There are always two possibilities – that you might owe money to the Australian Tax Office (ATO) or that you’re about to receive a much-needed cash injection. Regardless of which category you fall into, understanding tax for both personal and business finances is important. Not to mention, looking after your financial wellbeing during tax time is just as important as sorting receipts.
You might be wondering where to start or pondering where those pesky receipts you’ve been collecting are hidden. During tax time in Australia, there’s a significant amount of pressure and stress to ensure your tax return is completed correctly and optimised for the greatest return. We will unpack all the myths surrounding tax time and dive deeper into the rights and wrongs of personal and business taxation.
However, please note – never replace expert advice with this article – this story is for educational purposes only!
Understanding the Basics: Personal vs Business Tax in Australia
If you feel confused during this time of year, then you’re like most of us. However, there is valuable information you can learn to understand the difference between personal and business taxes.
Firstly, personal tax is the money you pay to the ATO each pay cycle. The way the ATO formulates your tax is based on your annual income. You can lodge a tax return in Australia once your organisation provides the necessary information to the ATO – usually post July 1 – and must be completed by October 31. (This date may vary if you regularly submit your tax returns to a tax agent and are eligible for an agent extension). Collective Financial Partners outlines that the five tax thresholds look like…
- 0 to $18,200: You pay nothing as you’re under the tax threshold.
- $18,201 to $45,000: You’ll pay around 19 cents for each $1 over $18,200
- $45,001 to $120,000: You’ll pay around $5,092 plus 32.5 cents for each $1 over $45,000
- $120,001 to $180,000: You’ll pay $29,467 plus 37 cents for each $1 over $120,000
- $180,001+: You’ll pay $51,667 plus 45 cents for each $1 over $180,000
Now, this seems confusing, so if you’d like a more accurate and indicative personal tax figure, you can use the ATO’s simple tax calculator Australia.
On the other side of the tax spectrum is your business taxes. Unfortunately, the tax headache can be longer-lasting here because business taxes can be somewhat more complicated. When it comes to business tax in Australia, understanding what you can claim is half the battle (and the paperwork).
A number of factors contribute to how much tax your business pays: employee size, type of business, fringe benefits, and more. Unlike personal taxes, where you lodge a return each year, you may have to pay your business taxes at different intervals throughout the year (hey, why not make things even more convoluted). Types of business tax you may face include:
- Income tax: Calculated based on your assessable income.
- PAYG: These are quarterly pay-as-you-go instalments.
- GST: A goods and services tax.
What You Can Claim: Tax Deductions for Individuals & Businesses
Another aspect of tax time in Australia that gets heads whirling is what a person or business can claim yearly. According to H&R Block, 84% of taxpayers expect a yearly refund. However, the ATO said there was an $8.7 billion tax gap due to errors and mistakes made on tax returns. Knowing what you can and can’t claim is more important than ever! However, you must have the necessary documentation to back up these claims. So, make sure you have all your receipts handy because incorrect tax filings can come with some severe penalties.
We can’t stress this enough: check what you can and can’t claim before lodging your tax return in Australia.
Business Australia says you could claim the following business expenses:
- Vehicle expenses
- Travel expenses
- Salaries and superannuation
- Repairs and maintenance
- Operating expenses
For the humble taxpayer, you could claim a range of expenses, including:
- Home office equipment
- Your vehicle and travel
- Clothing
- Education
- Gifts and donations
Mental Health at Tax Time: How Financial Stress Impacts Wellbeing
Being a business owner has its own level of stress. Work-related stress can be prevalent within the small business community, with 91% of SMB owners feeling some pressure. Compounded by the complexity of tax season, it can be a challenging time when it comes to your mental health and financial wellbeing.
For personal taxes, fearing that you’ve completed your tax return incorrectly, losing receipts, or worrying about finances can make you feel particularly stressed and vulnerable. If you’re hoping for a decent return to get you out of a jam, this can make you feel even more anxious.
If you’re exploring your personal or business taxes, getting guidance during this season is crucial. Seek support from a qualified accountant or financial planner and talk to someone close to you about your mental health. Also, use wellbeing services available to you (like us, a free and confidential employee wellbeing provider (EAP) offering financial coaching — just saying!).
Knowing when to seek help and finding support from the right people may help you offload your financial stress and understand your financial position.
Cost of Living & Tax Returns: Why Every Dollar Counts More Than Ever
Cost of living relief is top of mind as pressures are hitting every Aussie household in more ways than one. Each person can feel the pinch differently, but one thing is clear: every dollar counts more than ever. According to ABS figures (2024), the average employee household has seen a cost increase of 6.9%.
”“Increases in interest rates and insurance premiums over the year have contributed to annual living costs rises ranging from 3.3 per cent to 6.5 per cent for different household types. Employees, other government transfer recipients, and pensioner and beneficiary households recorded higher rises than the 3.6 per cent annual rise in the CPI.”
Michelle Marquardt, ABS Head of Price Statistics.
As such, the need to maximise your tax return Australia can feel critical. So, study up on what you can claim. Dig out those pesky receipts. And finally, seek financial coaching or professional guidance to get the most out of your return.
Tax Agents vs DIY: What’s Best for Your Situation?
Let’s explore the pros and cons of filing your own tax return Australia vs using a registered tax agent. There’s never a one-size-fits-all approach. However, knowing what’s best for your situation will make it easier once the new financial year commences. So, the pros…
Doing your own taxes looks fairly simple with the ATO providing a step-by-step process for filing your own tax return, commonly known as e-tax. There’s little time pressure and lower fees associated with doing your own tax return. Conversely, the cons are that it can be an overwhelming and time-consuming process, especially if you’re unsure how to navigate the process effectively. If you’re unsure how or what to claim, this can make things just that little more arduous.
On the flip side, hiring a tax agent also comes with its own pros and cons. A tax agent’s fees are deductible. They can also extend deadlines, have the knowledge and expertise, and can give personal, tailored advice. On the other hand, the time commitment and miscommunication can be considered cons, especially if they’ve misheard you and lodged the wrong expense. So, it’s best to consult with an accountancy firm or financial wellbeing service to understand if they’re the right fit for you.
- Have your Tax File Number handy
- Ensure your details (including those all-important bank numbers) are correct
- Keep records of all your expenses and income
- Double-check that the amount of tax withheld is correct
- Work out how much Medicare levy you owe
- Review how much you owe based on student loans, etc.
- Calculate if you’ve paid the right amount of tax (both personal and business)
This is a lot of information to comprehend. That’s why support from a tax agent could help you navigate the stresses of tax time in Australia.
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Common Tax Mistakes to Avoid This EOFY
Q. What are the most common EOFY tax mistakes?
A. Mistakes include claiming ineligible deductions, missing income sources, poor record-keeping, and lodging tax returns late—leading to ATO penalties or audits.
Q. Can I claim work-from-home expenses?
A. Yes, if you meet the ATO’s eligibility. You can claim costs like electricity and internet using either the fixed rate or actual cost method. Accurate records are essential.
Q. What if I lodge my tax return late?
A. Lodging after 31 October without an agent extension can result in fines, interest, and delayed refunds.
Q. How do I avoid deduction errors?
Q. How can I prevent tax mistakes?
A. Stay organised, track your finances, understand your entitlements, and get help from a tax professional if needed.
Q. Do I need to report side income or investments?
A. Yes. Income from freelancing, rental properties, dividends, or crypto must be declared. The ATO uses data-matching to detect omissions.
Q. Can I estimate expenses without receipts?
A. No. Guessing can trigger audits. Keep detailed records for at least five years to stay compliant.
Q. Should I skip a tax agent to save money?
A. DIY tax returns can save fees, but agents offer tailored advice, reduce errors, and their fees are deductible.
Q. What happens if I overclaim deductions?
A. Overclaiming—intentional or not—can lead to audits, fines, and repayment with interest. Accuracy matters.
