tax system

  • The module will aim to increase your basic understanding of the tax system and your confidence in managing the most fundamental aspects of your own tax.
  • It is quite unreasonable to gain a comprehensive knowledge of Australian tax law without extensive tertiary and professional education as well as real world experience, however we can place individuals in a better position to deal with their own taxes.
  • In order for The Government to receive tax money from its citizens and businesses, it must identify its taxpayers. It does this through the issuing of a Tax File Number (TFN), which is a unique identifier assigned to every taxpaying individual and entity.
  • As well as being subject to direct tax through income, there are indirect taxes that one might come across; the most common of which being a Goods and Services Tax (GST) which is collected by businesses on behalf of The Government.
  • Australia uses a progressive tax system, which implies that the higher your income, the more tax you are liable to pay. There are multiple tax ‘thresholds’ or ‘brackets’ which split taxpayers into different income groups, depending on how much they earn, and these thresholds are subject to differing tax rates.

defining income

  • There are a few forms of income to take note of when dealing with your own individual tax.
  • Your assessable income is any earnings that will be looked at by the Australian Tax Office (ATO) in terms of determining your tax liability.
  • If income isn’t assessable, then it falls under exempt income; essentially these are earnings which the ATO will not use in calculating your tax liability.
  • Generally speaking, assessable income covers personal exertion (e.g. earnings from employment), investment income, money from business owning activities as well as other forms of income such as capital gains.


  • The video will explain what deductions are and how this reduces the amount of assessable income.
  • A very important formula you should remember if you wish to calculate your tax is:                      Taxable income = Assessable Income – Deductions
  • Deductions are usually expenses that are made in the act of producing assessable income, however they are subject to the rules set out in the Income Tax Assessment Act 1997, in Section 8.1 (General Deductions) or Section 8.5 (Specific Deductions). It is recommended that you consult with a registered tax agent before claiming any deductions you are unsure of.

calculating tax



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practical steps

Step 1

Apply for a tax file number (or TFN). Keep this number in a safe place.


Step 2

Establish a tax filing system (physical or online) – make sure that it is secure and reliable. This filing system should be created to hold several years of information. You may need access to this information should the Australian Tax Office ever audit you.


Step 3

File all PAYG payment summaries, payslips, invoices, interest statements, dividend payments, and other records that make up your assessable income.


Step 4

File all invoices and receipts that make up expenses which you intend to claim as deductions. You take on a risk by claiming expenses without having tangible evidence.


Step 5

Research to see if you qualify for certain tax offsets. The ATO has more information about this.


Step 6

Lodge your tax return on time. Individuals, sole traders, and companies can have different deadlines. If you need help lodging your tax returns, a tax agent can help you with this. You can compare tax agents at Finder. Note that having a tax agent does not reduce your filing responsibilities. Make sure that you submit PAYG instalments if you have been requested to by the ATO.




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