It’s that time of the year again. We know many people dread tax time and just want to have an idea of how much tax they'll need to pay. Others are eagerly anticipating a tax refund. If you just want to have an idea of where your taxes sit, the Australian Taxation Office (ATO) hosts a couple of handy tools to help you know where you stand.
The Simple Tax Calculator
As the name suggests, the Simple Tax Calculator is straightforward. All you need is the income financial year, your total income, and your residency status. Three quick and easy steps and it will tell you how much tax you should pay.
You take that number and compare it with how much you actually paid. If you paid more, you will get a refund. If you paid less, you will have to pay the difference. Very simple, but unfortunately, it doesn't cover all aspects of your tax.
The Simple Tax Calculator doesn't take into account things like the Medicare levy, the Medicare Levy Surcharge, and study loans such as HECS. It also doesn't consider dependents, spouses, or deductions. The number you get gives you an idea of your tax bill, but expect the final bill to be different due to those other factors.
The Medicare Levy and The Medicare Levy Surcharge
Firstly, yes, there are two of them! Let’s understand the difference between them.
The Medicare Levy is paid by most taxpayers, unless you qualify for an exemption. It is typically 2% of your taxable income and it helps fund the Medicare system. You can calculate how much you will pay using the ATO's Medicare Levy Calculator.
The Medicare Levy Surcharge is for high-income earners who do not have private health insurance. In 2024-25, if you earn more than $97K (or $194K for couples) and don't have private health cover, you will pay an additional levy ranging from 1% to 1.5%. To work out what your rate will be, use the ATO's Income Tests Calculator.
We also have a whole other article specifically on this topic: The Basics of the Medicare Levy.
The Income Tax Calculator
For a more comprehensive tax estimate, the ATO's Income Tax Estimator is your go-to tool. It accounts for a variety of factors, like superannuation contributions, the Medicare Levy, and even your HECS debt. It is particularly useful for people with multiple income streams, deductions, or tax offsets.
However, it requires you to input much more information, ranging from income and deductions to super contributions and spouse's details. With all this data needed, you're quite close to completing a full tax return.
Preparing for Tax Time
As tax time approaches, being prepared is crucial to ensure accuracy and potentially maximise your refund or minimise your payable amount. Here are some tips for preparation:
- Gather Your Documents: Collect all necessary documents related to income and expenses, such as payment summaries, bank statements, and receipts for deductions.
- Know Your Entitlements: Research potential deductions and tax offsets you may be entitled to claim.
- Stay Informed: Tax laws change, so staying up-to-date with the latest ATO guidelines is important.
Seeking Professional Help
While the ATO's tax calculators offer valuable starting points for estimating your tax position, the depth and complexity of tax law mean that a personalised approach often yields the best outcomes. By leveraging our specialised knowledge and support, you can navigate tax time with confidence, armed with a clear understanding of your financial standing and how to optimise it.
Let us guide you through the process, ensuring you make the most of the upcoming tax season with assurance and precision. Contact us to get started.