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A sole trader in Australia lodging his income tax return
taxes

Tax returns in Australia: A guide to lodging your tax returns

It seems we do everything online: keep up with friends, check bank account balances, look for new homes and order food. So, why not complete your tax returns online?

If you’re not yet used to the idea of completing online tax returns – or if you need a few answers before you dive in – then you’ve come to the right place. Throughout this article, we’ll run through everything you need to know to lodge an online tax return – whether you’re reporting your own personal tax or doing so on behalf of your business.

Setting Up Your Online Tax Filing Account

Before you can file tax return details online, you need to create a myGov account and link it to the ATO by:

  • Adding your personal information (name, date of birth, tax file number)
  • Answering a couple of questions to prove your identity (for example, you may be asked to provide your bank account details or add a PAYG payment summary from within the previous two years)

If you don’t have enough information to answer the second question, you’ll need to call the ATO and ask for a unique linking code.Once all this is sorted, you’ll be able to file your tax returns online.

How to lodge your tax return?

All Australian residents are required to pay income tax on annual earnings above $18,200 (anything below this falls into the tax-free threshold). The income tax rate starts at 19%, but the more you earn, the higher your tax bracket will be (and therefore the more you will owe to the ATO).

Declare your income and claim deductions 


If you’re an employee of a company, your company will handle tax withholdings for you, i.e. automatically deducting the necessary amount of income tax from your monthly pay. While this saves you from monthly admin, it doesn’t mean that your job here is completely done.

Despite not having to pay income tax yourself, you still have to submit a yearly tax return to the ATO. October 31 is the deadline for all submissions. This return looks at what you’ve earned over the past year and provides details on your taxable income.

From this figure, the ATO can work out if you owe them any tax or if you’re due for a rebate or tax refund (happy days!).


Preparing your tax return 


If you’re not sure how to lodge your tax return, there are a couple of options for filing online. You can lodge your own tax return online with the ATO’s myTax portal. This is a fairly straightforward process and it’s available 24/7. Upon completion, the ATO will send you an email confirming that the form has been submitted correctly.

However, it’s not usually submitting returns that individuals find difficult – it’s working out what their taxable income (assessable income minus any deductions) is.

If this is the case, you might want to think about speaking with an online accountant or registered tax agent. Tax laws are often complex, so it pays to speak to an expert who can make sure you’re only paying as much tax as you legally owe. Following professional advice, you can either lodge your own tax return online or you can ask them to lodge your return for you.

Grow Your Business with QuickBooks

Australia Business Tax Return

Do you need to lodge a tax return for your business income? If you’re not sure how to submit a tax return in Australia, the following information is for a sole trader or Australian Business Number holders. 

Needless to say, there are many different types of businesses, so there’s no one-size-fits-all approach to lodging online tax returns for businesses. What you need to report – especially at the end of the financial year (EOFY) – and how you lodge your annual income tax return will depend entirely on your type of business entity.

So, let’s look at how this varies across the different types of businesses.

Not-for-profits and companies

Some not-for-profit (NFP) clubs, societies and associations are subject to income tax. Examples of taxable NFPs include social clubs, professional associations, and political parties.

For the purposes of income tax, taxable NFPs are treated as either nonprofit companies or as other taxable companies:

  • A nonprofit company with a taxable income over $416 per year must lodge a company tax return
  • Taxable companies are taxed on every dollar of taxable income and must lodge an income tax return each year regardless of their level of taxable income

Meanwhile, companies themselves will need to lodge a company tax return, and pay tax at company tax rates — whether it is at the small business company tax rate of 27.5% or the general company tax rate of 30%.

Any payments remitted from your company to you as an individual will be reported in your own personal income tax return. For more advice on this, speak to a tax professional.

It’s always worth delving into the specifics of your situation – even if you’re a not-for-profit, you might still be eligible to lodge a company tax return. While this is a bit of an administrative pain, the act of lodging your returns online is very straightforward: simply fill out this year’s company tax return.

Sole traders

This is the simplest business structure. It simply refers to an individual running a business. You own the business yourself, you control and manage the business by yourself, and you alone are legally responsible for all aspects of it.

As a sole trader, you:

  • Lodge your income tax return with the ATO using your individual tax file number (TFN).
  • Pay tax at the same income tax rates as individuals, although you may be eligible for the small business tax offset.
  • Have the option to pay your income tax in quarterly pay-as-you-go (PAYG) instalments. Generally, you will need to pay instalments if you reported at least $4,000 or more of business or investment income in your latest tax return, although some exceptions apply.
  • Report all your income and expenses on your individual tax return (under the section for business items).
  • Claim tax deductions for any business expenses or personal superannuation contributions you make in the relevant financial year.

You can’t employ yourself, although you can employ other people, with all the attendant employer responsibilities, including paying superannuation.

This means that the amounts you take from the business for yourself are not wages for tax purposes (even if you think of them as wages and you can’t claim a deduction for them).

However, any wages that you pay your employees will reduce your overall tax bill (as they’re considered to be business expenses).

It’s worth highlighting that if you’re receiving personal services income (PSI) (where you’re paid mostly for your personal efforts, skills, or expertise), your income may be treated differently than for a sole trader.

For example, you can’t claim deductions on any wages that you pay support staff for administrative tasks (like secretarial work), and you’ll have to complete the PSI question in your individual tax return. So, you’re still a sole trader, but there are some additional rules.

Filing your online tax returns is an easy process for sole traders (all things considered). All you need to do is grab your TFN, visit the ATO site, file your yearly income and expenses, and claim allowable deductions!

Partnership

A partnership is when more than one person owns and runs a business. Between you and your partner or partners, you control and manage the business and are legally responsible for all aspects of it. The partnership’s profits are shared among the partners in a legally agreed-upon manner.

A partnership doesn’t pay tax on its income, but it must lodge a partnership tax return with the ATO, declaring all income earned and listing all deductible expenses. The partnership tax return should also show how the net income or loss was distributed between the partners, and each partner must declare their individual share of the partnership’s net income or loss in their individual tax return.

Furthermore, each partner owns a proportion of any asset that is liable for capital gains tax (CGT). 

For example, you and your partner co-own an office block that you decide to sell for a net profit of $100,000. Given that you had an equal share in the building, your $50,000 share of the profits would be added to your overall income tax return (as there’s no specific CGT).

Partners can choose to pay their tax using the PAYG instalment system, too. To calculate the proportion of the partnership’s income that you need to include in your total instalment income, use the following ATO formula.

So let’s briefly run through the key takeaways to filing your partnership’s online tax return:

  1. Fill out the partnership tax return by October 31.
  2. Declare your total annual income and expenses.
  3. Show how the net income or loss was distributed amongst partners.
  4. Include the proceeds from anything that’s eligible for CGT.
  5. Include all this on your individual income tax return.

Trusts

A trust is not a separate taxable entity, but the trustee is required to lodge a tax return on behalf of the trust. In general, trust beneficiaries declare the amount of the trust’s income they are entitled to on their own individual tax returns and pay tax on it.

However, a trust distribution doesn’t need to be declared if family trust distribution tax has already been paid. Trust beneficiaries can pay their income tax in quarterly PAYG instalments in the same way as a sole trader, although you will first need to work out your portion of the trust’s instalment income.

Fortunately, the process of filling out the trust tax return online is a piece of cake.

How Long Does A Tax Return Take? 


Typically, tax returns are usually processed within 14 business days, whereas paper forms may take up to 50 business days (10 weeks). However, certain tax returns may require a manual check, which may extend the processing time beyond the standard timeframe.


Track the process of your tax return


Tracking the progress of your tax return is an important aspect of managing your finances. There are various ways to do this. 

You can check the process on:


  • ATO online services: By linking your myGov account to the ATO, you can utilise their online services to monitor the status of your tax return or any amendments you may have made.
  • ATO app: Upon using the ATO app, the current status of your return will be visible on the screen. If you require additional assistance, select the '?' icon located on the top right-hand side of the app screen to access the help function and obtain more information.
  • By phone: Phone 13 28 65 and have your tax file number ready.
  • Tax agent: Once you submit your tax return through a registered tax agent, you or your agent can monitor its progress at any time by logging into the ATO's online services.



Status of your tax return 

Upon utilising the online service to track the progress of your tax return, you may encounter one of the following statuses.


In process - processing

This status may appear at two stages of processing. The first is when the ATO receives your tax return and begins processing it. The second is when they have completed processing your return and are issuing a notice of assessment.


In process - information pending 

You will see this if the ATO requires additional information to finalise your tax return. They may reach out to you to collect the necessary data.


In process - under review

Before finalising your tax return, the ATO may conduct a manual review to ensure that all information is accurate. This review may also include an evaluation of your previous year's returns.


In process - balancing account 

To determine whether you owe taxes or are eligible for a refund, the ATO will balance the result of your tax return with your accounts with other Australian Government agencies.


Extra processing time is required: If additional time is necessary to complete the processing of your tax return.


Issued – $ Amount: Once your notice of assessment is available online, you can view the amount owed or refunded, along with the payment due date.


Common reasons for a tax refund delay

While the majority of tax returns filed online will be processed within two weeks, there are situations where processing time may be longer. These could include:


  • You only need to lodge your tax return once. If you attempt to lodge it again, the processing time will be delayed as details will need to be manually checked.
  • If you make an amendment before the ATO has finalised your original return or any previous amendments, it will delay the processing time.
  • Lodging several years of tax returns at once can cause delays.
  • Having a tax debt or unresolved debt with the ATO may also delay the processing time.
  • If you are under insolvency administration, such as a bank or debt arrangement, your insolvency advisor will inform the ATO of your situation before you lodge your return.
  • If your nominated financial institution details are not up to date, it may cause a delay.
  • The ATO may manually check details on your tax return, such as contacting your employer, financial institution, or private health insurer, or cross-checking the information you have provided.


Keep Everything Organised for Tax Time


Putting aside money for your tax bill is incredibly important, and even more so in your first year of business. During your first year, you can also pre-pay tax into your tax account or pay voluntary instalments.

When you have lodged your first income tax return and reported a tax-assessable amount above the relevant threshold, you will automatically enter the PAYG instalment system.

Most of your business reporting can be done online. There, you can file your income tax return, reporting your business income and personal income, and claiming expense and superannuation deductions.

Plus, you can handle your Business Activity Statement (BAS) online if you’re registered for goods and services tax (GST).

The best way to track your GST and prepare your BAS for lodgement with the ATO is by using a piece of Tax Software. If you’re self-employed, learn how to pay taxes as a sole trader so you can be better prepared at tax time.

By keeping everything online, not only do you save yourself from having to hoard endless mountains of documents, but you also set yourself up for quicker, more efficient tax returns going forward.

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