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  • Paying tax

    Income tax is paid on money you receive, such as salary and wages, Centrelink payments, investment income from rent, interest and dividends, and profits from selling shares or property.

    After the end of the Australian income year (30 June), you may need to lodge an annual income tax return which will include how much income you received and tax you paid. We will then send you a notice of assessment and your tax refund if you are entitled to one.

    You can reduce the amount of tax you pay by claiming deductions that are directly related to earning your income.

    Your tax may be further reduced if you are eligible for tax offsets or government rebates.

    How do I pay tax?

    If you are an employee, your employer is required to withhold tax on your behalf from your wages and send it to us. When you lodge your tax return, the amount withheld during the year reduces the tax you have to pay, if any.

    This system is called pay as you go (PAYG) withholding.

    Your payer (employer) will give you a Tax file number declaration form to complete. Centrelink is also a payer and will give you this form if you apply for Centrelink payments. Your employer (or Centrelink) will use the information you provide in this form to work out how much tax to deduct from your pay.

    The TFN declaration form will ask if you want to claim the tax-free threshold; this is where the first $18,200 of your yearly income isn't taxed. You can claim the tax-free threshold to reduce the amount of tax withheld from your pay during the year.

    If you earn income over a certain amount from a business or investment, you can make regular payments towards your expected annual tax liability. You can do this via the instalments system. If you pay PAYG instalments, you still need to lodge an annual tax return.

    See also:

    Last modified: 13 Mar 2017QC 51456