What is tax and other FAQs answered by an accountant

Find numbers rather taxing? If you’re wondering, ‘What is tax?’ you’re not alone. One in five Australians report knowing little to nothing about the Australian tax system (Australian Tax Office, 2023). So what better way to get the down-low on all things tax than to learn it from an accountant with 20 years of industry experience.

So, what exactly is tax? Let’s find out from Charles Sturt accounting alumni and chartered accountant, Lisa Durigo. We think you’d depreciate (get it?) this handy information in the lead-up to tax time.

What is tax?

Young woman doing her tax online.

We all know that life’s little certainties are, as Benjamin Franklin so famously wrote, ‘death and taxes’. But what exactly is tax and what determines how much tax is paid?

“The Australian tax system is a mix of direct and indirect taxes levied by both the Commonwealth and State governments, depending on the type of tax.

“Commonwealth taxes include income tax, and goods and services tax (GST). Our income tax is progressive, meaning the more income you earn, the more tax you pay. GST is a consumption tax on most goods and services.”

Do I need to lodge a tax return?

Young man lodging his tax return.

“You will need to lodge a tax return if any of the following apply:

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  • You were an Australian resident and either paid PAYG (pay as you go) Withholding Tax or had tax withheld from payments made to you.
  • Were eligible for a senior and pensions offset AND had income above a certain threshold.
  • Were not eligible for a senior and pensioners offset but received certain Australian government income and your income was above a certain threshold.
  • Had income above the tax-free threshold.

Learn more about lodging your tax in Australia by visiting the Australian Tax Office (ATO) website.

What’s better – a DIY tax return or one done by a professional accountant?

An accountant giving tax advice to a client.

Now to the big question. Should I prepare my own tax return or employ the assistance of a qualified accountant?

“This really depends on the complexity of your return and your knowledge of the Australian tax system. If you have straightforward income, such as interest received and salary with a few simple deductions, you may find the ATO online lodgement system via myGov easy to use, saving you the cost of an accountant.

“If you have more complex income and expenses such as Cryptocurrency trades or home office expenses, you may wish to engage an accountant with specialised tax knowledge. This will not only ensure you pay the minimum tax necessary but also reduce the risk of getting an audit by, for example, claiming deductions above the ATO parameters for your occupation.”

How much can a basic tax return cost?

So, wondering if shelling out for a qualified taxation professional will get you bang for your buck? Consider this helpful advice.

“Whilst more complex returns are generally billed at an hourly rate, most firms will have a standard ‘base rate’ fee for simple individual tax returns. These fees can vary significantly from firm to firm, its best to call and ask. Cheaper is not always better!”

How long will my tax return usually take?

“Most individual returns are processed by the ATO within two weeks. If manual checks are required it may take up to 30 calendar days, and if a paper return was submitted, this can take up to 50 days to process.”

What expenses can I claim on my tax?

We all know somebody who pushes the envelope when it comes to claiming expenses at tax time (because last week’s pizza party counts as a ‘business lunch’ right?). Keeping in mind that tax auditors can come knocking at any time, what can you legitimately claim on your tax return as a uni student?

“If there is a sufficient connection between your course and employment income, you may be able to claim self-education expenses. These include student fees (not HECS/HELP, unless you are enrolled in a full-fee-paying place), textbooks, computer/internet costs, student union fees, stationery and trade journals, to name a few. Items such as computers, office desk and chair can be depreciated and claimed over a number of years. Travel between your campus and workplace may also be deductible.”

When will I start paying back any HECS-HELP loans?

So, most undergraduate degrees offer Commonwealth-supported places, which means you can access the government’s HECS-HELP scheme and pay your tuition fees at a later date. Read more about what is HECS debt and how does it work?

But when will you start your HECS-HELP repayments?

“For the year ending 30 June 2024, you will not pay any HECS/HELP loans until your repayment income (taxable income plus net investment loss plus reportable fringe benefits plus reportable super plus exempt foreign employment income) exceeds $51,550.”

Are uni scholarships taxed?

Young woman reading a message on her phone.

Here’s some good news. “Scholarships may be exempt income – either partially or wholly. Refer to the ATO.”

Where can an accounting career take you?

“There are so many opportunities within the accounting industry including public practice, corporate/management accounting, forensic accounting and audit. The skills you will gain in undergraduate studies, as well as work experience, are transferable throughout the many different accounting fields.

“Post-COVID, accountants are in high demand. Further, the pandemic has meant that so many businesses are now offering remote/work-from-home opportunities, which really opens up the options available, particularly in regional areas.”

Best advice for anyone considering studying accounting?

“Consider working in your chosen field part-time whilst completing your course. A traineeship was so beneficial for me as I gained hands-on experience to assist with my studies. I also avoided having to compete with other graduates with no experience for employment positions at the end of my course.

“I would also recommend looking at choosing elective subjects that will lead to a minor specialisation (e.g. Bachelor of Business – Accounting / Business Management).”

Find out how to become an accountant.

Want to be a tax wizard? Study accounting

“Take your first of next steps towards a high-demand business career with Charles Sturt’s accounting degrees. Start your career with our Bachelor of Accounting or take your career further with the Master of Professional Accounting or Master of Professional Accounting (Professional Practice).”