you don't know what your TFN is contact the ATO.
How income tax works
If you generate income you will usually pay income tax on that
money. Income tax is paid throughout the year as you earn
Usually your employer will deduct tax from each pay and send it
to the Australian Taxation Office (ATO) on your behalf. This is
known as Pay As You Go (PAYG) withholding. This is done so you
don't have a big tax bill at the end of the year. You can see the
amount of tax that has been taken out by your employer on your pay
Your income tax may include the Medicare levy which pays
for the public healthcare system.
When you complete your return the amount of income tax the ATO
calculates you need to pay is assessed against the total PAYG
withholding amount your employer has taken out of your pay
throughout the year. From this the ATO determines if you will get a
tax refund or need to pay a tax bill.
The ATO's online tools for lodging your return will calculate
your tax for you. You just need to provide the ATO with the
information they need.
Video: Will's tax return
Video about Will's tax return.
TAFE teacher Andrew explains how Will's tax will be calculated.
Will is an apprentice who has been working for a year.
This video is from ASIC's Be MoneySmart
online modules. You can do these online modules informally to
learn how to make better decisions about your money or through a
registered training organisation (RTO) and have it recognised as a
Certificate III competency.
If you have more than one job you may be able to claim the tax free threshold from the job that pays
Assessable income is income that you must pay tax on. It
includes your employment income, most government payments, bank
interest and more.
The ATO has more information on income you must
declare in your return.
Allowable deductions are subtracted from your assessable income
to find your taxable income. These deductions reduce the amount of
money the tax rates are applied to which can help reduce your tax.
Common allowable deductions include:
- self-education expenses
- the cost of your uniform and laundry expenses for work
- gifts and donations of $2 or more to an approved charity.
Here are some simple rules about allowable deductions:
- You must claim the deduction in the same financial year you
made the purchase.
- You can't claim an expense you have been or will be reimbursed
- You must have written evidence of your purchase, such as a
There are a lot of different deductions that can be claimed.
Take a look at the ATO's deductions you can claim
webpage for more details.
Tax offsets directly reduce the amount of tax you have to
One common tax offset for part-time and casual workers is the
low and middle income tax offset. If your taxable income is below
$37,000 you'll get a $200 offset. If your income is higher, you
could receive up to $530. The ATO will automatically work out this
offset for you when you lodge your return.
Try the ATO's low income tax offset
calculator to see if you are eligible.
You can find out more about tax offsets on the ATO's offsets and rebates webpage.
How to lodge your tax
Not all people need to lodge a return. To see if you do try out
the ATO's online tool Do I need to lodge a tax
return? You can lodge your return online or via a paper
Most people under 25 lodge their return online. Lodging online
is easy because the ATO pre-fills a lot of information and
automatically calculates your tax for the year.
You can lodge your return online using mytax. You
need a myGov account linked to the ATO to lodge
You can also fill out a paper form return from the ATO.
If you are lodging your tax yourself, you need to lodge it by 31
October or you could face a penalty.
Getting your tax refund or
Once you lodge your return the ATO will send you a notice of
assessment which will tell you if you have a tax refund or how much
tax you need pay.
How Australians spend their tax refund
Most Australians get a tax refund. Take a look at
our tax refund
infographic to find out the average refund and how people spend
bit of help with your tax?
Many people choose to use an accountant or tax agent to do their
tax return. Find out more about choosing an
If you do your own tax return make sure you are getting all the
deductions and offsets you are entitled to.
Understanding how income tax works and how to do
your tax return can help you sort out your finances at tax
Last updated: 27 Aug 2018