first I thought that tax withheld is an option you can have by completing a form. so you have the option to get your tax deducted on each of your payslip or you can decide to pay all of your taxes later..
until one lady from the bank told me that the government already deducts taxes from your income, which your employer automatically deducts from your pay, meaning, you can never get a gross amount of your income, and that the only time you pay your taxes after the financial income is when you have your own business.
so this contradicts what i thought i knew on how paying your taxes work. so if shes right, what actually happens when you get tax withheld.
im confused can someone help me
thanks!
The lady at the bank is correct. If you work as an employee, your tax for the money you earn is deducted each pay period. This will be shown on your pay slip.
When you have tax withheld, at the end of each financial year you lodge a tax return and based on your total income and any deductions, you will get either a refund, or a bill to pay if your income is higher than estimated. This is called the Pay As You Go system, and is usually known simply as PAYG.
If you work as an employee, you're on TFN.
Tax will be withheld by your employer (as per the PAYG table) weekly, forthnightly or monthly from your pay.
At the end of the year, your tax payable or return payable will be:
Taxable Income = Total Income (earned/interest income) - Less Deductions (work expenses etc.)
Tax Payable/Return = Taxable Income - Tax withheld (or tax already paid)
Businesses however work differently, they have to forward the tax withheld from you to the government, as it is not their money.