In 2017, a survey was conducted and showed that 45% of Australian respondents were not happy with the amount they pay in taxes. Although it was a big percentage, which may have increased this 2019, Aussies do not seem to be too bothered at their standard of living overall.
According to the World Happiness Report in the same year, Australia was one of the top 10 happiest countries in the world. Also in the top 10 were Norway and Denmark, which are countries with high taxes.
The Organisation for Economic Cooperation and Development (OECD) regularly analyses the tax burdens of over 30 countries in the world. Out of these countries, Australians paid more than $25,000 per capita in 2014. Compared to other countries, specifically the US, Aussies pay $3,000 more in taxes each year.
However, despite the difference, a United Nations study ranked Australia as the second-best when it comes to the quality of life.
In return for paying taxes, Aussies get plenty of benefits. Programs are available to boost the quality of life, especially for average income families in the country. Paid leave is one of the benefits, including new parents getting 18 weeks of time off.
All these pieces of information may be overwhelming for young families in Australia. This guide will help you understand what taxes mean for families and how you can benefit from your tax payments.
What Families Need to Know about Taxes
Every family should understand the basics of the Australian tax system. This way, they do not miss the benefits that are in store for them, along with their responsibilities. Tax benefits for families include refunds, offsets, bonuses, and credits that can help you support your young family.
To be eligible, you need to get a Tax File Number (TFN) for all the tax concessions. All members of the family, specifically your spouse and children who earn a regular income should have a TFN. Those with investments and superannuation should also have a TFN to qualify for the benefits.
A spouse is defined as another person (either of the opposite or same-sex) whom you were legally with. Therefore, the relationship was registered under a territory or state law. It does not mean you need to be married to this individual. As long as you are a couple on a domestic basis, the person qualifies as your spouse.
What is a Family Taxable Income?
A family taxable income is classified in two points:
- It is the combined taxable income of both you and your spouse. The income includes the tax income of a spouse who may have died a certain year.
- If you are a sole parent, your income is considered taxable as well.
Calculating your taxable income requires some basic mathematical skills. However, it is quite simple, but you need to keep track of some numbers. So, get your pen and paper, along with your calculator to start computing your family taxable income. Here are the steps:
- Take your taxable income.
- Write down the relevant amounts of all the superannuation lump sums you got, if any.
- Deduct your taxable income with the amount in step 2. If it is negative, just write $0 here.
- If applicable, write your spouse’s taxable income now.
- Just like with the second step, write down all the superannuation lump sums that your spouse may have received, if applicable.
- As with step 3, take your taxable income and subtract the amount in step 5 from it. Once again, if the difference is lower than $0, write $0.
- Add the numbers you got from steps 3 and 6. It is your family taxable income.
Some limits are associated with your family taxable income. Your Medicare levy reduces based on certain amounts. Here are the easy steps to calculate the limit:
- Seniors and pensioners entitled to the tax offset should write $60,481 down first. If you do not belong to the mentioned category, simply enter $46.361.
- Write about how many dependent children you have.
- Multiply the number you wrote in step 2 by $4,257.
- To get the limit, add the amount in step 1 and the one in step 3.
Note that if you are a single parent, you should not increase the family taxable income limit for your child unless the tax benefit is payable to you for this specific child. Also, if your taxable income is equal to or lower than the limit you got in the fourth step, you can get a tax reduction.
Benefits You Can Claim
All Aussie families should know about the Family Tax Benefit (FTB). It is compensation from the government awarded to certain families for raising their children. The benefit is given every fortnight. It may also be paid as a lump sum, which can be claimed at the end of the year. FTB is comprised of two parts:
- Part A: FTB that is paid for every child based on the situation of the family
- Part B: FTB paid for each family, giving additional help for sole parents and couples with children that only have one source of income
If you are eligible for FTB, you may also claim other payments and supplements, including:
- Part A Supplement: This supplement is paid at the end of each year for every FTB child. Only families a maximum of $80,000 adjusted taxable income can qualify. The money can be used to pay outstanding debts. All recipients of the supplement and other Part A benefits should meet requirements for health checks and immunisations.
- Part B Supplement: Like Part A supplement, you can only claim Part B supplement after the end of the financial year. The amount will depend on the tax return that you and your spouse lodged.
- Multiple Birth Allowance: If you have triplets (at least), you may be eligible for this benefit. You will get paid the children reach 16 years old. If the children are full-time students, you may be given the allowance until they turn 18.
- Newborn Supplement and Upfront Payment: For families with a newborn baby, they will receive financial help until the infant reaches 13 weeks (or more). These benefits are available to those who are eligible for Part A, specifically those whose parental leave pay is not granted for the child. In this case, it applies to those who have a new baby, including adopted newborn and those who are under a year old.
- Energy Supplement: This payment gives families assistance when it comes to energy costs and other household expenses.
Family tax benefits are indeed efficient and helpful. However, you should first meet the requirements to avail them. Your dependent children should be 16 to 19 years. However, they should not receive any pension or payment, including Youth Allowance from the government. As the parents or guardians, you can only qualify for the benefit if you care for the child 35% of the time (at the very least).
There is also an income test that you should meet, which is one of the factors that will determine how much you can claim.
There are plenty of benefits, payments, and refunds that you can get from family taxes including:
- Education Tax Refund, which assists you with the costs of education for all dependents. The expenses include buying a personal computer. Claiming will depend if you are eligible for FTB Part A.
- Income Tax Offsets, which are for families to help lower the amount of taxes they pay. Depending on each family’s situation, some offsets that you may qualify for include dependent spouse, housekeeper, the parent or invalid relative, superannuation of the spouse, medical expenses, and private health insurance.
- Investments for Children, where the parent invests on behalf of the kids. Investments, such as shares and savings account should be under the name of the dependent child who is not 16 years old. If you qualify for this benefit, you should declare the earnings of the investments.
- Superannuation, which is helpful for a retirement plan. You may be qualified for a super co-contribution, as well as a tax offset if you contributed to the superannuation of your spouse.
- Separating families also get financial help from the tax system.
Family Tax Benefit, as mentioned, will be paid fortnightly or at the end of the financial year as the whole amount for the whole year. The money will be disbursed to a bank, the citizen’s building society account, or to a credit union.
Certain rules need to be followed, especially when it comes to the time when you can be eligible for a claim. For instance, families should lodge a claim for FTB three months before they expect their child to be born. The maximum rates will vary depending on several conditions. If you have a child who is under 13 years old, you can be paid $179.76 if you receive the payment fortnightly or $5,412.95 if as a lump sum.
If you and your family are ready to get your tax return underway, the experts at TaxReturn.com.au are here to help, we can do the leg work to get you the maximum return possible.