How to avoid an unexpected tax bill

The Australian Taxation Office (ATO) is giving taxpayers some simple ideas to help avoid an unexpected tax bill next tax time.

There are easy steps you can take right now to ensure the correct amount of tax is being put aside throughout the year. Such as:

• Let your employer know if you have a study or training support loan such as a HECS or HELP debt. Under the pay as you go (PAYG) withholding system, your employer will withhold an additional amount from your salary and wage income to cover your compulsory repayment.
• Check you are only claiming the tax-free threshold from one employer. Usually, you claim the tax-free threshold from the payer who pays you the highest salary or wage.
• Consider whether the Medicare Levy Surcharge may affect you this financial year. If you, your spouse and any dependent children (including newborns) don’t have an appropriate level of private patient hospital cover, and you earn above a certain income, you’ll have to pay a surcharge of up to 1.5 per cent of your total taxable income. The Medicare Levy Surcharge is not covered in tax withheld by your employer.
• Check your income tier is correct for your private health insurance rebate. By updating your income with your private health insurer, you ensure you don’t receive too much rebate, which would need to be repaid when you lodge.
• If you earn business or investment income, consider voluntarily entering PAYG installments and prepaying tax throughout the year to avoid a large bill at tax time. If you’re earning regular income through multiple sources, including a ‘side hustle’, prepaying your tax through PAYG installments will help you smooth out your cash flow and gives you the flexibility of spreading out the payments if you expect to owe tax on your income.

Remember that if you have multiple sources of income, you may end up with a tax bill as your combined income may push you into a different tax or study loan repayment bracket.

If you lodge your own tax return, the due date for payment is 21 November, regardless of when you lodge. If you are using a registered agent your due date may be later.

For taxpayers facing financial difficulties or hardship, reach out to the ATO or a registered tax professional early to discuss the support that is available including payment plan options.