Tax time!

It’s tax time right now (here in Australia, as it is most everywhere else). Being currently strapped for cash, Gabriel and I were eager to finish our tax returns to get any refunds which may be due us. During the last couple of weeks, our PAYG summaries or group certificates started coming in both from previous employers as well as the current one. Financial institutions and our health insurance provider have also sent out the appropriate documentation so we thought we’d start our tax returns earlier this week.

In previous years, we’ve always sought the services of a tax agent in preparing our tax forms because we’re not yet familiar with the terminologies and workings of the Australian taxation system. Wary of making any mistakes, we reasoned that the $100 fee for the accountant’s services is worth it. Besides, that fee is a deductible item for the next financial year anyway and we made sure we understood each item so that we could opt to do our taxes ourselves in the future.

Well, that time has come, we just couldn’t be bothered to find an accountant in the city, book an appointment, get permission to leave the office then subsequently make up the time we’ve spent outside the office. After a rave review from a friend who has used e-Tax, the automated program from the Australian Tax Office (ATO), we thought we’d better give it a go. This friend said that the program is easy to use and that he was able to file his return quickly and get his refund after only a week!

The software installed without any major dramas and we were soon filling out the questionnaire type forms. Most times, filling out the fields in the return only entails copying down the right amount into the appropriate box in the form. Sums are automatically calculated by the program and there is plenty of documentation about items you may get confused – depreciation, for example. And if you think that you need more information than what the user documentation provides, publications and guides concerning a variety of tax related subjects are also provided on ATO’s site.

A couple of hours and several windows later, we were nearing the end of the questionnaire. Doing our taxes is not a difficult exercise after all! Happy ending? Well, not actually. Although the software proved to be a boon in helping us do our taxes, we actually owe the government taxes instead of the other way around! Perplexed, we tried goiing over each item and inspecting our group certificates. We just couldn’t believe that after giving the government hefty amounts each month, we are now being asked to pay some more! A few days later, we figured out what went wrong, it seems that losing the option to salary sacrifice has made a significant impact in our finances.

In a salary packaging agreement, an employee agrees to lower pay in exchange for a benefit of similar cost. In this kind of arrangement, the employee may pay less tax because he/she may be on a lower tax bracket. While working in a hospital in Canberra, I was able to avail of this salary packaging agreement for our home rental payments and it made a big difference in the amount of tax I had to pay. When I left the hospital, I found out how beneficial salary packaging is and that not all salary packaging agreements were created equal. As an example, when I applied in another public hospital here in Melbourne, I found out that rental payments aren’t included in the list of items that could be salary-packaged with them. The list shrank even more when I worked for a public university, they only offer salary packaging for such things as parking and gym/theatre memberships. Working in a private company, this option disappeared altogether although there are now plans to allow salary packaging for some work-related items such as the purchase of computers or electronic organisers.

Going back to our tax forms, we haven’t submitted it yet. Already strapped for cash, we can’t afford to pay the tax we still supposedly owe. I guess we’d have to save up for it somehow. No rush to file those returns now, we still have till October 31 to file and pay up anyway.

Published in: on July 29, 2005 at 6:25 pm  Leave a Comment  

Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: