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Speaker 1: Already and this is the Daily This is the Daily OS.

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Speaker 1: Oh now it makes sense. Good morning and welcome to

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Speaker 1: the Daily OS. It's the second of January. Happy new year.

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Speaker 1: I'm Billy and we are back for another episode of

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Speaker 1: tda's summer series. We're here to keep your company over

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Speaker 1: the summer break with the best of tda's deep dies

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Speaker 1: from the year that was. Let's get into today's episode.

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Speaker 1: Today we are talking about tax. Now. I'm very aware

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Speaker 1: that we're exactly halfway through the financial year, so you

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Speaker 1: might not be thinking too much about tax at the moment,

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Speaker 1: but we think it is always a good time to

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Speaker 1: understand more about Australia's tax system. Tax always kind of

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Speaker 1: feels like one of those topics we were meant to

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Speaker 1: learn at school but didn't. And so this year when

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Speaker 1: it hit tax time, the TDA audience had a lot

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Speaker 1: of questions for us. In this deep dive, we asked

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Speaker 1: what you wanted us to explain to you about Australia's

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Speaker 1: tax system, and then we answer them. Here is my

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Speaker 1: chat with Sam.

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Speaker 2: It's just about to be tax time and we're going

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Speaker 2: to try and answer some of the questions that you've

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Speaker 2: got about tax I feel like it's one of those

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Speaker 2: topics where you just told that you should know, and

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Speaker 2: it's all of this expected knowledge that either you missed

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Speaker 2: a date at school where they crammed all of that

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Speaker 2: unto your ten and you just were sick that day,

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Speaker 2: or you won't actually taught it. And we all pay tax,

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Speaker 2: so we should all learn how it works.

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Speaker 1: Feels like it's sometimes in another language.

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Speaker 2: Yeah, and so when we put on Instagram this week,

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Speaker 2: what do you need to know about tax that you

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Speaker 2: currently don't understand? We were swamped with people asking us questions.

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Speaker 2: And what you and I are going to do today

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Speaker 2: is actually go through some of those questions and answer them.

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Speaker 1: And Sam, I'm going to introduce one rule, and that's

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Speaker 1: that there will be no silly questions.

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Speaker 2: We should write a book that's a good one. No, absolutely,

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Speaker 2: no silly questions. Now, just quickly before we get into it, Billy,

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Speaker 2: this episode is sponsored by the Australian Government, so they've

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Speaker 2: asked for our help in communicating about tax time, especially

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Speaker 2: to young Australians. The Government's had no editorial influence over

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Speaker 2: the content we're sharing in today's podcast, and this is

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Speaker 2: really just about trying to make sure you understand what's

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Speaker 2: about to happen to your money.

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Speaker 1: So Sam, let's get into the questions. I've literally got

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Speaker 1: it in front of me and we're just going to

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Speaker 1: go through it. The first one is a very basic one.

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Speaker 1: What is a tax bracket.

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Speaker 2: It's a good place to start, right, Like, let's actually

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Speaker 2: just figure out what we're talking about and the lay

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Speaker 2: of the land. So a tax bracket is what determines

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Speaker 2: the different rates of tax that apply to different levels

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Speaker 2: of income. So someone who's earning two hundred thousand dollars

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Speaker 2: is in the top tax bracket, and someone who earns

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Speaker 2: under eighteen thy two hundred dollars is in the bottom bracket.

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Speaker 2: So at a very top level, people who earn more

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Speaker 2: pay more tax, although this isn't always true in practice

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Speaker 2: because of deductions other exemptions. We're going to talk about

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Speaker 2: that a bit later. But for this reason, we call

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Speaker 2: our income tax system a progressive system because you pay

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Speaker 2: progressively more as you earn more.

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Speaker 1: And so you mentioned they're the bottom bracket, which is

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Speaker 1: under eighteen thousand, two hundred dollars, and then the top bracket,

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Speaker 1: but there are also other brackets in between there because

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Speaker 1: it's a progressive system, So can you explain how is

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Speaker 1: tax done progressively?

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Speaker 2: Okay, So for the first eighteen thousand, two hundred dollars

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Speaker 2: you earn, you don't pay any tax, So think of

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Speaker 2: everyone so exactly, So think of all of these dollars

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Speaker 2: as individual dollar coins. So you don't pay any tax

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Speaker 2: on those first eighteen thousand, two hundred dollars, and that's

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Speaker 2: the bottom tax bracket. But then any dollar you earn

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Speaker 2: above that point gets taxed. So from July, the tax

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Speaker 2: you pay above eighteen thousand, two hundred dollars starts at

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Speaker 2: a rate of sixteen percent and it eventually reaches forty

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Speaker 2: five percent for every dollar. Think of those coins earned

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Speaker 2: over one hundred and ninety thousand dollars. So importantly, let's

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Speaker 2: just say that I'm earning eighty thousand dollars and that

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Speaker 2: would be in the thirty percent tax bracket. That doesn't

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Speaker 2: mean that I'm paying thirty percent tax on eighty thousand dollars.

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Speaker 2: It means I'm going to get taxed nothing on the

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Speaker 2: first eighteen thousand, two hundred dollars. Then every dollar earned

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Speaker 2: between eighteen thousand, two hundred and forty five thousand is

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Speaker 2: taxed at a rate of sixteen percent, and then every

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Speaker 2: dollar earned between forty five thousand and eighty thousand is

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Speaker 2: taxed at thirty percent. Is that kind of makes sense

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Speaker 2: to you.

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Speaker 1: Yeah, so as the income goes up, you progressively get

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Speaker 1: more tax But I don't know if you've ever heard

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Speaker 1: that misconception that you never want to be earning just

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Speaker 1: above a tax bracket. Let's say you never want to

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Speaker 1: be earning above or just on the cusp of one

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Speaker 1: hundred and twenty thousand dollars, because that means you're going

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Speaker 1: to be paying way more tax than if you were

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Speaker 1: just below it. But that is completely wrong. That's a

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Speaker 1: complete misconception.

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Speaker 2: Right exactly. And just keep thinking about those dollar coins.

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Speaker 2: So if you're just over the tax bracket, you're only

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Speaker 2: paying the higher tax rate on that dollar that you're over.

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Speaker 2: Everything else underneath is taxed at the appropriate rate.

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Speaker 1: Got it. And so the next question we received is

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Speaker 1: what does ticking the tax free threshold mean? And why

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Speaker 1: are second jobs taxed more the first one?

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Speaker 2: First, So this is part of the form that you

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Speaker 2: fill out normally when you get a new job. And

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Speaker 2: if you tick a box on the form that says, yes,

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Speaker 2: I would like to claim the tax free threshold. It

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Speaker 2: means you're not going to pay tax on the first

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Speaker 2: eighteen two hundred dollars in that job. And so when

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Speaker 2: this comes in as important is when you have more

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Speaker 2: than one payer, so more than one job, because you

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Speaker 2: can only claim the tax free threshold from one payer,

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Speaker 2: and usually you claim the tax free threshold from the

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Speaker 2: payer who pays you the highest salary. But if you

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Speaker 2: do tick both, it means you're most likely going to

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Speaker 2: have to pay some money back to the ATO at

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Speaker 2: the end of the financial year because basically you've been

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Speaker 2: double dipping on that tax free income offer essentially, right.

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Speaker 1: But when it comes to the second job, it's actually

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Speaker 1: a misconception that you get tax more for a second

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Speaker 1: job because it's not about where the income is coming from.

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Speaker 1: It's just about how much you are earning.

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Speaker 2: Yeah, that is that's a misconception, right, And you don't

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Speaker 2: pay extra tax for having a second job. So if

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Speaker 2: you're earning one thousand dollars a week, it doesn't matter

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Speaker 2: if you're earning that money from one job or five jobs.

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Speaker 2: You'll be paying the same amount as tax as someone

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Speaker 2: who earns it from one. But it may feel like

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Speaker 2: you're paying more tax on the second job because of

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Speaker 2: how that tax free threshold works. So on one job,

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Speaker 2: that payer is not withholding tax on the tax free

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Speaker 2: threshold for you, and on the second job they are

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Speaker 2: withholding that tax, which means on the second job there

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Speaker 2: might be less money in your pay packet. But at

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Speaker 2: the end of the day, it comes down to what

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Speaker 2: your total income is. So think of your name and

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Speaker 2: one figure. That's what the ATO is seeing. And there's

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Speaker 2: no penalty at all for having a second job when

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Speaker 2: it comes.

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Speaker 1: To tax makes sense. The next question we had is,

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Speaker 1: so it's about to be tax time, why do we

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Speaker 1: get some money back? Which not everyone gets money back,

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Speaker 1: but for those who do why.

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Speaker 2: So in most cases, you're going to be taxed the

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Speaker 2: right amount by your employer, and if you don't have deductions,

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Speaker 2: and we'll get to that in a sec you're not

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Speaker 2: going to get anything back in your tax return because

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Speaker 2: you've been taxed the right amount by your employer and

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Speaker 2: that's all kind of automated for you. But if you

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Speaker 2: receive money back at the end of the financial year,

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Speaker 2: it's because you've paid too much tax through the year,

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Speaker 2: and the ATO calls that a tax refund. So if

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Speaker 2: you're working in a full time job, like your full

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Speaker 2: time at the daily Os, your employer so me, we

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Speaker 2: pay your tax for you throughout the year, and that's

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Speaker 2: called the pay as you go tax system. And there's

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Speaker 2: a whole heap of reasons then that you could then

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Speaker 2: look at your tax return and get some tax back.

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Speaker 2: And the most common reason is because of deductions that

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Speaker 2: you've claimed for work related expenses. You can also get

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Speaker 2: some money back if you change income during the year,

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Speaker 2: or there might be some mistakes in the way that

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Speaker 2: tax is withheld by your employer. There's a whole variety

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Speaker 2: of reasons. The main one is deductions.

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Speaker 1: Though you've mentioned that word deductions a few times now,

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Speaker 1: can you just explain what do you mean by that?

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Speaker 2: So this is something that does lower how much tax

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Speaker 2: you have to pay, and it's usually a work related expense.

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Speaker 2: And the idea here is that if you claim it,

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Speaker 2: that expense is deducted from your income and that can

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Speaker 2: mean that you might get some money back from the

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Speaker 2: tax office. And there are so many categories of things

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Speaker 2: you can claim as work related expenses. And the ATO

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Speaker 2: on their website actually has occupations specific guidelines for common

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Speaker 2: work related expenses. So I looked up what it could

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Speaker 2: be for you if you're a journalist, and it could

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Speaker 2: be the cost of hiring a camera when we've asked

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Speaker 2: you to go and film a piece somewhere exotic.

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Speaker 1: It can even be things like if you work from home,

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Speaker 1: for example, you can claim a partial amount on the

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Speaker 1: internet on your.

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Speaker 2: Wi Fi bill exactly. And for all of this stuff,

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Speaker 2: I really recommend talking to an accountant or a financial advisor,

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Speaker 2: or at the very least reading on the ato's website.

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Speaker 2: They're guidelines because it can get a little bit tricky.

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Speaker 2: But it's also a misconception. I've heard this from quite

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Speaker 2: a few friends that you can get back the full

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Speaker 2: amounts that you spend. That's not true. So if you

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Speaker 2: spend one thousand dollars on work related expenses so deductions,

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Speaker 2: and you're in that thirty percent tax bracket, the tax

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Speaker 2: benefit is only going to be thirty percent. It's three

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Speaker 2: hundred dollars, So you are still going to be out

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Speaker 2: of pocket seven hundred.

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Speaker 1: Bucks, right, And is there a maximum amount that you

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Speaker 1: can claim?

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Speaker 2: So you're talking about if you're hiring, you know, thousands

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Speaker 2: and thousands of dollars worth of cameras to film the

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Speaker 2: piece that we've asked you to film in Tahiti.

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Speaker 1: There can be I would go to Tahiti. I'm waiting

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Speaker 1: for that.

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Speaker 2: That's a nice tax deduction. It depends on the category

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Speaker 2: and the nature of what you're claiming. For example, in

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Speaker 2: terms of the maximum amount you can claim when you

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Speaker 2: donate to charity, So donating to charity is a tax deduction.

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Speaker 2: You can't claim more than your income. So in other words,

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Speaker 2: you can't say that you had an annual loss. You

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Speaker 2: earned fifty thousand dollars, but you donated fifty five thousand

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Speaker 2: dollars because you donated more than you earn. So that's

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Speaker 2: just one example. But in every sort of category and

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Speaker 2: occupation there's different guidelines and it's really important. I think

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Speaker 2: the most important thing here is you need to have

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Speaker 2: proof of what you did.

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Speaker 1: But there are often maximums. From what I understand, even

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Speaker 1: the example I said before about the Internet build, you

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Speaker 1: can't claim all of that.

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Speaker 2: So the ATO is given kind of a mathematical way

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Speaker 2: to work out how much you can claim. It's the

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Speaker 2: same thing as petrol if you're driving a car to

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Speaker 2: perform your work duties.

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Speaker 1: Now, next question, can I still get my tax return

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Speaker 1: money from a couple of years ago.

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Speaker 2: Yes, I'm imagining the moments where this person who asked

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Speaker 2: the question on TDA logged into their ATO and saw

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Speaker 2: like three or four years of tax returns that haven't

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Speaker 2: been done. Maybe they were you need they didn't understand

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Speaker 2: that they needed to do it. You actually do have

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Speaker 2: a legal obligation to lodge a tax return, even if

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Speaker 2: you're not due a refund, you still need to get

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Speaker 2: it in and the ATO ideally always wants you to

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Speaker 2: file that tax return before the thirty first of October

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Speaker 2: of that year.

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Speaker 1: So that's four months after the end of the financial

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Speaker 1: year exactly.

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Speaker 2: So our financial year is ending in a couple of

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Speaker 2: weeks on the thirtieth of June, and they want you

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Speaker 2: to get it in by the thirty first of October.

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Speaker 2: And if you do that, you're one hundred percent going

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Speaker 2: to avoid fees or penalties. And that's something we should

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Speaker 2: talk about. I mean, the ATO can impose some penalties

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Speaker 2: on you if you put in your tax return late,

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Speaker 2: but there are also lots of different ways for you

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Speaker 2: to ask for ways out of that penalty, Explain why

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Speaker 2: it took you so long the ATO is always ready

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Speaker 2: to understand what's been going on. Now, if you go

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Speaker 2: to an accountant to help you with your tax return,

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Speaker 2: you just need to engage with them before October thirty one.

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Speaker 2: So you need to set up your appointment and start

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Speaker 2: that process. But you don't actually necessarily need to do

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Speaker 2: the filling out of the tax return with your accountant

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Speaker 2: before October thirty one. So just get a bit more

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Speaker 2: time if you're going with an accountant.

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Speaker 1: Right, So, just to be clear, you've got four months

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Speaker 1: if you're doing it by yourself, but if you engage

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Speaker 1: an accountant, then you have a little bit longer as

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Speaker 1: long as you engage the accountant before the four month deadline.

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Speaker 2: Yeah, but I think if you're listening to this and

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Speaker 2: a little bit confused and you want like a super

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Speaker 2: short takeaway answer, just do it by the thirty first

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Speaker 2: of October that if you can do that, you're in

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Speaker 2: a safe place.

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Speaker 1: I think some people listening will think an accountant sounds great,

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Speaker 1: but also we are in the midst of a cost

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Speaker 1: of living crisis. They also sound expensive.

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Speaker 2: Well, there's a couple of things I'd say to that.

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Speaker 2: I mean, one is it's going to be more expensive

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Speaker 2: if you get fined, and it's going to cause a

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Speaker 2: lot more emotional stress as well. But secondly, an accountant

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Speaker 2: can help you identify areas of deductions you might not

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Speaker 2: even know about, and they can really help guide you

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Speaker 2: through the process. Interestingly, also the cost of seeing an

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Speaker 2: accountant is tax deduction next year, so it's a work

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Speaker 2: related expense in the eyes of the ATO. So if

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Speaker 2: you're feeling really overwhelmed and clueless, it is worth getting

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Speaker 2: professional advice with this. Obviously there's a cost to it.

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Speaker 2: I know that this is a really tough time for Australians,

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Speaker 2: so there's always ways to do it yourself as well,

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Speaker 2: but that options there if you can.

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Speaker 1: Now, another thing the ATO can do is they can

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Speaker 1: conduct an audit. And one person asked, how far back

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Speaker 1: can the ATO audit you? But before we get there,

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Speaker 1: can you first just explain what is an audit?

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Speaker 2: So I've seen on TikTok recently this idea of asking

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Speaker 2: for receipts. It's exactly that, it's literally asking for receipts

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Speaker 2: and it's a more intense examination of you as a

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Speaker 2: tax payer.

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Speaker 1: We have different fyps.

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Speaker 2: Deep in dating FYP right happily married but deep in

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Speaker 2: dating FIP. So it's basically asking for receipts to make

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Speaker 2: sure that what you've said is a work related expense

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Speaker 2: and you've deducted some of your tax for that actually happened.

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Speaker 2: So you know, did you spend one hundred dollars on

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Speaker 2: a textbook that you said would help you for your

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Speaker 2: job when you claimed it as an education expense. Did

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Speaker 2: you actually go to Tahiti to film a piece for

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Speaker 2: us on climate change? Or was that a trip up

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Speaker 2: the coast? And you're not telling the truth.

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Speaker 1: So it's compliance making sure that everyone is complying with

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Speaker 1: the laws.

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Speaker 2: Exactly and if you have done the right thing, there's

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Speaker 2: nothing really to be scared of here. Now in terms

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Speaker 2: of a time limit, you know, how long should you

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Speaker 2: be keeping these receipts for. There's no actual written time

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Speaker 2: limit for how far back the ATO can audit you,

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Speaker 2: but in terms of how they typically work, you can

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Speaker 2: expect to be notified that you've being audited within two

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Speaker 2: years of the date of assessment, so that's normally the

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Speaker 2: end of financial year. That's for individuals and small businesses,

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Speaker 2: and medium to large businesses can expect one within four years.

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Speaker 2: Now one other really important point. If you get a

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Speaker 2: notice that you're being audited, it doesn't mean you've done

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Speaker 2: anything wrong. It might be totally random. It might be just,

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Speaker 2: you know, you've kind of drawn the lucky number and

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Speaker 2: that year's lotto and they just want to go a

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Speaker 2: little bit deeper.

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Speaker 1: Think of it as like the RBT exactly.

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Speaker 2: That's a really good comparison. And so as a guiding rule,

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Speaker 2: I'd keep receipts for five years. I mean it's pretty

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Speaker 2: easy now that most of our receipts are online. So

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Speaker 2: I've got a little folder in my Gmail account that's

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Speaker 2: got every year's receipts.

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Speaker 1: Wow, way to rub it in that you're organized.

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Speaker 2: Well, there's a reason that I'm explaining. So I keep

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Speaker 2: them for five years after I've lodged a tax return.

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Speaker 1: Okay, next question. Now, this is a big one. Why

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Speaker 1: do individuals pay more tax than some companies?

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Speaker 2: Oh, Billy, this is one that really gets people fired up.

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Speaker 1: We often talk about this.

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Speaker 2: Yeah, and so there's this idea out there that large

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Speaker 2: corporations avoid tax and that they're doing so legally, which

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Speaker 2: is a bit weird. I mean it's not always legal,

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Speaker 2: but there is this idea that they've figured out ways

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Speaker 2: to get around the tax system a loophole. Yeah, and

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Speaker 2: we could honestly spend a whole podcast talking about this,

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Speaker 2: and I actually really understand how frustrating it is to

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Speaker 2: look out onto these massive companies and see they're not

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Speaker 2: paying tax, and of course you're earning you know, fifty

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Speaker 2: grand and paying tax on that. So essentially individuals attax

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Speaker 2: differently to companies like a big bank or a big supermarket,

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Speaker 2: or a big mine company or a big tech company,

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Speaker 2: And that basically comes down to what the government has

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Speaker 2: decided is needed to keep the economy moving, growing and

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Speaker 2: relatively fair. So companies are taxed at a flat rate

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Speaker 2: on their profits, so how much they're making minus how

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Speaker 2: much they're spending, and that can be reduced through various deductions,

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Speaker 2: tax credits, government incentives, a whole range of things. I mean,

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Speaker 2: there's full time jobs dedicated to helping companies lower their

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Speaker 2: tax rate. But individuals, on the other hand, are taxed

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Speaker 2: on a progressive scale, as we've talked about, based on

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Speaker 2: their income, So profits versus income, that's really the difference.

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Speaker 1: Right, And the difference there is that profits is once

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Speaker 1: expenses are deducted and if the expense is deducted, means

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Speaker 1: that you're a negative, then you're not paying tax exactly.

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Speaker 2: So if your business makes a loss in a financial year,

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Speaker 2: then you won't be asked to pay tax on that loss.

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Speaker 1: Got it, Okay, next question, we're moving along quickly. If

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Speaker 1: you make a little mistake in a tax return, will

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Speaker 1: you end up in jail?

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Speaker 2: Oh gosh, I've had sleepless nights thinking about the police

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Speaker 2: banging down my door because as I accidentally, you know,

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Speaker 2: done something a day late or that kind of thing. No,

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Speaker 2: I mean, making a small mistake on your tax return

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Speaker 2: is not going to land you up in jail. The

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Speaker 2: ATO takes an approach that mistakes happen, and even if

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Speaker 2: they do find a mistake in your tax return, they

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Speaker 2: typically allow you to amend that. They'll give you a

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Speaker 2: notice saying we've noticed a discrepancy, would you like to

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Speaker 2: adjust it. It's a very different case, though, when you're

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Speaker 2: coming across instances, and these are the ones that you

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Speaker 2: and I talk about in the news, of deliberate tax

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Speaker 2: evasion or fraud, and that can result in severe penalties

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Speaker 2: that you can go to jail one hundred percent for

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Speaker 2: tax crimes. So the golden rule here is if you've

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Speaker 2: been notified of an error by the ATO, they're not

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Speaker 2: about to come to your house and arrest you. You just

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Speaker 2: need to fix the error and go about it in

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Speaker 2: the quickest way possible. Then you know, if you're in doubt,

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Speaker 2: still go and speak to someone. Go and speak to

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Speaker 2: an accountant, because you know there might be then a

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Speaker 2: penalty in play. It's going to be cheaper, it's going

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Speaker 2: to work out cheaper to get some professional advice.

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Speaker 1: So what I'm hearing is the big difference there is

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Speaker 1: intention Did you intentionally make mistake, in which case you

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Speaker 1: may be in trouble. Obviously I think you would be

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Speaker 1: in trouble. But if you didn't intentionally do it, then

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Speaker 1: it's more likely that they will be fine with it.

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Speaker 1: And it's just a case of amending it exactly.

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Speaker 2: And I know you're a good person, and I know

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Speaker 2: that good people like TDA listeners, they always don't mean

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Speaker 2: to make the mistakes. So just fix it up and

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Speaker 2: move on.

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Speaker 1: Okay, last question, and we did touch on this briefly before,

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Speaker 1: but someone asked, do you need an accountant?

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Speaker 2: Well, I think yeah. So this has come up a

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Speaker 2: couple of times in our chat, and it's a weird

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Speaker 2: one because, yes, an accountant is fantastic their job. They've

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Speaker 2: studied for years and years to help you get the

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Speaker 2: most out of your tax return. But you don't necessarily

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Speaker 2: need one, and especially if you can't afford it, it

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Speaker 2: might not be a reality. But if your tax situation

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Speaker 2: is complex, so if you fall into that category of

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Speaker 2: having a few different jobs, if you have you know,

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Speaker 2: different family wealth situations, if there's properties involved, if there's

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Speaker 2: overseas accounts and travel and government allowances and job seekers

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Speaker 2: and whatever, it can help to really make sense of

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Speaker 2: everything and to work out what you can still claim.

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Speaker 2: So when you go and see an accountant, you sit

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Speaker 2: down and they make sure that your tax return is accurate,

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Speaker 2: but they also then identify where you could perhaps getting

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Speaker 2: some more money back, what government programs you might be

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Speaker 2: eligible for. And again, as I said, the actual cost

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Speaker 2: of going to see an accountant is a tax deduction itself,

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Speaker 2: so you can claim that year after and at the

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Speaker 2: end of the day. This is not meant to be

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Speaker 2: a hugely stressful period of life. It's meant to be

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Speaker 2: kind of a form that we have to fill in

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Speaker 2: at the end of the year to make sure we're

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Speaker 2: part of a growing country.

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Speaker 1: Great. I feel so much more informed. This feels like

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Speaker 1: a classic example of one of those things that we

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Speaker 1: weren't taught in school. Yeah, but definitely should have been

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Speaker 1: that one hundred percent biased opinion. But it's just crazy

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Speaker 1: that we I just expected to know this.

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Speaker 2: I do think there's a whole series of examples, like

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Speaker 2: a tax return, of things that we just should have learned.

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Speaker 1: Sam, Thank you so much for explaining.

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Speaker 2: Thanks so much, Billy.

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Speaker 1: That's it for today. Thank you so much for listening

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Speaker 1: to tda's summer series. If you're on break, we hope

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Speaker 1: that you are having a relaxing time, and if you're

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Speaker 1: still at work, we also hope that you are having

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Speaker 1: a great day. We'll be back again tomorrow with another

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Speaker 1: episode from our summer series. Until then, have a great day.

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Speaker 1: My name is Lily Maddon and I'm a proud Arunda

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Speaker 1: Bungelung Calcoton woman from Gadighl Country. The Daily oz acknowledges

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Speaker 1: that this podcast is recorded on the lands of the

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Speaker 1: Gadighl people and pays respect to all Aboriginal and Torres

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Speaker 1: Strait Island and nations. We pay our respects to the

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Speaker 1: first peoples of these countries, both past and present,