The Law Handbook 2024

Chapter 5.5: Taxation 397 Taxpayer’s responsibilities and your tax file number Self-assessment Most taxpayers operate on a system of self- assessment, which means that you are responsible for preparing your tax return. It is your responsibility to maintain records; this is particularly important when you are claiming deductions, which are subject to strict substantiation requirements (i.e. you must be able to prove that an item you claimed as a deduction does exist and the amount claimed was correct). The policy of self-assessment means that the ATO initially accepts the information in your tax return. However, interest and penalties may be imposed if your tax return is incorrect. The ATO conducts both systematic and random audits to ensure that taxpayers comply with their responsibilities. If you are subject to an audit, you will need to produce documentary evidence to establish that your tax returns have been true and correct. In general, if you follow the ATO’s guidelines when preparing your tax return, you will not be charged a penalty if you make an honest mistake. Also, you can rely on the rights in the Taxpayer’s Charter . This Charter sets out your rights and obligations, and the ATO’s service standards. The Charter covers confidentiality, fair and reasonable treatment, and truthfulness. The Taxpayer’s Charter is available on the ATO’s website (www.ato.gov. au/About-ATO/Commitments-and-reporting/ Taxpayers--Charter/) . Professional advice Taxation law is extremely lengthy and complex. This, plus your self-assessment responsibilities, means that it may be important for you to obtain professional taxation advice, particularly when completing a tax return. You may wish to consult a registered tax agent, although it may be appropriate to see a lawyer. You can obtain a tax deduction for amounts you spend in managing your tax affairs, including the preparation of your income tax returns by tax agents and the taxation advice you receive from tax agents and lawyers. Individual taxpayers can use Tax Help (tel: 13 28 61). This is a free and confidential service provided by a network of ATO-trained and accredited community volunteers who help individuals complete their tax returns online using myTax. Tax file numbers All taxpayers are required to have a tax file number ( TFN ). Apart from serving as a means of identifying individual taxpayers, the number also helps the ATO collect tax that may otherwise escape the tax net. If you are an employee, you are required to provide your employer with your TFN and, subject to some exceptions, you may choose to quote the TFN to investment bodies, such as banks, credit unions, building societies and companies issuing dividends. Unless an exemption applies, if you do not quote your TFN, tax will be deducted from interest and dividend payments at the highest marginal tax rate plus the Medicare levy under the PAYG system. The amount of tax deducted will reduce the amount of tax payable on your taxable income but will not be refunded until an income tax return for the year is lodged. A comparison between the marginal tax rates for the 2021–2022 financial year, and the marginal tax rates to take effect from 1 July 2024 Bracket 1 July 2021–30 June 2022 From 1 July 2024 Rate % Income $ Rate % Income $ Zero bracket 0 0–18200 0 0–18200 First bracket 19 18201–45000 19 18201–45000 Second bracket 32.5 45001–120000 30 45001–200000 Third bracket 37 120001–180000 30 45001–200000 Top bracket 45 180001+ 45 200001+