Income and deductions
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Understanding tax - starting out
Before you start work, or soon after, you may need to get a tax file number (TFN). The main tax you'll pay is income tax, which is charged on income you receive, such as salary and wages, investment income and business income. At the end of the income year (30 June), most people need to lodge an annual tax return.
How much income tax you pay
The amount of income tax and the tax rate you pay depends on how much you earn. The more you earn, the higher your rate of tax. If you're an Australian resident, the first $18,200 you earn is tax-free.
Income you must declare
You pay income tax on assessable income you receive, such as salary and wages, most Centrelink payments, investment income from rent, interest and dividends, and profits from selling shares or property.
Deductions you can claim
When completing your annual tax return, you're entitled to claim deductions for some expenses that are directly related to earning your income. You subtract these 'allowable deductions' from your total income to reduce your taxable income.
Offsets you can claim
You may be eligible for tax offsets that reduce the amount you pay. You claim offsets in your tax return.
Records you need to keep
Income tax works on a self-assessment principle. This means we initially accept the accuracy of the information you provide and work out your tax on this basis. However, we can check your tax return later and ask you to show the records you used to complete it, so it's important to keep records to verify your claims.
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