In most cases both individuals and businesses are required to file an annual tax return.
Do you have to file a tax return?
Generally, if your taxable income exceeds the minimum tax-free threshold, you must lodge a tax return. If you are an Australian resident (but not a primary producer or, in some cases, under 18 years old) the threshold is $18 200 (as at 1 July 2019). The availability of various rebates means that, even if you earn more than the threshold, you may not have to pay tax, although you do have to lodge a tax return.
Individuals who earn less than $66 667 can receive a low-income tax offset (LITO) of up to $445. However, the offset amount is reduced for taxable incomes of more than $37 000. The LITO no longer applies to reduce the tax payable by minors (persons under 18 years as at 30 June) on unearned income (e.g. dividends, interest, rent and royalties).
Changes to the LITO were made by the federal government in their 2018–2019 budget: from 1 July 2022, a new LITO of up to $700 applies to individuals who earn less than $66 667.
The new LITO amount is reduced by 5 per cent of the amount by which an individual’s taxable income exceeds $37 500 (up to a taxable income of $45 000), and a further 1.5 per cent of the amount an individual’s income exceeds $45 000.
The federal government has introduced a new low-and middle-income tax offset (LMITO) that only applies from 1 July 2018 to 1 July 2022. The LMITO is up to $1080 and applies to individuals who earn less than $126 000; the offset amount is reduced for taxable incomes over $37 000. An individual’s entitlement to the LMITO is in addition to the existing LITO and is available on assessment after lodging a tax return. The LMITO was introduced to provide tax relief for eligible low- and middle-income earners until the new LITO takes effect in the 2022–2023 income year.
If you are an Australian resident aged under 18 at the end of the tax year (30 June) and received income in a form other than salary or wages (e.g. dividends, interest, rent, royalties), you do not have to lodge a tax return if your income was $416 or less in the 2019–2020 income year. (Note that different rules apply to minors who received income as a result of an inheritance and in certain other circumstances.)
If you are not a resident of Australia for tax purposes, you need to lodge returns if you derive income that is taxable in Australia, other than income from which withholding tax has been deducted.
In some cases, you may need to lodge a tax return even where you have not reached a tax-free threshold. For example, you may work for only a short time but have had taxation instalments withheld from your pay. Even though you have earned less than the tax-free threshold, you will have to complete a tax return in order to receive a refund of the tax that has been withheld. Resident companies (except not-for-profit companies), partnerships, trusts and superannuation funds are required to file returns regardless of income. Not-for-profit companies (which include most clubs and associations) have to file a return if their taxable income exceeds $416.
More information about who is required to submit tax returns is contained in the Individual Tax Return Instructions 2019 and on the ATO’s website.
In most cases, you will be required to complete an “income tax return for individuals” form if you are:
• a salary or wage earner;
• a pensioner;
• on unemployment benefits; or
The Individual Tax Return Instructions 2019 has copies of forms, instructions and an outline of the relevant tax provisions to assist you to prepare your forms.
If you are the legal personal representative of a deceased person (e.g. the executor of a person’s estate), you must complete a “date of death” return for the period up to the date of their death. The form used for this is the “tax return for individuals” form. You then need to apply for a TFN for the estate and complete a “trust tax return” on behalf of the estate for each income year until its administration is completed. More information about the responsibilities and liabilities of executors is in the Individual Tax Return Instructions 2019.
Businesses also need to file annual tax returns. If you are carrying on a business, you also need to complete a Business Activity Statement (BAS). The BAS is used for the majority of your tax obligations including your business income and your PAYG and Goods and Services Tax (GST) reporting requirements (see “Goods and Services Tax”). While some businesses are required to lodge their BAS quarterly or monthly, others only need to lodge a BAS annually.
If you earn investment income or carry on a business but are not required to be registered for GST, you need to complete an Instalment Activity Statement (IAS). Like the BAS, the IAS is used for reporting your tax obligations, such as company income tax, PAYG and Fringe Benefits Tax (FBT).
For more information about the BAS and IAS, visit the ATO’s website (www.ato.gov.au).
Tax returns are due on 31 October each year. If you cannot meet this date, lodge an extension application with the ATO. This must be lodged before the due date and the application should state your reasons for requiring an extension.
Tax agents are allowed to spread their work over the working year. As a result, one advantage of using a tax agent to lodge a return is that for many taxpayers, the return does not have to be lodged until later than 31 October. This date varies depending on the characteristics of the taxpayer. The ATO publishes details of its lodgment program each year on its website. However, when you use a tax agent for the first time you must complete a form provided by the tax agent, preferably prior to 30 November.
The Individual Tax Return Instructions 2019 (see “Tax resources”) explains how to lodge a return. If you lodge a paper return, it takes up to 50 business days after lodgment to finalise your tax return.
Alternatively, you can lodge your return online using myTax. From 1 July 2016, myTax replaced the ATO’s e-tax service, which is no longer available and cannot be used to lodge tax returns online. When lodging your tax return using myTax, you are required to create an account with myGov and link your account to the ATO. The myGov portal links all your information held by multiple government agencies into one account. To register for myGov, visit https://my.gov.au.
Taxpayers using myTax will find their tax returns pre-prepared by the ATO with information already included, including salary and wages, interest, dividends, Centrelink payments and private health insurance details. As most of the information from your employer, bank and government agencies is not pre-filled until late August, the ATO recommends you wait until late August to lodge your return using myTax. The lodgment can be done at your convenience, as myTax is available at any time, and you will get your refund faster (generally within two weeks) than if you lodge a paper return.
MyTax has been upgraded to do everything that the ATO’s e-tax service could do, and more. The myDeductions data from the ATO app automatically loads into your return. There are new tools to record depreciation and capital gains, and you can lodge or amend prior returns. MyTax also includes fully integrated tools and calculators, and helpful messages to guide you through lodging your return.
Once the ATO has completed your assessment, a notice setting out the details is posted to you. If you are entitled to a refund, the notice will indicate this and either a cheque will be attached, or a bank account you have specified will be directly credited with the amount. Where you are required to pay additional tax, this will be indicated on the notice, along with a date by which it must be paid.