Money Doesn’t Come Without Guidance ...
Tax deduction will reduce the income that is able to be taxed, and is commonly occurred as a result of expenses, particularly for those expenses which are incurred to produce additional income. The difference between deductions, exemptions and credit is that deductions and exemptions both reduce taxable income, while credits reduce tax.
Tax deductions are one of the few tax topics that generate some excitement. While nobody likes to pay taxes, everybody loves to use deductions to lower their taxes. To put it plainly, a tax deduction lowers your taxable income, which therefore lowers your tax liability.
Most of the business related expenses are tax deductible. Individuals could claim these deductions in the annual tax return for business or, if he/she is a sole trader, in his/her personal tax return.
Expenses That can be Claimed
Individual can only claim expenses that are directly related to earnings of his/her assessable income. If the individual makes a purchase or uses an asset for both business and private purposes, in that situation he/she can only claim a deduction for the business portion of the expense. If individual uses an item in his/her business for only part of a year, then he/she may need to restrict his/her claim to the period it was used for the business.
To claim a work-related deduction
Below are the specific deductions that you can claim
Some other tax deductions:
One system of taxation in Australia is the Pay as You Go (PAYG) withholding. This entire PAYG takes place without definite knowledge of the taxpayer, therefore people have some confusion about the system. Given below is a detailed discussion about the basic idea of the PAYG withholding.
Under this method, the employer keeps a portion of payments from your income throughout the financial year for the employee's expected tax liability at year's end. The PAYG system is based on weekly, fortnightly or monthly wage payments being inferred into a quarterly income level from which a likely tax liability for the year is estimated according to personal tax rates. The employee will get a 'payment summary' form his/her employer at financial year's end, which will contain the records of the total amount that the employer withheld as tax from you.
To make PAYG payments, an employer needs to register his/her business for PAYG withholding. Depending on the size of the company it will be decided as to how often the PAYG will be paid. At the end of the tax year the employer will need to give the Tax Office a payment summary annual report which will include details about the tax that has been paid as PAYG. Both electronic and a personalised PAYG payment summary statement are available to fill in the details.
The actual tax liability is worked out from your final tax return, and the payments withheld during the year are credited against your taxation. After calculating the tax payable if your PAYG withheld is higher than tax payable than you will get a refund, if the tax payable is more than the amount withheld as PAYG than you need to pay more tax.