Tax Return:: Some of the Reasons Why You May Have To Pay a Tax Bill

Hello, this is your tax accountant, P&C Tax Professionals.

As the title suggests, in today’s blog post, we will be going through some of the key reasons why you might receive a tax bill from the ATO instead of a tax refund.

<Factors that may result in a tax bill>

- Your employer did not withhold enough tax from your gross wage

- You’re a sole trader with an ABN and you did not make enough tax payments to the ATO during the year (these are often referred to as pay as you go (PAYG) instalments)

- You have received other income where tax was not withheld (e.g., money you have earned from your investment property or dividends)

- A change in your income has affected your single or family income threshold and as a result, you are now charged for the Medicare levy or Medicare levy surcharge (MLS)

- You have received too much in your private health insurance rebate

<Tax withheld from your income>

As mentioned above, not withholding enough tax from your income may result in a tax bill later on when you lodge your tax return. This may occur due to the circumstances listed below:

> You have moved up to a higher tax bracket (e.g., this can be due to getting promoted or simply because you had multiple sources of income)

> You have made a mistake by incorrectly making several claims for the tax-free threshold (e.g., if you happen to work for multiple employers)

> Your income has risen resulting in a higher repayment threshold to repay your study/training support loan(s).

> You have a study/training support loan which you did not advise your employer about when you provided your tax file number declaration form.

> You have received Australian Government payments or allowances (e.g., Jobseeker, Youth Allowance, Parenting payment, etc.)

Please also keep in mind that tax is not withheld from the following sources of income:

> Additional income you receive from the sale of a capital asset which may include shares or real estate (i.e., a capital gains event arises)

> Income you receive from a partnership, trust or a business

> Income you receive from property investments (such as the sharing economy), dividends derived from shares, interest or returns you receive from other investments and income that you generate as a sole trader.

<Ways to prevent a tax bill>

1. Increasing the amount of tax withheld from your gross income

If you believe that the total amount of tax withheld from your income would not be enough to fully cover your estimated annual tax payable amount, you can request one or more of your employers to increase the amount of tax to withhold from your wages. This is referred to as an “upward variation”.

2. Voluntarily entering into PAYG instalments (applicable to sole traders)

For those people who have earned income as a sole trader or through investments, you are able to voluntarily enter into what is known as PAYG instalments. This basically allows you to prepay your tax and therefore reduces the likelihood of having to pay a large tax bill in the future.

3. Reducing excess private health insurance rebate

Normally, the ATO calculates each individual’s correct entitlement to their private health insurance rebate when they lodge their tax return and makes any adjustments as necessary.

For example:

> If the ATO has deemed that you have received more rebate than you were entitled to --> the ATO will claim back the excess amount upon the lodgment of your annual tax return. You would be able to check this figure on your notice of assessment.

> If you happen to overestimate your income and therefore do not claim your full rebate to help reduce your premium --> ATO will pay you the remaining rebate in the form of a refundable tax offset upon the lodgment of your annual tax return.

Well, this brings our discussion to an end, but if you have further questions, please reach out to us via our Official Facebook Page (P&C Tax Professionals – Australia) or contact us through our email at pnctax@naver.com.

Thank you and bye for now!