You might be wondering: why do I owe tax? Well, there are many reasons why you may receive a tax bill. In this guide, we’ll discuss the reasons for receiving a tax bill and common actions that you need to take.
Understanding Your Tax Assessment
The statement issued by the ATO that explains how your tax assessment is calculated is called your notice of assessment (NOA). According to your Notice of Assessment, you will see whether you will receive a refund or have a tax bill. If you have a tax bill to pay, your notice of assessment will include your payment advice alongside the due date. If you don’t understand your notice of assessment, you can seek help from a tax return accountant.
Why do I owe the ATO money?
There are many reasons why you owe the ATO money:
- A tax offset is no longer available, or you don’t qualify for a tax offset; for instance, the low and middle income tax offset ended 30 June 2022.
- Enough tax was not withheld from your income throughout the income year to meet your tax obligations, because
- You fall into a higher tax bracket – for instance, through promotion, or you have more than one job or extra sources of income.
- You have claimed the tax-free threshold incorrectly for more than one job.
- You are the recipient of Australian Government allowances and payments.
- Your increased income results in a higher repayment rate on your training support or study loan.
- You have a training support or study loan, and you didn’t advise your employer so they didn’t withhold an amount to cover your repayment liability.
- You receive income as a sole trader or from a trust or partnership.
- You receive income as a sole trader, and you haven’t paid sufficient in instalments through the income year through the Pay As You Go (PAYG) instalments system.
- You receive additional income from the sale of a capital asset such as real estate, shares, or crypto assets; this is called a capital gains tax event.
- You obtain income from investments or assets, for instance, dividends on rental income or shares.
- You are receiving money from sharing economy activities, for instance, renting out or sharing assets, ride-sourcing, or providing personal services.
- Changes to your income affect your single or family income threshold, and you may have to pay the Medicare levy or Medicare levy surcharge (MLS).
- The amount of private health insurance rebate changes or is too much.
- You have surpassed the concessional contributions cap with your super fund.
- The ATO identifies discrepancies between the details in your tax return and the information they receive through pre-fill data or their data-matching program.
What if you receive a tax bill?
We have answered your question: Why do I have to pay tax this year? Now, you might be wondering: What to do if I receive a tax bill? If you owe tax, you will have to pay it by the due date on your NOA. If you don’t pay on time, it’s crucial to take appropriate action quickly while your debt is still manageable. You may qualify to set up your own payment plan according to your circumstances. If you are not sure why you have a tax bill, you can speak to your registered tax accountant Melbourne. No matter what your situation is, personal crisis support is available. If you experience financial difficulties and you find it challenging to file or pay your tax, we can help.
How to prevent a tax bill?
Most people who receive income as employees have had tax withheld on their behalf throughout the income year via PAYG withholding. These amounts help you to meet your annual tax obligations. However, if you receive income that doesn’t have tax withheld or doesn’t have enough tax withheld, here are some actions that can help you prevent a tax bill:
- Increasing tax withheld from payments
- Voluntary entry into PAYG instalments
- Making tax prepayments.
How much tax do you need to set aside?
By using the ATO’s income tax calculator, you can estimate how much tax you may owe. After that, you can decide how much money to set aside or pay via PAYG instalments or prepayments in future income years.
Conclusion
Now, you are aware of why you owe money on your tax return in Australia and what actions you can perform, and how you can prevent a tax bill. For more information on tax return lodgment and payment, you can get in touch with Reliable Melbourne Accountants.