Money Bite-Size Read:
- Tax is a non-negotiable if you want to earn money.
- It’s important to know why we pay tax and what it’s used for.
- Let’s talk about tax and why it’s a tough reality of working life as you earn money.
The Money Bites Take:
We pay tax when we earn money to fund government services for ourselves and others in society.
Who the hell is PAYG, and why are they taking away my money?
That was my initial reaction when I noticed that someone was taking money out of my paycheques. When I was young, it was a physical cheque that we occasionally got from the franchise owner. I earned barely $5, which I now doubt the legality of and why I’m so passionate about salary negotiation, so this PAYG person had a lot of explaining to do.
It turns out that PAYG means Pay As You Go tax.
Under this system, our employer withholds amounts from salary payments, which helps you pay your final tax bill. These small payments are much better than getting a big tax bill at the end of the year.
Paying tax is a non-negotiable if you want to earn money in most countries. Celebrities like Wesley Snipes have even gone to jail, with Wesley sentenced to 3 years in prison and fined $5 million for failure to file income tax returns. But why do we need to pay tax, and what is it for?
Let’s talk about tax and why it’s a tough reality of working life:
1. Why do we pay tax?
Tax is money that our government takes from us to pay for programs and services. This includes affordable healthcare, the welfare system as a safety net for those who need it and building roads so that we can drive our cars around. These services and programs cost money, which comes from taxes collected by the government as revenue to pay for these costs.
2. How much tax do I pay?
In Australia, there are different types of tax. This includes income tax paid when you earn money. It also includes a tax on buying assets like stamp duty when you buy a house. Finally, you also have to pay tax when you buy most basic goods and services, known as the GST, a tax that will be added to your bill when you buy or consume something.
3. How much tax will I pay on my income?
Under income tax rules, you pay a percentage of your income to the federal government. The percentage of tax you pay depends on the amount you earn, with individual income tax rates set by the Australian Tax Office (ATO). You should also look at relevant deductions that the ATO allows you to deduct from your tax bill, most of which are work-related expenses.
4. When will I need to file my taxes?
A new financial year typically starts from 1 July, ending on 30 June. From 1 July, you’ll need to likely submit a tax return outlining how much money you earned and if you have any relevant deductions. The exact date you’ll need to submit your tax return depends on where you live, but in Australia at the time of writing, you must lodge it or engage with a tax agent by 31 October.
5. What is the budget?
Each year, the government will outline their budget to show how they’re going to spend or raise taxes. This is similar to when you make a budget, except while you budget for your rent, they budget to keep a healthcare system running. In Australia, the federal budget is presented in a speech given by the Treasurer in Parliament.
Taxes enable our society to function by providing essential services.
This means that we can access healthcare when we need it or be looked after with a pension when we retire. So, let’s talk about tax and the value of taxes to our entire working lives, including when we’re earning money.