Why do you need to claim the tax-free threshold from your employer?

Question

What does this achieve? Can't the tax office just not tax you for $6000? Why does it matter where the non-taxed money came from?

Forgive me if this is a stupid question, but I have never dealt with tax before, it's so confusing!!

Answer 1

The tax rates for indivduals are:

Tax rates 2007-08



$1 – $6,000 Nil

$6,001 – $30,000 15c for each $1 over $6,000

$30,001 – $75,000 $3,600 plus 30c for each $1 over $30,000

$75,001 – $150,000 $17,100 plus 40c for each $1 over $75,000

$150,001 and over $47,100 plus 45c for each $1 over $150,000



Therefore if you earn less than $6000 in the financial year, you don't need to pay any tax. It is not mandatory to claim the tax free threshold from your employer, but it is in your best interest to do so. This means that you aren't over paying in tax therefor you have more money in your pocket everyweek. A company called Paycheck Investigators might be able to help you if you are still confused.

Good luck

Answer 2

Your employer needs to take tax out of your pay each period and the amount of tax will vary heaps whether or not you claim the tax-free threshold.  On the ATO website you can search for 'tax tables' and see how much of a difference it actually makes.

The tax tables are used by the ATO so that they can say if you earn this much on average each pay period your total income for the year would x and the amount of tax on that is xx.  If you have more than one job, you only claim the tax-free threshold for one otherwise not enough tax is taken out.  In other words, your employer is the ATO's tax collector.

Hope this makes sense.

Answer 3

some people have a few jobs, so having to claim it means the govt has a record of it n we not cheatin them.  

Answer 4

Your employer is basically asking you how much tax you would like to pay each week. You might have one part time job, two part time jobs, full time plus part time, etc. The tax office only calculates how much tax you owe at the end of the year, and most people would hate to have to pay a lump sum for thousands of dollars in one go at tax time.