How to get a tax refund

Tax time can either be an exciting time if you are expecting a return, or a daunting time if you are expecting a tax bill.

The biggest misconception for employees, is that they are owed a refund at the end of the year. If your employer is taxing you correctly you should have no refund or payable. The only reason you get a refund is if you have allowable deductions to claim back against what has been withheld from you, or your employer is over withholding from you.

Tax Free Threshold

One reason why you may have gotten a larger return one year rather than the other is that your employer was not applying the tax-free threshold. Which means you were having tax withheld at a higher rate. This is a good idea for sole traders to do if they have a wages job and are running their own business at the same time. This way you may have a lower tax bill at the end of the financial year if you are not already on PAYG Instalments (quarterly tax payments).

Business Related Expenses & Deductions

Another misconception around tax is that you will receive money back for things that you spent for your business. This is not the case. Say you spent $3,000 on a laptop in the financial year, this does not entitle you to the $3,000 back in your pocket. The $3,000 gets deducted from your overall taxable income. Meaning you will lower the amount of income you pay tax on.

Tax 101, the more money you make the more tax you pay. Please see the below tax table for the rates you will pay according to how much money you earn:

FY2021q Tax Rate Table