Put simply, tax is the name for the money that the government collects from you and uses for the public good.

Why does the government collect tax?

Money collected from citizens as tax is used to build or fix things in the community. This includes public hospitals, swimming pools, public schools, free parking, libraries, national parks and bike paths. Without tax, the government wouldn’t be able to provide these things for everyone to use.

What types of tax are there?

There are many types of tax in Australia, and they can be a bit complicated, some you will pay and not even realise! The main one you will be dealing with if you have a job is income tax. If you want to find out more go to this page for information on Australia’s taxes.

What is ‘Income Tax’?

If you earn over a certain amount of money in a year, you have to pay some of it to the government and this is called an income tax. At the moment if you earn anything under $18,200 in a year, you don’t need to pay any tax.

When you start earning more money, a small part starts getting taken out each time you get paid for tax payment. For example, if you earn between $18,200 and $37,000 – for every dollar you earn over $18,200, 19 cents needs to be paid in tax. 

How does tax work?

You normally don’t have to figure out your own tax payments; your employer should sort it out, but they need a copy of your tax file number.

Even though your employer figures out your tax contribution in line with your pay, it is still good to know how much you should be paying (you can do this by checking your payslips). This is important to know because it will affect the amount of your pay that actually goes into your bank account.

If you are someone who has a job and pays tax, then at the end of the financial year you need to do a tax return to make sure you are paying the right amount of tax. When you do your tax return, if you haven’t paid enough you’ll need to make a payment to the government, and if you’ve paid too much then it will be paid back to you.

Tax is part of life everyday life

Paying tax is just a part of life, ideally, the money you pay in tax goes towards keeping you safe, and healthy and giving you great facilities to use. It’s a system that has been in place for a long time and for the most part, helps to look after everyone.