ATO Tax Return Help - Anyone Had to Pay Back Large Sums?

futuresailors on 17/07/2018 - 12:18

Hi, I am in the process of completing tax returns for my wife and I. The tax estimate has both of us owing thousands to the ATO. We are both not high income earners and there hasn't been a huge increase in salary or change in source of income from the year before. We basically every time have received money and not owed.

For the first time we joined Private Health Insurance on June 29 (to avoid loading for one of us). Does this have something to do it with it? I may have missed something in completing the tax returns, but they are asking in excess of $10,000 combined!

Financial

closed Comments

  • tomsco on 17/07/2018 - 12:28

    Not commenting on why the bill as it could be a number of reasons, but you can speak to the ATO about a payment plan.

    Do you have an accountant?

    I know someone that had a debt of ~$4k that managed a payment plan of $500/month, so if the $10k is $5k for each of you, then I would expect the ATO would be happy to accept $500/month each from the two of you.

    • CyberMurning on 17/07/2018 - 12:31
      +2

      OP doesnt want payment plan, he doesnt want to pay (or not sure why he need to pay that amount)

      • tomsco on 17/07/2018 - 12:39
        +1

        Fair enough. Without them providing any figures/circumstances though, it's a bit hard for anyone to help.

        • CyberMurning on 17/07/2018 - 12:54
          +1

          of course. this is example of question that is impossible to answer.

  • QW3RTY on 17/07/2018 - 12:29
    +4

    Please provide the following:

    • Comprehensive summary of income for your household
    • Comprehensive summary of your investment activity for the past tax year
    • Comprehensive summary of deductions claimed for the past tax year

    I'll endeavour to get back to you as soon as possible.

    • CyberMurning on 17/07/2018 - 12:33
      +4

      and qw3rty will also need your bank account so he can send ATO refund to you directly, for free! how good is that

      • ronnknee on 17/07/2018 - 14:16
        +1

        And also bank account password to personally notify you when the refund is received.

        • Scrooge McDuck on 17/07/2018 - 14:45

          Plus copies of your driver's licence and Medicare card, your mother's maiden name, your first pet's name and the name of your best childhood friend, so that he can provide a complimentary back rub with your tax return.

  • Baysew on 17/07/2018 - 12:30
    +2

    Something may not be right, but without checking all details hard to pinpoint.

    Go an see a Tax Professional. Fees are tax deductible.

    • futuresailors on 17/07/2018 - 12:38

      Yeh that is what we will have to do, but thought I would check here for any other advice or similar experiences

      • HighAndDry on 17/07/2018 - 12:40
        +6

        If you have last year's return handy, compare the pre-lodgement summaries and see where the discrepancy is.

  • tsunamisurfer on 17/07/2018 - 12:30
    +4

    We do not know what you have declared to the ATO this year nor years prior, there are too many variables.

    I suggest you call them and have them give you a brief explanation as to why there is a discrepancy.

  • HighAndDry on 17/07/2018 - 12:36

    Have there been any other changes in your financial circumstances? Purchased a property? Sold one? Boss changed accounting software (and so withholding less)? Kids got older so losing some kind of benefit/discount? Check your PAYG summary (if you have one) and see if the Tax Withheld portion is similar to previous years'.

    • futuresailors on 17/07/2018 - 12:42

      No major changes and no kids, but yeh good point will check the previous years PAYG summary

  • CyberMurning on 17/07/2018 - 12:36
    +1

    wait… "For the first time we joined Private Health Insurance on June 29 (to avoid loading for one of us)"

    so 29 june 2018? hmm i thought we need to be covered for the whole year so we dont have to pay Medicare Levy Surcharge? you cant just join last minutes and then no need to pay. all ozb will do the same otherwise hahahah

    unless you mean 29 june 2017?
    read this
    https://www.privatehealth.gov.au/healthinsurance/incentivess…

    • futuresailors on 17/07/2018 - 12:40

      yep joined june 29 2018. If birthday is within the same tax year you join you avoid the loading

      • PeterC86 on 17/07/2018 - 12:53
        +2

        not sure where you got this info from about birthday in the same year, sounds like fairy dust to me. you pay for the % of year you werent covered. so you're paying nearly all the medicare levy surchrge amount if you're over the thresholds amount (180k combined?) since you only covered for 2 days

        but you said you're not high income earners so am guessing you arent over the 180k combined and this isnt the issue. also, MLS would only be around 2k for you, so that cant be the 10k you're saying.

        did the company you work for withhold all tax needed? did either of you have HELP debt?

        • CyberMurning on 17/07/2018 - 12:56
          +1

          "If birthday is within the same tax year you join you avoid the loading"
          tax year: 1 july to 30 june.
          that means all human (that i know) will have birthday fall between those.
          maybe you know someone who doesnt? please introduce.

        • trex on 17/07/2018 - 14:02

          Futuresailors talking about Lifetime Health Cover (LHC) loading not Medicare Levy Surcharge, refer here

        • Scrooge McDuck on 17/07/2018 - 14:49
          +1

          @dragonindespair:

          maybe you know someone who doesnt?

          I was artificially created on the 31st of June.

      • futuresailors on 17/07/2018 - 12:57

        If you do not have hospital cover with an Australian registered health fund on your Lifetime Health Cover base day and then decide to take out hospital cover later in life, you will pay a 2% loading on top of your premium for every year you are aged over 30.

        • toniyellow on 17/07/2018 - 13:33
          +1

          If the only reason you are joining is to potentially save money on future health insurance you should really do the math. Is paying money now for a potential saving in the future worth it? The loading isn’t as bad as it sounds. It only lasts for 10 years.

          There are quite a few articles out there about it e.g. https://www.choice.com.au/money/insurance/health/articles/ho…

  • MrHyde on 17/07/2018 - 12:40
    +2

    Also, getting Private Health Insurance on June 29 means you only avoid the loading for 1 day. You still have to pay the loading for the remaining 364 days of the year.

    • futuresailors on 17/07/2018 - 12:51

      If take out private insurance before age 31 in next financial year there is no lifetime loading for that person

      • nicolemcmilllon on 17/07/2018 - 12:53
        +4

        Loading is different from medicare levy surcharge. do not confuse the two.

        What is your taxable income per your payment summary and the tax withheld for you and your wife.

        Perhaps your work did not withhold enough from the two of you (doubt it).

        Owing $10,000 doesn't sound correct unless you have $20,000 of other income on which no tax has been paid.

        Source: I am a tax agent

        • CyberMurning on 17/07/2018 - 12:57
          +1

          ah finally tax agent is coming.
          you two, please get a room (whooopss)

        • futuresailors on 17/07/2018 - 13:00
          +2

          If you do not have hospital cover with an Australian registered health fund on your Lifetime Health Cover base day and then decide to take out hospital cover later in life, you will pay a 2% loading on top of your premium for every year you are aged over 30.

          This is what I was referring to in regards to taking the private insurance, not for tax reasons

        • CyberMurning on 17/07/2018 - 13:05

          @futuresailors: i see. you are right about 2% loading. but taking it on 29 june 2018 means you wasnt covered from 1 june 2017 till 28 june 2018 so you pay Medicare Levy Surcharge.
          (note: word surcharge not loading).

          btw, even if you will have to pay 2% loading, it is still cheaper not to take it (as long your income is below threshold)
          good you have taken it, now do you know about 3 years less 1 day rule?

          https://www.privatehealth.gov.au/healthinsurance/incentivess…

          Permitted days without hospital cover
          If you have taken up hospital cover on or after your Lifetime Health Cover base day, then you can access the following 'permitted days without hospital cover' during which you do not have an active hospital policy, but your loading does not increase. For most people, your base day is the later of 1 July 2000 or the 1 July after your 31st birthday.

          Gaps in cover - to cover small gaps, such as switching from one fund to another, you are able to be without hospital cover for periods totalling 1094 days (i.e. three years less one day) during your lifetime, without affecting your loading. This is known as 'Days of Absence'.
          If you use up your Days of Absence - that is, you have a total gap period of 1095 days - you will pay a loading on rejoining private hospital cover. The loading is an additional 2% on top of any previous loading, and will increase by 2% for every year after the 1094 days without cover.
          Suspension of membership - if you apply to your health fund to suspend your hospital cover for a short period (for example, to travel overseas for a holiday), and the fund agrees, this period of suspension is not counted towards your 1094 days of absence. Suspension terms and conditions vary from fund to fund, so check with your fund as to whether you can suspend your policy.
          Going overseas - if you cancel your hospital insurance after your Lifetime Health Cover base day in order to go overseas for at least one continuous year, the days you spend outside of Australia are not counted towards the 1094 Days of Absence. You are able to return to Australia for periods of up to 90 consecutive days, per visit, and are still considered to be overseas. Any periods of 90 days or more which you spend in Australia will be deducted from the 1094 Days of Absence.

        • futuresailors on 17/07/2018 - 13:10

          @dragonindespair: In these 17/18 returns the information I have filled it says we do not have to pay the Medicare Levy Surcharge. We are not in pay bracket to be hit with it.

  • SnoozeAndLose on 17/07/2018 - 12:50
    +1

    Can you let us know you income and tax being paid so that we can use our accountant mind to assist you?

  • PissLUR on 17/07/2018 - 12:53

    if you are not a high income earner, why would you take private health insurance? i dont see the need even if you are 31 and over.

    • CyberMurning on 17/07/2018 - 13:01

      some people just got mind trapped in the word insurance they think they will need it one day so it is okay to spend $$$$ each year. i know someone with $45k yearly gross salary but paying $170 per month to medibank for extras and hospital cover. WHAATTT???

      • HighAndDry on 17/07/2018 - 13:05

        Yeah. PHI is…. inaccurately named. It's not really insurance so much as it is a subscription for health services, and it should be assessed on that basis.

  • JimmyF on 17/07/2018 - 12:57

    they are asking in excess of $10,000 combined!

    Ok, well that means nothing really. The ATO is asking my to pay near $50k income tax too, but my employer has taken that out of my pay for me already ;)

    So what was the total income and what tax was paid? Any HECS debt etc?

    If you both worked two jobs each and claimed the tax free on all jobs, then you would be screwed like this.

    $10k tax owing means you earned $30k 'tax free' on the lower tax brackets and $20k in the upper tax bracket. Either way, its not pocket change.

  • [Deactivated] on 17/07/2018 - 13:18

    Might be your HECS debt

    • futuresailors on 17/07/2018 - 13:21

      both of us never had HECS debt

      • Baysew on 17/07/2018 - 14:55

        It's a mistake that can happen. Wrong box ticked and suddenly your return has a HECS debt repayment calculated.

      • CheapSticks on 17/07/2018 - 15:51

        you can do a back of envelope check with how much u got paid vs tax deducted and can check against the threshold to see how much should have been deducted as per ATO slabs…

  • zonra on 17/07/2018 - 13:52
    +1

    We’re gonna start to sound like a broken record but without more details it’s flat out impossible to give you any real inputs.
    Some basic numbers like net income and collected PAYG for starters, further would be interest earned, shares, how many jobs each of you work etc.

  • trex on 17/07/2018 - 14:04

    Did you forget to input PAYG? Or is your income source other than salaried income?

  • pantsparty on 17/07/2018 - 14:05

    This should not be the case. Do you have any income other than wages from your employer? If no it sounds like your employer screwed up

    • tomsco on 17/07/2018 - 14:36

      If no it sounds like your employer screwed up

      But if there is tax payable for both his wife and himself sounds like it's more on his side than the employers side.

      • pantsparty on 17/07/2018 - 16:40

        Agreed but your employer is meant to withhold tax at the correct rate to ensure these kind of things don't happen. OP and his wife will be liable to pay the tax shortfall - but his employer should have withheld the correct amount in the first place.

        • HighAndDry on 17/07/2018 - 16:43

          If I had to take a guess, I'd say the employer did withhold the correct amount (since OP would've mentioned a ~20% increase in take home), but just forgot to report it or enter it correctly.

        • tomsco on 17/07/2018 - 16:50

          I understand that. I am simply saying if both his wife and himself both have equally high tax liabilities, unless they work for the same company, it seems unlikely it has something to do with the company.

  • danielh on 17/07/2018 - 14:48

    Until Futuresailors provides us some income details, it makes it hard to work out his situation. I am assuming that both he and his wife are <31 years of age as well based on the discussion above.

    Also, unless both you and your wife both earned $250,000, I cannot see the $10,000 as a result of the 2% Medicare surcharge.

    I suspect that they forgot to tick the box that says they wish to include the tax free threshold which is $18,200 in whatever software they are using to calculate tax which combined with his wife, and general low income will easily hit the $10k estimate they worked out.

    • futuresailors on 17/07/2018 - 15:45

      Hi, I am lodging on mygov, haven't seen a box or question about the tax free threshold? If there is somewhere that could be it, but as I said havent seen it. Combined income is less than 100k

      • CheapSticks on 17/07/2018 - 15:56
        +1

        Clearly something is wrong there ! Am sure you can figure it out yourself - check it against last yr and with the ATO calculator to give you an tax estimate. I wont be going to the agent yet !

        • futuresailors on 17/07/2018 - 16:00

          yep I will double check everything, must have answered something wrong along the way

      • danielh on 17/07/2018 - 16:04

        I don't have a myGov account so cannot log in to see what the tax thing looks like but can you just quickly find a free Australian tax app or online site and roughly enter in your tax details and see if you get the same result. I'm pretty sure the difference is because of the threshold.

        Well, either that or your boss has not been doing your PAYG tax properly.

        Go to this Pay Calculator and enter in just YOUR income details and compare what you were supposed to pay in tax against what PAYG tax your boss withheld for you.

        Do the same for your wife.

        If there are large differences then I blame the boss, if not, then I blame some little tickbox on the myGov website you may have missed (hence try doing your taxes via another online method to compare).

  • stargalaxy on 17/07/2018 - 15:30

    Wonder why you lodged now when you owe ATO money, you have until 31/10/18 to lodged your return online. Peoples usually lodged early when they have a refunds from ATO. Before you lodge online, ATO will estimate the tax owed by you, you can choose to lodged just before the deadline, in the meantime, come less to Ozbargain as it definitely cost you money.

    • futuresailors on 17/07/2018 - 15:43

      haven't lodged it yet, filled everything out thinking I would get the usual refund, checked the tax estimate.

  • Meho2026 on 17/07/2018 - 15:51
    +2

    Look at your payment summaries (group certificates).
    Go to this page https://www.paycalculator.com.au/ and enter your total income before tax.
    It will automatically calculate a "Total Taxes" amount that includes the medicare component.
    Compare that amount with the amount of tax paid on your payment summary. The difference is what you owe

  • Moderatorscrimshaw on 17/07/2018 - 16:52

    Thread closed, as per OP request.

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