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  • Why you may receive a tax bill

    If you are an employee and enough tax hasn't been withheld from the payments made to you by your employer or you are a sole trader and haven't paid enough to the ATO throughout the year, you may receive a tax bill. You may also receive a tax bill if you receive other income where no tax was withheld.

    Sufficient tax to cover your obligations may not have been withheld in the following circumstances:

    • you move to a higher tax bracket (eg through promotion or multiple/extra sources of income)
    • your income increases leading to a higher repayment threshold for your study or training support loan
    • a change in your circumstances means you need to pay the Medicare levy or Medicare levy surcharge (MLS) or the amount of private health insurance rebate you receive changes
    • a change in income affects your single or family income threshold for relevant tax offsets or rebates

    Tax is not withheld from the following income sources:

    • an occurrence of a capital gains event where you receive additional income through the sale of a capital asset such as real estate or shares
    • you receive income from a business, partnership or trust
    • you receive income from property investments (including the sharing economy), dividends on shares, interest or returns on any other investment
    • you earn income as a sole trader.

    See also:

    How to prevent a tax bill

    Most people who earn income as employees have tax payments made on their behalf throughout the year through pay as you go (PAYG) withholding to help them meet their annual tax obligations.

    However, if you earn income that does not have tax withheld or does not have sufficient tax withheld the following methods could help you prevent a tax bill.

    See Managing payments

    Voluntary entry into PAYG instalments

    If you earn income as a sole trader or you receive income from investments and tax is not withheld when you receive the payment you can choose to voluntarily enter into PAYG instalments. This is a way of prepaying tax and reduces the chances of having to pay a large amount at the end of the year. We recommend voluntary entry into PAYG instalments if you are in your first year of business as a sole trader. You can arrange voluntary entry into PAYG instalments online (via myGovExternal Link).

    See PAYG instalments: How to start paying instalments

    Tax prepayments

    You can make tax prepayments any time and as often as you like to make it easier for you to manage your tax. We will hold the prepaid amounts you make towards your expected bill unless you, or your agent, request a refund.

    See also:

    Increasing tax withheld from payments

    If the total amount of tax withheld from your income payments is not going to cover your estimated annual tax bill, you can ask one or more of your payers to increase the amount of tax they withhold. This is known as an upward variation.

    See also:

    Consider the impact of selling a capital asset

    When selling a capital asset for a gain, consider the impact the gain will have on your assessable income. You may want to put aside enough to cover the extra tax payable, or use one of the options identified above; choosing the approach that best suits your personal circumstances.

    See Selling an asset and other CGT events

    How much tax to set aside

    Use our Simple tax calculator to estimate how much tax you are likely to owe so you can plan how much money to set aside or pay through PAYG instalments or prepayments.

    Last modified: 30 Jan 2018QC 54461