So, you’re about to take that first step into the workforce. Congratulations. But it comes with a whole host of tax obligations that you need to understand and meet.
Here’s H&R Block’s simple guide for everything you need to know about your taxes when starting your first job.
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Obtaining a Tax File Number (TFN)
One of the first things you’ll need to do when you get your first job (or in some cases before that) is to get a TFN.
A TFN is a nine-digit number that is your unique identifier with the Australian Taxation Office (ATO).
Everyone has a different TFN. Your TFN is yours for life, even if you change jobs, move interstate or change your name. If you leave the country and later come back to Australia, you still use the same TFN.
You will need a TFN in order to transact not only with the ATO but also with many other Australian Government agencies.
A TFN is required when:
Lodging a tax return
Starting working or changing jobs
Filling out a TFN declaration
Applying for an Australian Business Number (ABN) when starting a business
Applying for income assistance or support payments through Centrelink or Department of Veterans’ Affairs
Claiming family tax benefit (FTB)
Applying for HECS-HELP student loans
Making or receiving payments under PAYG withholding
If you are working and do not have a TFN, your employer must take 47 per cent of your pay in tax and any financial institution will also withhold 47 per cent of any interest earned if they don’t have your TFN.
Remember your TFN is important and there are fraudsters out there who will happily steal your TFN and use it for their own nefarious purposes. So you need to protect it at all times.
To obtain a TFN, follow instructions from the ATO here.
What do I do when I get a job?
When you start a job you must give your employer your TFN and your bank account details. You must do this so your employer can pay you and deduct the right amount of tax.
Your employer will ask you to fill out a TFN declaration form, because if the employer doesn't have your TFN, your wages will be taxed at the top tax rate of 47 per cent.
The first $18,200 you earn will be tax-free, which is called the tax-free threshold. Then any payments you receive above that amount, including from Centrelink or your employer, will be taxed. Your employer will deduct an amount to cover your income tax liability from each pay and will forward this to the ATO.
Your employer will issue an income statement shortly after the end of the financial year (June 30) which shows how much you earned and how much tax you paid in that year.
This information will need to be reported on your tax return but because your employer will also send your income statement details direct to the ATO, the ATO will usually already have access to this information and will be able to pre-fill your return with your employment income from all employers you worked for during the tax year.
When you lodge your tax return at the end of the financial year, you will be entitled to a credit for the amount of tax that has been withheld from your pay over the course of the year. This amount is shown on the payment summary.
In many cases, once you have claimed a credit for tax already deducted by your employer, and claimed any other deductions you might be entitled to, you will get a refund of tax back from the ATO. If your employer hasn’t deducted enough tax, or if you have additional sources of income from which tax hasn’t been deducted, you’ll have a tax liability which you’ll need to pay to the ATO.
How to navigate a payslip
When you start work, you will receive a payslip every time you get paid, whether it’s weekly, fortnightly or monthly. You’ll find the following information on your payslip:
The pay period
The number of hours you have worked
Your hourly rate
Your gross pay – this is typically your hours worked multiplied by your hourly rate
Any loadings, allowances, bonuses, incentive-based payments, penalty rates or other paid entitlements that aren’t part of your usual ordinary hourly rate/salary
The amount of tax deducted
The amount of any HELP repayments (if applicable)
Your net pay – this is typically your gross pay less your tax deduction and HELP repayments and is the amount that you will actually see in your bank account on payday
Superannuation contributions paid and the name and/or number of the superannuation fund the contributions were made to. Superannuation is paid by your employer in addition to your gross salary so it isn’t a deduction.
You might also see any accrued leave balances (such as sick leave or annual leave).
Mark Chapman is director of tax communications at H&R Block.