Had a big year? This is what you need to tell the tax office
New jobs, new relationships, new human beings: a lot can happen in a year, and many of those things can have an impact on your tax.
If you've experienced a big life event in the past 12 months, these are the things you need to consider at tax return time
IF YOU'VE CHANGED JOBS
The Australian Institute of Business (AIB) recently revealed that the average worker in this country changes jobs 12 times during their career, with three years and four months the average length of stay in any one role.
Workers under 25 in Australia flit around even more frequently, the AIB found, with an average job tenure of just one year and eight months.
That means a lot of people every year will have had more than one employer - and that has big ramifications for tax purposes.
"If you have changed jobs in the past 12 months, make sure you have your payment summaries from each of your employers," advised Mark Chapman from H & R Block. "A really common mistake is people forget that they worked for someone else at the beginning of the tax year."
This applies even for bits and pieces of work in the gig economy, said Ashley Debenham from online site Etax.com.au.
"An increasing number of people do more to top up their income through things like Airtasker and Airbnb, but this is still classified as income by the ATO," he said. "If you leave it off the return, the ATO is going to know about it. It's better to be upfront."
Another issue that can arise is if multiple employers provide you with the tax-free threshold (currently the first $18,000 you earn per year). This can lead to an underpayment of tax through the year, and thus a big fat bill at the end of it.
"We see that issue pretty commonly," said Mr Debenham. "People don't understand the implications of that question when they start a new job and they are asked if they want to claim the tax-free threshold, and they end up owing a couple of thousand dollars to the ATO."
Chapman advised talking to a tax agent if you're uncertain.
"If you're beginning a second job, take your pay slips in, and ask if you are paying the right amount of tax," he said. If you're not, at least the mistake can be rectified early, avoiding a costly bill at the end of the tax year, he said.
IF YOU'RE IN A NEW RELATIONSHIP OR GOT MARRIED
In Australia we are all taxed as individuals, and we all need to file a tax return as individuals (unlike in the USA, where couples can file a joint return).
But even so, if you started a new relationship in the past 12 months, the ATO will probably want to know about it.
So what's the criteria for declaring your new love to the tax office?
- If your relationship is recognised under law (eg, you are married)
- If you live with a partner on a genuine domestic basis in a relationship as a couple
If you've started a new relationship but you're not yet gotten married or started living together, you don't have to declare it to the ATO.
Mr Debenham advised against trying to "hide" your spouse if they are in fact a genuine partner.
"The ATO is pretty clever at figuring stuff out. They get information from other government departments, and from banks. The ATO can generally join the dots," he said.
They're not just being nosey parkers, either: advising them of your new relationship helps establish your entitlement to various tax offsets and entitlements.
"There are certain things like the Medicare levy, and private health insurance rebates; they're all calculated on your joint income," Mr Debenham said.
When entering your partner's income on your tax return, Mr Debenham reminds clients to minus the deductions their partner is claiming, as this can have an effect on levy and entitlement thresholds.
If you changed your name when you got married, Mr Debenham also advised that you inform the ATO before you try to do your tax return.
"As soon as you get married or paperwork is finalised and your name changes one way or the other, go in and update the ATO straight away; it avoids any delays at the ATO's end when it comes to paying a refund," he said.
IF YOU'VE BROKEN UP OR GOTTEN DIVORCED
According to the ABS, the median length of a relationship in Australia is 18 years. Some last; others don't; and if you're facing your first tax return as a single person in quite some years, rest assured you're far from being the only one.
If your relationship breakup happened within the past 12 months, the ATO will want to know at what point you called it quits, and they'll want to know what your ex's income for the financial year was.
That can prove tricky for some recently broken-up couples, if the relationship ended badly - although Mr Debenham said the ATO can be understanding in these situations.
"The ATO will generally allow you to put in an estimate of your ex's income," he said. "You don't have to make a phone call to a person you haven't spoken to for six months."
Mr Chapman noted that there are "usually bigger issues at play when a couple go their separate ways," citing financial settlements and splitting up superannuation as two examples.
"We often get asked if maintenance payments are taxable, and they're not," he said. "But equally the person who is making the payments can't claim them as a deduction."
IF YOU'VE HAD A BABY
Babies can be quite taxing, in their own sweet way, but Mr Chapman confirmed they don't have "a huge amount of impact in terms of preparing a tax return".
Couples who have had a baby will often ask if they can claim deductions for child care and other items, he said.
"That question comes up all the time. Unfortunately no, none of those costs are tax deductible."
One thing that will make an impact on your tax return if you have just had a child is if you have opened up a savings account in their name, he warned.
"Income from those accounts is taxable on the parent, not the child, so that interest will have to go on your tax return," he said.
Other new parents put trust arrangements in place for their children, and this does come with an additional requirement: the trust itself will have to complete a tax return, as it is regarded as its own stand-alone legal entity.
Mr Debenham also reminded new mums and dads that if they have received maternity or paternity leave pay, that all counts as income - and thus has to be declared on your tax return.
IF YOU'VE BEEN PROMOTED
If you've won yourself a decent payrise in the past 12 months, congratulations, you're ahead of the trend.
Government data reveals Australia's Wage Price Index has grown at a sluggish annual average of 2.2 per cent in the five years to December 2018, whereas in the five years leading up to December 2013 it was growing at a much more brisk annual average of 3.3 per cent.
Mr Chapman said if you have been promoted by the same employer you previously had, their payroll department should deduct tax at a higher rate if you have moved into a different bracket.
Moving into a new role may also bring with it the possibility of claiming additional or different deductions - but be warned, these are only claimable for the period in which you actually performed in the new role, and not the entire financial year.
IF YOU'VE WORKED OVERSEAS
According to the federal government, at any one time one million Australians - about four per cent of the population - are living and working overseas.
Working overseas can have "very significant implications" for taxation purposes, Mr Chapman said. "But if you get it wrong it can turn out to be very expensive."
It all hinges on whether your time spent overseas qualifies you as a nonresident.
"A lot of people assume that as soon as they get on the plane they're nonresident. But the best test for whether you've become a nonresident or not is your intention. If you've gone overseas and you intend to come back, whether that be in two or three or 10 years, the ATO will probably have a crack at saying you were resident all the way through as you still regarded Australia as home."
Mr Debenham warned that one area of tax law that has changed in the past few years is in the repayment of incurred HELP and HECS debts. Gone are the days when a few years spent overseas meant a break in your payments.
"The ATO has changed the rules to recover HELP and HECS debts," he said. "They want people living and working overseas to continue paying - even people now classified as nonresidents."
With a sizeable client base of Aussies living overseas, Mr Debenham said Etax.com.au frequently applies to the ATO for payment plans on behalf of their clients to help with their HECS and HELP debts.
"(The new rule has) caught a lot of people out," he said. "Finding several thousand dollars can be a challenge for a lot of people."
Mr Chapman noted that Aussies returning to the homeland after time spent overseas also have to provide the ATO with details of all assets they are bringing in with them.
"The ATO will want market valuations on assets that you bring in to Australia - foreign property that you've kept, foreign business, works of art or jewellery - they'll all come into the Australian tax system," he said.
IF YOU'VE HAD A DEATH IN THE FAMILY
Death and taxes have long been known as the only certainties in life, but did you know the dead still have to send in a tax return?
In fact, they have to send in two - or more accurately, the executor of their state does.
Mr Chapman explained that one tax return covers the period of the year in which the deceased person was alive, and a second return covers any income generated by the dead person's estate, for example through rent or shares owned.
"There's a lot involved in wrapping up a person's estate," he said. "It can take years to wrap up a person's estate and through that time there will be tax issues. It's very common for estates to take two to three years to wrap up, and I'm aware of estates that have taken decades.
"It can be a very long convoluted process if there are a lot of assets, liabilities, and disputes that need to be resolved … it's very easy to see how these things blow out."