The word tax elicits fear into the hearts of men and paying tax seems like a death sentence.
I always make the joke that many believe “Thou Shalt Not Pay Tax” is the 11th commandment. This perspective is wrong and the ideology of your thinking needs to change.
What is tax?
Taxes are generally an involuntary fee levied on individuals or corporations that is enforced by a government entity, whether local, regional or national in order to finance government activities. In economics, taxes fall on whomever pays the burden of the tax, whether this is the entity being taxed, like a business, or the end consumers of the business's goods.
So now we know tax is involuntary, let’s forget about trying to avoid it all together. As you are probably aware by now, the more profit you make, the more tax you will pay. That makes tax a by-product of making profit. If we continue with this line of thinking, and we know that we get taxed more when we make more, wouldn’t you want to pay more tax?
If an individual makes $18,200 in Australia they will pay no tax. Great right? WRONG!! If an Individual makes $77,255 they will pay $18,200 tax, which one do you think is better off?
Individual A
Income $18,200
Total Tax $0
Total Income after tax $18,200
Individual B
Income $77,255
Total Tax $18,200
Total income after tax $59,055
Individual B is better off because their disposable income is $59,055 where as individual A’s income is only $18,200.
Now don’t misunderstand, paying too much tax is wrong. If you have spent money to produce your income it is important to ensure you are claiming the right amount. If you want to understand what you can and can’t claim and want to maximise your refund or minimise your tax call us today!