Newbie question on tax - recently employed fulltime how to pay tax?

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Australian Taxation Office

• 

  mskeggs on 08/11/2016 - 09:56

  +10

  It is called PAYG.
  The company deducts tax from each pay cheque and sends it straight to the ATO.
  At the end of the year they will review your return and send you a return if you had too much deducted (usual for PAYG) or a bill if you owe some (if you did some extra freelancing, for example).

  • 

    BatmanBeer on 08/11/2016 - 13:04

    That makes sense, thanks. How is it that people usually get deducted 'too much'?

    So from my understanding…
    If I earned $55,000 from my full-time, and then $10,000 from freelance, since the tax from $55,000 is already managed, I would (usually) only need to worry about paying tax from the extra income ($10,000) that I earned?

    And the percentage I have to pay back is calculated from 55,000+10,000? i.e. 32.5c per $1 - so in my example it'll be something like $3250 that I have to pay?

    I appreciate your help!

    • 

      foxmulder on 08/11/2016 - 13:14

      Hi yes for the freelance income as it wasn't taxed it will be taxed at at 32.50 percent. And you also need to add 2 percent for medicare levy.

      Assuming yout company pay you fortnightly they collect the tax from your gross pay then every company activity statement (monthly or 3 monthly) your company will pay ATo this collected tax.

      • 

        BatmanBeer on 09/11/2016 - 17:30

        Thanks so much totally wasn't aware of the extra bits! Looking through I realise that I may have extras I need to start pay tax for

    • 

      mskeggs on 08/11/2016 - 13:26

      How is it that people usually get deducted 'too much'?

      Because the PAYG tax rate assumes you will make no tax deductions.
      When you do your tax return you are likely to have some work expenses (commonly called tax deductions). The money used for work expenses shouldn't have any tax taken out, so it is refunded.
      A simple example is a charity donation. If you gave $100 to a registered charity like the Red Cross, they will issue you a receipt. There is a section on your tax return to enter such amounts.
      When you complete your return, you add all the income and subtract all the deductions.
      Since when you earned that $100 your employer took out 30% tax (or whatever your rate), the government will refund you that portion.

      So from my understanding…
      Your example is generally right. As foxmulder says, there are other bits and pieces like the medicare levy, less any tax deductions.

      • 

        BatmanBeer on 09/11/2016 - 17:32

        Thanks so much for your explanation. It's all coming together now :) Now I understand how donating helps.

• 

  k-rokfm on 08/11/2016 - 10:08

  They will calculate how much tax you have to pay each fortnight and deduct that from your earnings for that fortnight (or weekly/monthly however you are paid). Then at the end of financial year you will submit your tax return and that will calculate how much you have earnt for the whole year and how much tax has actually been paid. You may then need to pay additional tax, or you may get some back depending on your situation. Usually if you only have the one job through the FY you will likely get very little back or have to pay very little additional.

• 

  Baysew on 08/11/2016 - 10:52

  +2

  At the end of the financial year (30th June) your employer with give you a "PAYG Payment Summary" (Sometimes called a Group Certificate). This will show your total income along with the amount of tax your employer has deducted on behalf of the ATO.

  From there you would complete your return adding the income from Payment Summary and additional income from your freelance work, interest etc less your deductible expenses. The tax paid via employer is also recorded on the return.

  Once the return is lodged, the ATO will send you an Assessment Notice, then you will either get a refund or an amount to pay.