Reason Aussies are being hit with shock ATO tax bills: ‘Same problem'

Yahoo

3 days ago

Many Australians have been left blindsided after lodging their tax returns and finding that, rather than getting a refund, they actually owe money to the Australian Taxation Office (ATO). An Australian tax accountant said many workers were running into the 'same problem' due to the way the payroll system works.
Australians have flooded social media to share the outcome of their 2025 tax returns since the start of the new financial year. While some have been 'boasting' about their hefty tax refunds, others have shared their shock at being hit with a tax bill.
Tax Invest Accounting director Belinda Raso told Yahoo Finance she was seeing more people getting tax bills because they worked multiple jobs and no longer had the 'buffer' of the $1,500 low and middle income tax offset, which ended on June 30, 2022.
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'The way our payroll system works is even if you do the right thing and you tick not to claim the tax-free threshold on your second job, that [job] is not withheld at enough,' she said.
If you earned more than $45,000 in your first job, for example, you would already be in the 32 per cent tax bracket, including the 2 per cent Medicare Levy.
'When you tell your [second] employer not to claim the tax-free threshold, you're actually going straight onto that first tax bracket, which is 16 per cent plus 2 per cent Medicare levy,' Raso said.
'But if your first job is already $45,000, you need to be paying it at 30 per cent plus 2 per cent, so you are down 14 per cent and this is where people are getting tax bills.'
Raso said Aussies in this position should either ask their employer to withhold the additional tax, put it away themselves during the year, or not claim the tax-free threshold on their main job. Otherwise, it's likely to happen again this year.
There were 963,100 multiple job-holders in March this year, the latest ABS data found, representing 6.5 per cent of all employed people.
Raso said she thinks changes to the payroll system would mean "less disgruntled Aussies" who end up with a tax debt, despite thinking they are doing the right thing.HECS-HELP debts can be a factor
If you have a HECS-HELP debt, Raso said you'll need to let your employer know about it, or you could end up with a tax debt.
If you have reportable fringe benefits or salary sacrifice, this could also be a reason you get a tax debt.
That's because HECS repayments are calculated with salary sacrifice added back in and reportable fringe benefits are 'grossed up'.
If you work multiple jobs, your combined income may also be enough to push you over the HECS repayment threshold and mean you get a tax debt. The threshold for the 2025 financial year was $54,435.
'If you have two employers, and if you don't reach that HELP debt limit, even though they know you've got a HELP debt, it won't come out of your pay,' Raso said.
'But then, added together, both of them will get you over that threshold and you will end up with the tax debt.'
Other reasons you could get a tax debt
Raso said the Medicare Levy Surcharge can be another reason you receive a tax debt. Your employer withholds the Medicare Levy, but not the surcharge.
For the 2025 financial year, the surcharge applies to singles earning $101,001 or more and families earning $202,001 or more who don't have hospital health insurance cover.
You can also get a tax bill if you earned other income during the year. That could include from side hustles, bank interest, investments, rentals and capital gains tax.
What do I do if I have a tax bill?
If you receive a tax bill, you need to pay it by the due date on your Notice of Assessment.
If you can't pay on time, you can ask the ATO to set up a payment plan and break your bill down into smaller amounts.
If you have an outstanding amount owing to the ATO after the due date, you will be charged a general interest charge.
It is currently 10.78 per cent annually and compounds daily, even if you are on a payment plan.