It’s the end of the financial year today, with the new financial year (2021-22) starting tomorrow. If you’re confused as to why people keep saying the word ‘tax’ around this time of year, here’s why.
The Australian financial year begins on July 1 and ends June 30 the next year.
EOFY is a time when individuals and businesses calculate their taxable income, and begin submitting a tax return form to the Australian Taxation Office (ATO) for the year ending 30 June. The ATO uses this information to determine how much tax individuals/businesses owe to the government or how much they need to be reimbursed. The forms aren’t actually due tomorrow – you get a few months to do all the work.
What is a tax return?
A tax return is a form you complete online that tells the ATO:
- How much money (income) you earn
- If you are claiming any deductions
That information is then used to check if you:
- Have paid enough tax
- Have paid too much tax
- Can access any tax offsets
- Need to pay the Medicare levy or surcharge
What does tax deductible or tax deduction mean?
A tax deduction reduces someone’s (a business or individual) tax liability (tax they need to pay) by lowering their taxable income. Deductions are usually work-related expenses that the taxpayer spends during the year that can be subtracted from their full income to figure out how much tax needs to be paid. This is related to EOFY because if you want any deductions in your next tax return, you have to make sure all bills are paid, and purchases are made before June 30. That’s why electronics stores go so hard on the EOFY sales – they know a lot of people will be looking to buy a work-related item (like a computer) before the end of the financial year to minimise their tax liability.
For work from home expenses, take a look at this comprehensive list of things to claim to see if these apply to you.
What about crypto?
Just because you’re trading in cryptocurrency, that does not mean that you won’t be paying tax. Just like anything, if you made realised gains (which means you sold) you may need to pay tax. If you had a capital loss (which means you sold at a loss) you may get a deduction.
And just like that, you’re ready to submit your tax return!