Taxation

[Ausvisitor]

So a bit of a question for the tax savvy peeps on here (I'd know the rule in the UK but not a clue here )

So in summary, got to AUS in Feb (as PR, previously resident in UK) and started work last month (April) so will be working for 3 months in the tax year.

However my tax seems to be being worked out based on my whole salary for the year even though I won't hit some of the higher rates of tax this year because of the shorter amount of time working, rather than the fact my income for 22/23 will only be quarter of what it would normally.

Is this something payroll would usually sort or something that you claim back with a tax return? Or maybe I'm being taxed correctly (but that seems unlikely)

Edited May 3, 2022 by Ausvisitor

[Skani]

When you lodge your tax return your tax liability for the financial year will be assessed and you'll  receive a refund if tax has been overpaid.  Have a tax agent prepare your first tax return to ensure that you claim all expenses/deductions etc. to which you are entitled.

[Marisawright]

50 minutes ago, Ausvisitor said:

So a bit of a question for the tax savvy peeps on here (I'd know the rule in the UK but not a clue here )

So in summary, got to AUS in Feb (as PR, previously resident in UK) and started work last month (April) so will be working for 3 months in the tax year.

However my tax seems to be being worked out based on my whole salary for the year even though I won't hit some of the higher rates of tax this year because of the shorter amount of time working, rather than the fact my income for 22/23 will only be quarter of what it would normally.

Is this something payroll would usually sort or something that you claim back with a tax return? Or maybe I'm being taxed correctly (but that seems unlikely)

It's a pain in the neck, isn't it?   However you could look at it as enforced savings.  As Skani says, on 1st July you can go to a tax agent and get your tax return done, then you'll get a nice fat tax refund. 

[Ausvisitor]

When I do a very simple online calc of tax due if earning the amount I will get paid for these three months as an annual salary and then comparing it with trebling the amount I paid last month it looks like they will owe me about $16k, I realise it might not be quite that simple as that calculation doesn't do the pro-rata on the tax free allowance bit because I wasn't resident all year.

So on a related question, how quickly do they repay

Edited May 3, 2022 by Ausvisitor

[Guest AltyMatt]

25 minutes ago, Ausvisitor said:

When I do a very simple online calc of tax due if earning the amount I will get paid for these three months as an annual salary and then comparing it with trebling the amount I paid last month it looks like they will owe me about $16k, I realise it might not be quite that simple as that calculation doesn't do the pro-rata on the tax free allowance bit because I wasn't resident all year.

So on a related question, how quickly do they repay

You should receive the refund within a week of submitting your tax return.

[NicF]

11 hours ago, Ausvisitor said:

So on a related question, how quickly do they repay

11 hours ago, AltyMatt said:

You should receive the refund within a week of submitting your tax return.

Umm, not in my experience.  I've never had a refund back in a week, it's usually more like 3 weeks.  And my tax return is usually no more complicated than submitting what has been prefilled for me.  OP how quickly you get your refund will probably depend a bit on when you submit your return and how busy the ATO are at the time and maybe how complicated your return is and if there are any queries.  I've never used a tax agent though so maybe they get refunds back sooner, but they also have longer to submit returns.

 

 

[Parley]

It should take maximum of 2 weeks. I normally receive it about middle of the second week after lodgement.

The ATO basically process it as submitted. However there is always the possibility of a subsequent audit down the track. If you keep your deductions reasonable it is unlikely you will ever get audited. If your work deductions are under $300 I don't think you even need to keep receipts anymore.

[Ken]

14 hours ago, Ausvisitor said:

So a bit of a question for the tax savvy peeps on here (I'd know the rule in the UK but not a clue here )

So in summary, got to AUS in Feb (as PR, previously resident in UK) and started work last month (April) so will be working for 3 months in the tax year.

However my tax seems to be being worked out based on my whole salary for the year even though I won't hit some of the higher rates of tax this year because of the shorter amount of time working, rather than the fact my income for 22/23 will only be quarter of what it would normally.

Is this something payroll would usually sort or something that you claim back with a tax return? Or maybe I'm being taxed correctly (but that seems unlikely)

All Australian tax deductions are on what the UK calls the Week 1/Month 1 basis. There's no concept of a cumulative basis. Your payroll department can't help with that. Instead everyone who pays tax does a tax return after the year end to get their overpayments back. Obviously anyone who's had some untaxed income (e.g. on renting a property in the UK) may have to pay some tax rather than get a refund. There is extra encouragement at the moment because the LMITO (Low and Middle Income Tax Offset) will give all the middle income tax earners an extra $1,500 refund this year (or reduce the amount of tax they would have had to pay by that amount).

Your tax free allowance is pro-rated as you weren't resident for the full year, so you'll only get it from Feb to June but the other tax bands (e.g. 19%) are not pro-rated so you'll get the full amount despite only having 3 months of income.

Edited May 4, 2022 by Ken

[Marisawright]

55 minutes ago, Ken said:

. There's no concept of a cumulative basis. Your payroll department can't help with that. Instead everyone who pays tax does a tax return after the year end to get their overpayments back.

I recall when I got my first investment property, there was some form I could complete to show that I wouldn't be liable for so much tax, and that allowed the payroll department to deduct less. Does that no longer exist, or is that something specially for investments?

[Ken]

30 minutes ago, Marisawright said:

I recall when I got my first investment property, there was some form I could complete to show that I wouldn't be liable for so much tax, and that allowed the payroll department to deduct less. Does that no longer exist, or is that something specially for investments?

Those forms do still exist (it's called a PAYG withholding variation). To reduce the tax withheld it has to be lodged with the ATO and they then authorise the employer to reduce the withholding. It takes at least a month to process and the ATO don't accept any applications after the 30th April due to the processing times. They are almost always only used for investments and are sadly mostly spruiked for poor investments that people wouldn't invest in if it weren't for the tax incentives.

Note however that if you want more tax withheld (say because you've got a lot of untaxed income and don't like a big bill shock at the end of the year) you can just ask your employer to do a voluntary extra withholding at any time.

[Marisawright]

3 hours ago, Ken said:

Those forms do still exist (it's called a PAYG withholding variation). To reduce the tax withheld it has to be lodged with the ATO and they then authorise the employer to reduce the withholding. It takes at least a month to process and the ATO don't accept any applications after the 30th April due to the processing times. They are almost always only used for investments and are sadly mostly spruiked for poor investments that people wouldn't invest in if it weren't for the tax incentives.

Yes, I did it the first year then didn’t bother after that because I rather liked getting a big refund at the end

[Ken]

1 hour ago, Marisawright said:

Yes, I did it the first year then didn’t bother after that because I rather liked getting a big refund at the end

Of all the companies I run the payroll for (or have done in the past) I've never known an employee to do one of these downward PAYG variations, but a surprising large number have chosen to do upward variations.

[Ausvisitor]

9 hours ago, Ken said:

All Australian tax deductions are on what the UK calls the Week 1/Month 1 basis. There's no concept of a cumulative basis. Your payroll department can't help with that. Instead everyone who pays tax does a tax return after the year end to get their overpayments back. Obviously anyone who's had some untaxed income (e.g. on renting a property in the UK) may have to pay some tax rather than get a refund. There is extra encouragement at the moment because the LMITO (Low and Middle Income Tax Offset) will give all the middle income tax earners an extra $1,500 refund this year (or reduce the amount of tax they would have had to pay by that amount).

Your tax free allowance is pro-rated as you weren't resident for the full year, so you'll only get it from Feb to June but the other tax bands (e.g. 19%) are not pro-rated so you'll get the full amount despite only having 3 months of income.

Thanks that makes sense, I get the week 1/month 1 concept so now I know that it's just normal and not incompetence on my company's payroll team.

Looking forward to about the third week in July

[Jon the Hat]

On 04/05/2022 at 18:02, Ausvisitor said:

Thanks that makes sense, I get the week 1/month 1 concept so now I know that it's just normal and not incompetence on my company's payroll team.

Looking forward to about the third week in July

Ha yes me to.  And my final P11d in the Uk so I can get that tax back too!  Tax bonanza in July!

[Ausvisitor]

Yes I just did the UK one for 21/22 and they owe me a fair bit there to

Going to be a good July/August