Comparing tax time to avoiding the elephant in the room highlights the importance of facing financial responsibilities head-on rather than delaying the inevitable. It’s something every working Australian must face, so why not take the bull by the horns (or should we say the elephant by its trunk)? With a bit of knowledge, you'll breeze through tax time without breaking a sweat. So, let’s start off by discussing how the Australian tax system works.

What is income tax?

Income tax is simply a stream of revenue for the government whereby they collect money from individuals and businesses. It consists of three main categories which include personal earnings, business earnings and capital gains. This money can go towards thing things such as the funding of public services, public transport systems, social security and defence systems. 

Income tax is applied to an individual’s taxable income and is paid on all forms of income. This can include income such as wages/salaries, profits from a business and any returns from investments. Income tax can also apply to assets an individual sells such as when a house or shares are sold.

Income tax rates in Australia

First off, let's talk about Australia's progressive tax system. The basic idea is, the more you earn, the higher percentage of tax you pay. But before we get into the nitty gritty, there's a magic thing called the tax-free threshold. You can earn up to the tax-free threshold without paying a single cent in income tax. 

Now, let's say you earn above the tax-free threshold. This is where the tax brackets come in. Imagine a bunch of buckets lined up, each with a different tax rate. Essentially, the more you earn, the higher the tax bucket you are in. You can check the tax rates on the Australian Taxation Office (ATO) website here.

Lodging your tax

The key dates to remember for lodging your tax return are that it can be lodged anytime after the 30th of June and the deadline for self-submission is the 31st of October.

Preparation is key to ensuring your lodgement process is as smooth as possible. Therefore, it’s important to file away receipts, invoices and documents throughout the year as this will save you time when it comes to completing your return.

The key takeaway is this: understanding tax doesn't have to be scary so long as you prepared and equipped with the correct information. The ATO website has a range of resources to help you navigate the system such as their tax calculator or information for business owners. Plus, there are always tax professionals who could help if things get too complex. So, next time tax time rolls around, you can approach it with a little more confidence.