Your tax return is your sole responsibility. So if you generate income in Australia, you have to have a tax file number (TFN) and pay taxes using your earned money. You can compute the amount you need to pay for taxes in a specific year based on your annual tax return.
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Filing your income tax return may be a burdensome activity for you. Still, you must understand that this is your moral and social duty as a responsible citizen of your country. Learn more about how to lodge your income tax return and the reasons why you need to below:
Lodging Your Income Tax Return
If you are making a stable income, you need to pay taxes on that income. If you are a salaried employee, your employer will deduct tax from your pay and then transfer the amount to the ATO. This is commonly known as Pay As You Go (PAYG) withholding.
But if you’re self-employed and are using an Australian Business Number (ABN), you’ll have to pay your tax and super on your own. After completing your tax return, your income, expenses, and deductions will be assessed by ATO to see if you’re eligible for a tax refund or have to pay some additional taxes.
Lodging your tax return can be very complicated and confusing, especially if this is your first time. A simple mistake might make you miss out on a refund or cause you to pay fines. It might be best to seek a reliable tax return accountant in Melbourne if you live in that area.
Why You Should File Income Tax Returns Every Year
There are many reasons why you must file your income tax returns every year. Below are seven significant reasons why you should exercise this activity without fail. Read to know more:
1. Claim Tax Deductions
The Income Tax Assessment Act of 1997 lets taxpayers claim several deductions under various sections to reduce an individual’s tax outgo. But, to claim these deductions under several sections of the Income Tax Assessment Act of 1997, you have to consistently file your income tax returns every fiscal year by the due date.
2. Claim Tax Refunds
In most cases, when Tax Deducted at Source (TDS) is subtracted from your income, you may start claiming a refund from the Australian Taxation Office. This happens when the total amount of taxes you have to pay is less than the amount deducted from your income. But you can only do this if you consistently file your income tax returns on or before the due date.
3. Adjust Your Capital Gains and Losses
If you are currently investing in equities, you are most likely eligible to adjust your capital gains and losses. According to the Income Tax Assessment Act of 1997, you can adjust your capital losses against your capital gains.
But for you to do that, it will be mandatory for you to file your income tax returns each fiscal year. And if you regularly file your income tax returns, you can actually carry your capital losses forward for the next eight fiscal years.
4. Assists in Visa Processing
If you plan an international trip to countries like Russia, filing your income tax returns may come in handy. When applying for a Visa, the foreign consulate will ask you to prove your income if you aren’t visiting someone who will act as your sponsor. They will also ask for your income tax receipts for a particular time.
5. Apply For Credit Cards and Loans
When applying for a credit card or a loan, most banks will check how responsible you are with your finances. If you have regularly filed your income tax returns, it will stand as solid proof that you have a stable income and have paid the appropriate amount of taxes for it.
You also need to keep in mind that most financial institutions will ask for your income tax returns for the previous years before approving your home or car loan or your credit card application. Insurance companies will also require your income tax receipts when you purchase term insurance with a higher amount.
6. Recover Overpaid Tax From Your Paycheck
Without knowing so, your employer may have had too much tax deducted from your paycheck. And you might not have benefited from all the tax credits and deductions that you were actually entitled to. Again, you can only recover overpaid tax if you have regularly filed your income tax returns.
7. Become a Responsible Citizen
Regularly filing your income tax returns is a good sign that you are a responsible citizen of your country. Filing on time can contribute to Australia’s economic growth, and you’ll have peace of mind for you and your loved ones.
It might be tempting to think that filing your income tax returns is both a waste of your time and money. If you are starting to think this way, you can review the reasons listed above and why you need to regularly file your income tax returns.