Maisie thought she was good for a tax refund of $5000, but the tax office popped that bubble. In this sponsored post accountant GAIL FREEMAN explains why.
“I just tried to lodge my first tax return on MyGov and it says I owe about $5000, but I was expecting a refund. Surely, this can’t be right?”
That was unhappy Maisie on a Zoom meeting to discuss her tax return.
I said: “Looking at what you have lodged, it may well be right. I will explain the things that I see which could have created this.
“Firstly, you seem to have two employers and the tax deducted doesn’t seem to be enough. When you have two employers you can only claim the tax-free threshold from one of them, usually the one who pays you the higher salary.
“So you need to tick the ‘yes’ box at question 9 on the tax-file number declaration form for one employer and for the other you tick the ‘no’ box. Is it possible that you answered this question incorrectly?”
Maisie said she hadn’t filled in the form. “My employers did it for me as I didn’t know what to do. I just signed it,” she said.
I replied that was probably the reason she was undertaxed.
“I recommend that you complete a new Tax File Declaration Form for each employer now so that this doesn’t also happen in the current year,” I said.
“The effect of claiming two tax-free thresholds is that you are not paying tax on the first $36,400 that you earn as opposed to the correct process which is not to pay tax on the first $18,200 that you earn.
“The next thing I note is that you are repaying a HELP debt. You need to tick the ‘yes’ box at question 10 so that your employer knows to take out additional tax to repay your HELP debt.
“However, HELP is a little complex. When you answer ‘yes’ to question 10 your employer takes out additional tax in accordance with the tax tables. There can be an issue when neither job pays you over the HELP threshold which is currently $47,014.
“The best way to ensure that you have paid sufficient tax to cover your HELP debt is to add your two incomes together and work out whether your total income will exceed the HELP threshold.
“Put that total into the HELP calculator on the Australian Taxation Office website and that will tell you how much to pay towards your HELP debt. Then you can work out how much that is per pay period and in writing ask one of your employers to pay that amount in extra tax each pay. When you lodge your tax return the computer calculates how much you actually need to pay based on your taxable income which is your gross income less allowable deductions.”
Maisie wanted to know how to repay her debt once I had calculated it.
“You will have to contact the tax office to make a payment plan,” I told her.
“You can do this online and you just have to nominate the amount you can afford to pay. I can help you with this when we have calculated the amount you owe.
“There is a payment plan calculator so that we can confirm that the amount you want to pay is acceptable to the ATO.”
Resigned to this outcome, Maisie said she understood now why she had a tax debt.
If you need help understanding why you have a tax debt contact the friendly team at Gail Freeman & Co on 6295 2844 or via firstname.lastname@example.org
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