It’s tax time and as parents we’ve done our taxes for years and no longer need to think about what is required of us. Tax time has become automatic, yet trying to explain tax to our children who are young adults now, who do not have our years of experience, often stop us in our tracks.
To make things easier we’ve designed a quick guide that you can download here and hand directly to your child/young adult to take the guess work out of it.
Firstly though, explaining to your child how income tax works.
If you generate an income at any point in the financial year, being 1st July to 30th June, you will usually pay income tax on the money earnt.
Your employer has a responsibility to deduct tax from your pay each time and send it to the Australian Taxation Office (ATO) on your behalf. The reason for this is so you don’t end up with a large tax bill at the end of the year. Your payslips show the amount you have been taxed (This is known as Pay As You Go (PAYG) withholding).
The income tax may also include a medicare levy (which is designed to pay for the public healthcare system)
Upon completion of your return the total amount of income tax paid throughout the financial year is assessed against the total amount the ATO calculates you need to pay. It is then determined if you will receive a refund or a tax bill.
Once the tax return has been lodged, the ATO sends an assessment notice that informs of either a refund or how much tax needs to be paid.
Now not everyone needs to lodge a return. So to see if your child/ young adult is eligible, simply contact our office. We’re more than happy to help!
As a snap shot, of those that receive a refund 5% put it towards a holiday, 21% save it and 29% pay bills. What will your child do?