Tips for Australian Individual Tax Returns and Assessable Income
In Australia, an employee is a person who receives a salary or wage for work performed under a contract wholly, or principally, for labour provided. If you derive a salary or wage under the PAYG withholding tax system, your employer is required to withhold tax from your gross pay. And your employer has a statutory obligation to make employer superannuation guarantee contributions on your behalf to your nominated complying superannuation fund.
You can deduct from your assessable income certain work-related expenses that have a direct and relevant connection with deriving your assessable income, such as subscriptions to a trade union, protective clothing and tools, or trade and car expenses.
But you can’t claim expenses that are private or domestic in nature, such as travel expenses from home to work and child-minding expenses to look after your children while you work. You need to supply documentary evidence to substantiate work-related expenses that exceed $300. Under the car substantiation rules, there are two ways you can claim a car expense. But you need to satisfy certain conditions, such as the number of kilometres you travel each year and whether you had kept a record of all your car expenses.
At the end of the financial year you need to lodge an individual tax return disclosing the income you derived during the financial year, such as your salary or wage, any allowances you receive, and investment income.
A main residence is a place where you and your family normally reside and use for private or domestic purposes. Under the capital gains tax (CGT) provisions, owning a main residence is normally exempt from CGT. But if you use your main residence to derive assessable income (for instance, you run a home-based business) you’ll only be entitled to claim a partial exemption.
If you have children, you could qualify for a number of tax concessions if you satisfy certain conditions, such as a paid parental leave scheme if you have a baby, and a child care rebate to help cover the cost of child care while you work. There are anti-tax avoidance provisions with respect to income derived by children under 18 years of age. The purpose of these provisions is to stop parents putting large sums of money into their children’s accounts in order to avoid or reduce the amount of tax payable on investment income derived.