Most taxpayers expect a sizable refund check each tax season. But for those who fail to prepare their tax returns, it can be confusing to understand how the refund is calculated. The good news is that it’s quite a simple process, especially if you use a tax calculator.
When you calculate the taxable income, you can use the information to figure out your total income tax that applies for the year. You can then compare this amount to the amount that you were paid throughout the year. If this amount that you paid is above your tax, then you can receive a refund for the difference. This article discusses the tax refund process.
As explained earlier, if you pay a lot of tax during the year, then they can pay you back some of it. This is called a tax refund. There are several reasons why you can be due tax back. But, you do need to file a tax return to claim your refund.
You should note that there are various ways you can calculate the amount of tax back you are due. You can decide to lodge your tax return. When your paperwork is processed, the ATO informs you whether or not you paid a lot of tax during the year. Besides this, you can also choose to know the amount of tax you paid before you lodge your taxes. This way you should be able to calculate the tax yourself.
To calculate the tax refund yourself, you need to determine the amount of money you earned during the specific tax year. You should also know whether you are eligible to the tax-free allowance, your rate of income tax, and your entitlement to tax deductions. When you have this information, you can compare what you should pay during the tax year to what you did pay.
There are several common tax deductions which you can claim to improve your tax refund. One of them is work-related expenses. This usually includes travel and car expenses, tools and equipment, uniform and dry cleaning costs, food, cell phone costs, and self-education bills.
You can also include donations and charitable gifts. Remember that you can be eligible for a donation tax refund. Especially if it contributed to good causes. Some of the donations and charitable gifts include personal superannuation contribution, investment income deductions like interest charges, and union membership.
If you want to claim deductions on your tax return, you should keep the relevant documents safe. Some of the documents you need to have are invoices and receipts.
You should also note that tax rates tend to be progressive. Therefore, you can pay more tax if you earn more money. That said, the amount of tax they can deduct from your pay usually depends on your residency status.
In conclusion, if you paid a lot of income tax during the tax year, then you can lodge your return. You should always use a tax calculator to know the amount of tax that you can get back.