How to Do Your Tax Return in Australia: A Step-by-Step Guide

Most Australian residents earning income above the tax-free threshold ($18,200 in 2025–26) must lodge an annual tax return. The Australian income year runs 1 July to 30 June. Returns cover the prior year - so in the October 2025 – March 2026 window, you are lodging your 2024–25 return.

• Lodgement deadline - 31 October: If you are lodging your own return via myTax (ATO's online portal via myGov), the deadline is 31 October each year. If you use a registered tax agent, their clients typically have extended deadlines (as late as May the following year) - but you must be on their books before 31 October.
• Who does NOT need to lodge: If your only income is from salary/wages and you have no deductions and no other income, you may not need to lodge - the ATO can issue a 'no lodge required' notification. However, most people should lodge to claim deductions and ensure any over-withholding (leading to a refund) is returned. Check via myGov if you have a 'not required to lodge' status.
• myTax - the ATO's free online tool: Log in to myGov (my.gov.au), link the ATO service, and access myTax. Pre-filled income data from your employer, bank, super fund, and government agencies is loaded automatically. You review, add deductions, and submit. Returns lodged via myTax are typically processed in 2 weeks with refunds direct to your bank account.
• Tax agents - when to use one: A registered tax agent (find via the Tax Practitioners Board register at tpb.gov.au) adds value when you have: rental property, business income, shares sold (CGT events), complex deductions, multiple employers, or foreign income. Their fee is itself tax-deductible in the following year's return. Average cost: $150–$400 for a standard individual return.
• Paper returns: Still possible but slow (12-week processing). Avoid unless you have no alternative.
• Lodging late: Late lodgement without a tax agent attracts a Failure to Lodge (FTL) penalty: $330 for each 28-day period late (up to 5 periods = $1,650 maximum for standard returns). Interest on unpaid tax also accrues at the General Interest Charge (GIC) rate (~11% p.a. in 2024–25).

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Attempting your tax return without all documents leads to errors and omissions. Collect everything before opening myTax.

• Payment summaries / income statements: Your employer lodges your income statement with the ATO by 14 July. It appears in myTax pre-filled as 'income statement.' Check it is marked 'Tax ready' before lodging - if still 'In progress,' wait or contact your employer.
• Bank interest statements: All interest earned in savings accounts, term deposits, and offset accounts is taxable income. Your bank reports this to the ATO and it should pre-fill. Check each account including joint accounts (you declare your share).
• Share dividend statements / DRP statements: All dividends received (cash and dividend reinvestment plan) are taxable. Franking credits attached to dividends are included as income but then claimed back as a tax offset. Your broker's annual tax statement or the company's Investor Centre provides this data.
• Rental property records: Full-year statements from your property manager (if used), all expense receipts, loan interest certificate from your bank, council rates notices, insurance certificates, and the QS depreciation schedule. Rental income and expenses require a separate schedule in your return.
• Capital gains / losses: Any sale of shares, property, crypto, or other CGT assets during the year triggers a CGT event. You need: purchase date, purchase price (cost base including brokerage), sale date, sale price (proceeds minus brokerage). Your broker's CGT report (available on most platforms) pre-calculates this.
• Government payments: Centrelink payments (JobSeeker, Youth Allowance, Parenting Payment, Age Pension) are taxable income. They are pre-filled by Services Australia. Check the amount is correct.
• Super contributions: Your super fund reports your contributions. The pre-filled super data shows employer SG contributions and any salary sacrifice. Check your SMSF annual return if applicable.
• Working from home records: If claiming the 67c/hour fixed rate, you need a record of actual hours worked from home for the full income year (diary, timesheet, calendar). If claiming actual expenses method, you need receipts for all claimed items.
• Deduction receipts and records: All deduction claims must be supported by receipts held for 5 years. The ATO accepts digital receipts (photos, PDFs). Apps like ATO myDeductions allow year-round receipt capture.

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Australian tax law requires you to declare all income from all sources worldwide if you are an Australian tax resident. The ATO receives data from hundreds of sources - omissions are detected through data matching.

• Salary and wages: Pre-filled from your employer. Verify the gross amount matches your last payslip's year-to-date figure. Check PAYG withholding (the tax your employer sent to the ATO on your behalf).
• Allowances and reimbursements: Taxable allowances paid by your employer appear on your income statement. Non-reimbursed amounts included in your salary that you then spent on work expenses form the basis of work-related deductions.
• Interest income: Pre-filled from banks. Add any accounts not pre-filled - overseas bank accounts, crypto platform interest (staking rewards), and peer-to-peer lending returns.
• Dividends: Include all Australian and foreign dividends. Enter the dividend amount, the franked portion, and the franking credit. Foreign dividends go in the foreign income section. myTax pre-fills domestic dividends from ASX-listed companies for most investors.
• Rental income: Gross rent received (before expenses) is income. Declare even if you made a net loss - the loss offsets other income (negative gearing) but must be declared correctly.
• Capital gains: If you sold any CGT assets, complete the capital gains schedule. Apply the 50% CGT discount where the asset was held >12 months. Capital losses are first applied against capital gains before the discount is applied.
• Cryptocurrency: The ATO treats crypto as a CGT asset. Every disposal (sale, swap, exchange, payment using crypto) is a CGT event. Keep detailed records of every transaction. The ATO receives data from Australian exchanges (CoinSpot, Swyftx, Independent Reserve) - non-disclosure is high-risk.
• Gig economy income: Uber, Airtasker, Airbnb, Deliveroo, Fiverr and similar platform income is assessable. The platform may send a summary but you must declare gross income - platform fees are deductible expenses.
• Foreign income: If you are an Australian tax resident, foreign employment income, foreign interest, and foreign rental income must be declared. Foreign tax paid generates a Foreign Income Tax Offset (FITO) - a credit against Australian tax.

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Tax deductions reduce your taxable income. The three rules for deductibility: (1) you must have spent the money yourself, (2) it must be directly related to earning your assessable income, and (3) you must have a record. The ATO cross-references deduction claims against occupation benchmarks and flags outliers.

• Work-related car expenses: Cents per kilometre method: 88c/km for 2024–25, up to 5,000km, no log book required but must show work-related purpose and record keeping. Log book method: actual expenses × business-use percentage from a 12-week log book held every 5 years. You cannot claim home-to-work commuting - only work-to-work travel.
• Work-related travel (not car): Public transport, flights, and accommodation for work-related travel away from your normal workplace. Home-to-work travel is not claimable.
• Working from home: Fixed rate 67c/hour (from 1 March 2023): requires actual hours diary, covers energy, internet, phone, stationery. Depreciation of furniture and equipment claimed separately at full cost over effective life. Actual expenses method: requires dedicated home office space and detailed calculation of each expense (electricity bill × work floor space ÷ total floor space × work hours ÷ total hours, etc.).
• Self-education: Directly related to your current job - not a new career. Includes course fees, textbooks, stationery, and a portion of internet/travel to attend classes. HELP repayments are NOT deductible (they are repayment of a loan, not education expenses).
• Professional memberships and subscriptions: Union fees, professional association memberships, occupation-specific journals and subscriptions. Industry body membership is deductible; general interest subscriptions are not.
• Tools and equipment under $300: Immediately deductible in full. Over $300: depreciated over the effective life (ATO's Tax Ruling TR 2023/1 sets effective lives by category - e.g., laptop 4 years = 25%/year diminishing value or 12.5% prime cost).
• Income protection insurance premiums: Deductible where the policy replaces income (not where it pays a lump sum). Life insurance, trauma, and TPD are NOT deductible (they are capital in nature).
• Investment expenses: Interest on loans used to purchase income-producing investments, accounting fees for your investment portfolio, and margin loan interest are deductible. Interest on a loan that has been contaminated by personal use (e.g., redraw used for holidays) is only partially deductible.
• Tax agent fees: The fee you paid your tax agent last year for preparing your prior year's return is deductible this year. Not the current year's fee.

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Offsets (also called rebates) reduce your tax payable directly - unlike deductions, which reduce taxable income. After applying offsets, Medicare Levy (2%) and any surcharges are calculated to arrive at your final liability.

• Low Income Tax Offset (LITO): Up to $700 offset for taxable incomes below $37,500 (2025–26). Phases out at $1.50 per dollar from $37,500 to $45,000, then $0.50 per dollar to $66,667. Effectively raises the tax-free threshold to $21,884 for residents.
• Low and Middle Income Tax Offset (LMITO): This offset was REMOVED from 1 July 2022. Many taxpayers received unexpectedly smaller refunds in the 2022–23 year because they expected LMITO of up to $1,500. It no longer applies.
• Franking credit offset: Franking credits attached to dividends are added to your income, then claimed as a tax offset. If your total tax liability (including Medicare) is less than your franking credits, the excess is REFUNDED to you - valuable for retirees and low-income investors.
• Seniors and Pensioners Tax Offset (SAPTO): Eligible seniors receive an offset of up to $2,230 (singles) or $1,602 (each for couples) that further reduces tax. Rebate income threshold for singles: $50,119. Effectively raises the tax-free threshold to ~$32,279 for eligible seniors.
• Spouse super contribution offset: If you contribute up to $3,000 into your low-income spouse's super (spouse income ≤ $40,000) you receive an 18% tax offset - up to $540. Phases out as spouse income rises from $37,000.
• Medicare Levy (2%): Applies to most Australian residents on taxable income above $26,000 (2025–26 low-income threshold). Reduced Medicare Levy for low incomes. Medicare Levy Surcharge (1–1.5%) applies if you are a high earner (>$93,000 single / >$186,000 family in 2025–26) without private hospital cover.
• Private health insurance rebate: If you have private health insurance, the government rebate reduces your premium. Reconcile via the return - if your income was higher than estimated when setting up the rebate, you may owe money back.
• HECS/HELP repayment: Compulsory HELP repayments are calculated on your 'repayment income' (taxable income + reportable fringe benefits + total net investment loss) at progressive rates from 1% at $54,435 to 10% above $159,664 (2025–26). These are shown on your notice of assessment and deducted from any refund or added to any debt.

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The ATO's data-matching capability is extensive. Common errors that trigger reviews or audits are entirely avoidable with good record-keeping.

• Claiming the full home office deduction without records: The ATO requires an actual hours diary (not an estimate) for the 67c/hour method. 'I worked from home 4 days a week for 48 weeks' without a diary is not sufficient - you must have contemporaneous records.
• Over-claiming car deductions: The ATO benchmarks work-related car claims by occupation. A librarian claiming 5,000km of work travel raises flags. For the log book method, claims above 80% business use are heavily scrutinised.
• Forgetting bank interest on multiple accounts: The ATO pre-fills data from Australian banks but you must confirm accuracy. Overseas accounts, new accounts, joint accounts (your share), and term deposits that matured during the year are common omissions.
• Not declaring crypto: Every disposal is a CGT event. The ATO receives exchange data. Ignoring crypto income is one of the highest-risk omissions in 2024–25.
• Claiming non-deductible work clothing: Plain suits, business shirts, and 'professional' clothing are NOT deductible unless they are a compulsory uniform with identifying features (employer logo) or protective in nature. The ATO disallows millions in clothing claims each year.
• Deducting expenses your employer reimbursed: If your employer paid you back for an expense, you cannot also deduct it. Only unreimbursed expenses are deductible.
• Mixing investment loan purposes: If your investment loan redraw has been used for personal purposes (holiday, renovation, car), the interest on that portion is not deductible. The ATO traces loan accounts carefully in rental property audits.
• Lodging before your income statement is 'Tax ready': If you lodge while your employer's data is still 'In progress,' your pre-fill data may be wrong. Wait for the 'Tax ready' status - typically available by late July for most employees.

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