Hello, my name's Santasha Nabananga Bamblet. I'm a proud yr
the Order Kerni Whoalbury and a waddery woman. And before we get started on She's on the Money podcast, I would like to acknowledge the traditional custodians of the land of which this podcast is recorded on a wondery country, acknowledging the elders, the ancestors and the next generation coming through as this podcast is about connecting, empowering, knowledge sharing and the storytelling of you to make a difference for today and lasting impact for tomorrow.
Let's get into it.
She's on the Money, She's on the Money.
Hello, and welcome to She's on the Money the podcast Millennials who want financial freedom.
You sound so cheap, But this morning I'm in such a good mood. Why are you in such a good mood.
You've never gotten up this early ever in my lifetime? Absolutely, what time is it? It's nine twelve, so.
Nine twelve am. And Beck has never been up there. I've never seen the morning sun. It is so gorgeous.
Where I'm living at the moment is a fair bit out of the CBD. And obviously I'm a little bit used to having only like a fifteen minute commute. This morning, beck one hour and fifty two minutes to get to the hell yeah, I had to get up before six am, and you're you're talking about nine twelve am being ridiculous.
Oh my god, why did it take so long?
Traffic? Traffic, very sexy traffic. Did you know what else is sexy?
Bet? You get this tax?
My god, that is kind of sexy, and you know, white sexy. Because I have no idea how it works. Yeah, I feel story.
Yeah it's not, it's not actually a mystery, but I feel like so many of us are just living under a rock when it comes to taxes. Any if you've heard any of my content historically, I genuinely believe it is a privilege to pay tax. And we'll go on and on about that a little bit later because I can't stop myself. But I just think we are so lucky to live in a world where everything is looked after, Like, you know, if someone gets sick, we have a healthcare
system that can prop us up. We have you know, roads that are drivable, We have infrastructure that is keeping us safe and has been built safely. There are just so many things in Australia that we should be grateful for. And the amount of times I hear people saying, oh my gosh, I have to pay so much tax the amount of times I snap back and I'm like, okay, cool,
So you also make a lot of money. They might be nice, That might be nice for you, but I'm sick of people talking about how much of drag it is. And while we'll get into it, and I know nobody loves paying taxes, we'll talk about how they work.
But have you ever heard the.
Saying beck that there are only two certain things in love?
Yes, live, love and love. No, those are three. Those are three.
We're talking about the phrase references too, and those two are death and taxis Ah, yeah, that's really sexy, sut And obviously this show is all about money, so we're going to be talking about the latter on today's show.
Don't worry.
But often when something is so universal, we don't actually stop to ask really basic questions about it right. It often becomes a given. And I think that's why our education system has genuinely skipped over financial literacy for so long, because we should just get it right right, and that's not the case at all, but taxes beck just an inevitable thing that we actually have to organize each and every single year.
But don't worry.
If you've maybe let it slip, it is not the end of the world. We can get you back on track. But very few questions are ever asked. So I thought, why not do an entire episode on the sexy, sexy topic of paying taxes.
Let's jump straight in.
Oh, you look so psyched. You came in here absolutely cheaper. And then I was like, we're going to talk about tax and You're like, why did I get up this early?
All I know about tax so far is that I don't understand how people let it slip?
How do they do it late? Because I get so excited July.
First, you get excited in my tax Yeah, because I don't wonder I let you on this team.
I just think that, okay, cool, I'm going to get some money and I'm going to do it as soon as it hits July one, twelve am. I am so excited and I don't know why. I don't know where it's coming from, but I'm going to get some money.
Ten out of ten. That sounds like an experience I would like to sign up for. That is your experience,
and I don't want to stereotype here. That's your experience because you are a PAYG employee and often over the year you would have recruit a few things that you could have claimed on tax, and you would have submitted in your tax return to say, oh, I can claim ab C and D. But in your PAYG job, you were taxed at the full rate of your marginal tax rate, not including any of the things you could claim back.
So then tax time, when it came to submitting your tax, you're going to get a little bit back, which is really sexy and why so many people love doing their taxes, just like you, but also why somebody like me, who's a business owner doesn't love doing it because I have.
The opposite problem.
The second I submit my tax, often I end up with a little bit more to pay than I had actually anticipated because business financials are not as clean cut as a PAYG employee. So you're side of the table excited about tax. My side of the table not that excited, but also still thinks it's a privilege.
Okay, Well, on that, I guess we'll start a base level what is income tax?
Sexy question? I like it.
So, income tax is the amount of tax that is applied to your quote taxable income every year and is paid on every single form of income that you derive as an individual. The amount that you pay is going to really depend on how much that you earn and any deductions that you can claim.
Or offset that you're entitled to.
So if you're an employee, your employee is going to deduct the tax from each pay so you don't need to stress about it. They're going to do it for you, and they're going to send that tax from your pay straight to the ATO or the Australian Taxation Office on your behalf. And that's the pot of money that goes to the taxation office that you're claiming on to say, actually, Hi, I had some deductions, can you give me some of that money back at tax time?
And that's why you think it's so sexy.
If you're someone who is self employed, or you freelance or you have your own business, this is going to be your responsibility. So you're going to need to set aside money each and every single pay, or each and every single time you derive an income to pay that tax. And if you want some more information, and I'm just going to do a not so subtle plug to the Business Bible, our business podcast if you haven't listened to that.
On that podcast, I actually break down exactly how I run my business bank accounts, and I think that as a small business owner, that's really important to go have a look at because there is so much confusion over what is right and what is wrong. And I'm not saying I am absolutely right, but it works for me.
And tax is not stressful. So at the end of every single financial year, most people need to lodge a tax return with the ATO, and you're actually able to do that yourself, or you're able to enlist the help of an accountant or a tax agent. And I think that's an important question to cover as well, because so many people ask do I actually need an accountant to
do this? And I guess the summary of that is the tax system, from my perspective, is actually quite elite, and they actually want you to file your tax return right. They want you to do that as soon as possible, and their online claiming system is actually super easy. So unless you have a more complicated tax return, if you're just a salaried PAYG employee who has a very clean cut salary. I don't see why doing it yourself would be too much of an issue.
Right right, Okay, yeah, I do mind myself and I feel like it's not too complicated.
It can't be.
If you're like me, I don't understand tax but I do my own returns, I'm like, okay, well their system must not be that flawed.
Yeah, exactly, it's very very easy to follow the prompts and kind of like add maybe deductions that you really didn't.
All right, right backtrack, we would absolutely not do that. You're doing that, and you're going to out yourself on Australia's biggest finance as they might least, just do everything very by the book.
Wow, fancy VI.
When you mentioned before that all the income you earn is taxable, what exactly does that mean? What income is taxable?
Yeah?
Okay, so you actually have to pay tax on any money earned from a lot of different things, so from your job, so from any type of employment. If you have a pension or an annuity, which is something that a lot of people listening to Chees on the Money probably have no experience in.
But I'll teach you about that later.
Don't worry most government payments from any type of investment you have, from any type of capital gains you have. So if you bought and then sold a property and you made capital gain on that property, which means that property increased in value over time, you're going to pay tax on that. You're going to pay tax on some grants and payments that you might receive. You would pay tax on any income that you get from trusts or partnerships or businesses. And you'd also pay tax on foreign income.
And I think that that is one of those ones which is a little bit misconstrued because people go, but if I made money in the UK, I shouldn't have to pay tax here because I paid it in the UK, and we actually have to declare it and some of that income could be taxable.
Oh okay, and what income isn't taxable?
Okay?
So get this. The worst of all is lottery wednings. So if you win the lotto or other prizes, you don't have to pay tax on it. But hypothetically, if you are really smart, what you would do with your lottery winnings is invest it. If that investment starts making money, you have to start paying tax on that money. That that money has made. Does that make sense?
That makes sense. Yeah, So the lump sum.
Absolutely tax free, but anything above and beyond that that that money makes for you is going to be taxable because that's just become an income.
Oh okay, so may as well splow.
Just just go ahead, buy a new car, get a boat.
Do you want to jet skalle? Let's get three? Why not?
So?
You don't have to pay any tax on lottery winnings or other prizes. How good, things like small gifts and birthday presents. You don't have to pay tax on the fifty bucks that your grandma gave you for Christmas. Imagine if you did, Oh my gosh, it would literally be the worst. You don't have to pay tax on some specific government grants and payments. You don't have to pay tax thankfully on child support.
Good.
You don't have to pay.
Tax on the tax free portion of a redundancy payout. So if you haven't gone through the redundancy process before, it actually could be quite confusing, and it's something that I do think we all should understand because it could happen. But essentially, if you get made redundant in your role, you will accrue a lump some payment to be paid out of, and it will depend on how long you've.
Worked for that business.
So if you've worked there for twelve months, it won't be that chic, but if you've worked there for like ten plus years, it could look really sexy. And then the government looks at that lump some payment and says, okay, we're only going to tax a certain portion of that and the.
Rest of that is tax free, which is just good to know.
Yeah, it's not essential information for absolutely everybody, but I think that if you're going through that process, just a little fyi to keep it in check. And if you are going through that process and it is a nice amount of money, please have a chat with your accountant to make sure that you're in the best possible position.
Because I don't mean to be rude, but not every single employer is going to get the calculations correct because it's not all that often that people, you know, do redundancy payouts for employees, right, right, And then you don't need to pay tax on government super co contributions, which is very nice.
Super co contributions that's when you pay a certain amount, like a small amount, and the government matches it matches.
Matches it or adds something else for you, if.
You are on a low income, or for anyone, for anyone, it's a co contribution.
And so essentially, if you're getting a co contribution, you probably meet the criteria of being able to get that co contribution. If you're making millions, you probably not get the co contribution.
I see, I see.
So my next question is why do taxes even exist? And where are our taxes going?
So let's just do a little preparation for our next trivia and I beck I'm pretty sure we're on the same page. We've never done this before, but like, I reckon, you and I would be a really good trivia team,
do you think so? I reckon, I reckon because we have such an eclectic knowledge between us, Like there's no way I know everything that you know, and like I'm just technically intelligent, Like I'm just not street smart, you know, Like you're like the street smart one in our relationship and I'm like in books smart one, and so like together we could take over the trivia.
Well.
I got to tell you, though, there is no question in the history of trivia that asks about street smarts.
And I am usually quite terrible.
Yeah, well, but when it comes to book smarts, here's some hot tips for you. So the federal income tax was first introduced in nineteen fifteen in order to help fund Australia's war effort in the First World War. So it hasn't been around forever and ever and ever. But essentially the ATO or the Australian government collects taxes and they actually fund community services.
I feel like taxes.
Get a really bad rap some times because people are like, ah, we're just funding dull bloodgers. Yep, cool, really glad that we can support people in our community.
That need it.
There is always, always always going to be a very small group of people who wrought a system. There is always going to be a very small group of people who take advantage of any system that exists. And for you to crucify absolutely everybody else who is making use of a system that is from my perspective, absolutely essential, that is wildly unfair.
Absolutely we wilieve it at that.
But as you know, like it doesn't matter what it is, like people wrought in the system, it coals when they do their self checkout. Like absolutely every system has people who are like na ah, I'm going to do it differently, and I'm going to take advantage. But just because people do that does not mean we should throw the entire
system out right. Yeah, But essentially, the ATO collecs taxes to pay for things like our healthcare, our education system, our emergency services, roads and then train lines and trammed and stuff like that. It pays for the Australian Defense Force. It also pays for welfare and disaster relief. So there are so many things that our taxes pay for which ultimately put us in a very privileged and better off position.
I'm very very grateful for that, so am I.
I just I hate this concept that people are like, oh, I'm paying tax for what for them to live their best life? It's like, do you know what if you genuinely believe that someone is living their best life on less than minimum wage, you've got something else coming. Yeah, you have rocks in your head because that is not easy or from my perspective, a best life.
Like, Yeah, that.
Income is about two hundred and fifty dollars a week, and most people who are utilizing that system are definitely needing more than two hundred and fifty dollars a week to live. They might have kids, they might have other commitments, doesn't leave anything for saving or investing or creating a dream life. Like in a way, it blows my mind that people would go taxes because such a small percentage of it goes towards welfare. Like, no, I love that system and I want to support it to the nth degree.
I love it as well.
And if they maybe touch would ever had to be in a situation where they needed that assistance, then I'm sure they'd be very, very grateful that they had paid tax I.
Couldn't agree more. And then also to further that, it's funny because Sony and I could go on and on about this, but we're going to do an entire episode on the cost of care soon about how much a cost to live with disability and the insurances you need to cover that. But I also think it's kind of hypocritical because here in Australia we are the most underinsured
country in the entire world. And the main argument people have when they're like, oh, I don't need insurance back, it doesn't matter, like I don't need to waste my
money on income protection. It's what the government's therefore, that's what I paid taxes for But then on the flip side, they're crucifying people who are actually making use of those systems, And it just is this crazy juxtaposition where they're like, I don't want to pay taxes because people are abusing the system and I'm working so that they can live
their free life. And then on the flip side they're like, by the way, I also don't want to get insurances because if anything would happen to me, I could just go on the doll Yeah exactly, you little hypocrites.
You kick a lane.
Maybe exactly on the topic of picking a lane, Yeah, what lane.
Do we fit in? What is a tax bracket? What are the rates?
Yeah?
All right, So a tax bracket is basically the range of income that you fall into, which then determines how much tax you're going to have to pay. It's kind of like buckets. And from my perspective, Australia has a very progressive tax system, which actually means the higher your income, the more tax you are going to pay. So beck, you can earn up to eighteen two hundred dollars in a financial year and not pay one cent of tax.
Very sexy. That is very sex very sexy.
This is known as the tax free threshold, and after which the tax rate then kicks in. So you would have come up against a conversation or even just a one sided conversation with you and some tax papers when you join a new job whether you want to claim the tax free threshold or not. And a lot of people are like, I want.
A tax free threshold.
Of course they do, So you might be really tempted if you get a second job in the same financial year, to go and tick that again and be like, yeah, I'll claim it again. And basically, when you're ticking the box that says claim the tax free threshold, you're notifying your employer that you have not made eighteen thousand, two hundred dollars this year, and they're then going to pay you eighteen thousand, two hundred dollars in full before starting
to apply your tax rate. Because you know how before I said, your boss goes and takes your income, sends a portion of the income off to the taxman, and then gives you the money that you can spend the responsibilities on them. That's telling them that the responsibility on them is to make sure that you get your eighteen thousand, two hundred dollars tax free, no worries and carry on.
But if you've already claimed that before at a previous job and then you're claiming it at your second job, your second job has no idea what your previous job pays you.
It's all about disclosure.
So what's gonna happen is they're gonna pay you, and you're gonna get your tax free threshold twice, and then come tax time, you're gonna have to pay it back and you're gonna get bit in the bottom when it comes to paying tax, and you're not going to understand why, because you'll be like, well, I didn't understand what tax free threshold men in the first place. I thought it
would have all been automatically calculated. And that's not actually the case, because your employer has no idea what other tax you've paid, because you haven't submitted a tax return yet, has it all been added up. No one's calculated it for you. They'll let you make use of that system twice because they don't know any different. So what we actually need to understand is one what the tax free threshold is, and two, if you've already earned more than
eighteen two hundred dollars. Don't tick that box because you're going to end up having to pay that tax back when tax time comes, and that can be quite painful.
So when at side notes.
So just hypothetically, yeah, I make twenty thousand dollars a year, Yes, tick the tax three threshold box.
I only pay tax.
On one thousand, eight hundred dollars.
Do Yeah, So what would happen is up until eighteen thousand, two hundred dollars you'd pay absolutely no tax, not one cent. And then for every dollar you earn over eighteen thousand dollars, you would pay nineteen percent tax. Okay, because you've only earned twenty thousand dollars, So that takes you into the first I guess bucket of tax. And so that's a good segue. I suppose let's go through what those marginal tax rates look like. I feel like the word marginal's
just so unnecessary, but that's okay. So essentially, the tax rates for the twenty twenty one and twenty twenty two year, which you would have just submitted last year, and the twenty twenty two slash twenty twenty three financial year are actually the same. That is important because sometimes the tax rates change, So that is what we're talking about today. So, as we said before, no tax if you're earning eighteen thousand,
two hundred dollars or under. But the second you get to eight eighteen thousand, two hundred and one dollars all the way up to forty five thousand dollars, you're going to pay nineteen percent of any dollar over that eighteen thousand, two hundred dollars. That's the second bucket. So third bucket is forty five thousand and one dollar all the way up to one hundred and twenty thousand dollars. Now, this
is a relatively new tax bracket. It used to be smaller, so the forty five thousand dollar bracket went up to about eighty thousand dollars, and I'm really glad that this is expanded a little bit. So you're now on a lower tax bracket if you earn up to one hundred and twenty thousand dollars, which I think is really sexy. But essentially what happens when you earn over forty five thousand dollars is you now have a two component tax rate. You pay what's called a base amount, and then you
pay a percentage amount, and it's not confusing. I promise, it's just a set amount. If you earn more than forty five thousand dollars, you'll pay five thousand and ninety two dollars in tax, and on top of that, you will then pay thirty two and a half percent of the excess over forty five thousand dollars.
Does that make sense?
So you've kind of got a base amount that you owe the government as a you know, it doesn't matter.
What it is.
You might earn forty six thousand dollars, Yeah, but you will always owe that five thousand and ninety two to begin with, and then you pay a percentage of every dollar over that. Okay, so if I'm making one hundred and ten thousand dollars, I'll still pay the base five thousand, yeah ninety two. Yeah, it doesn't change whether you're earning that one hundred and ten or you're earning fifty grand.
It's exactly the same tax rate, which is why it kind of, I want to say sucks in a way, but it's actually a very fair and equitable tax system from my perspective, comparing it to every other tax system around the world. The next bracket will be nice to be in this tax bracket is the fourth bucket.
And this fourth bucket is.
From one hundred and twenty thousand and one dollar up to one hundred and eighty thousand dollars, in which case your base amount of tax payable that jumps significantly. So the base amount of tax payable is twenty nine thousand, four hundred and sixty seven.
Dollars, oh my gosh, plus.
Thirty seven percent of excess over one hundred and twenty thousand dollars. And then the fifth bucket, which is the highest marginal tax rate here in Australia, is anyone who earns more than one hundred and eighty thousand dollars pays a minimum amount of fifty one thousand, six hundred and sixty seven dollars in tax plus forty five percent of excess over one hundred and eighty thousand dollars.
Oh that's a lot of money.
It is a lot of money. And I guess, contextualizing this a little bit, none of us were born before nineteen fifteen, Like, it's just it's not possible, right, So Beck, when you were born, this tax system existed. In fact, this tax system was not as sexy as it is now.
It's a better, more equitable tax system today than it was when you were born, right and you grew up and you were told you're going to get a job, and you're going to grow and learn and develop, and once you get your full time job, you're going to pay tax. Like it has always been a given. This is not something that has been put on you as a surprise, like you didn't get your first job and someone went, oh, by the way, have you heard of tax? And you're like no, what, Like this is something that
has existed the entire time. And I think it's really important to remember when we're looking at salary packages or what we're going to have in take home salary, is that we always talk if we are an employee about post tax earnings because at the end of the day, you have always been in a position where if you wanted to work in Australia, you would pay tax, full stop, end of story. You have always known that it doesn't matter if you didn't understand the tax system or how
it works, like nobody is expecting that of you. If you were in prep, it is not going to count. But we've always known that, So why are we now acting like tax is such a big burden and you didn't see it coming and you hadn't taken it into consideration when it's been there all along. Like to me, it's about only considering your post tax take home salary and making sure that that puts you in a good
financial position, because tax is just a given. It literally gets taken out of your salary before you even see it, like you can't take it home, and then you know you have to pay the taxman later it doesn't come into your account and you create some kind of emotional relationship with it, and you know, go, oh my gosh, but you know that twenty nine thousand, four one hundred and sixty seven dollars that I have to pay in tax I was actually going to buy a new car
with or that was going to be my home deposit. It never was going to be that for you. So I think that we really need to reframe how we view tax as it's the amount of money that you earn to put you in the best possible position, and that is being in the privileged position of working and living in Australia. Right, Like I just think from my perspective, I get so confused when people are like, oh my god, I just I didn't know this, Like, if you didn't
understand the process, I get it. But to act like tax is such a burden on you and stops you from living your best life, that's not the case at all. In fact, it helps you leave your best life and is usually the reason why you're actually able to drive an income because most of us relied on the public education system or their healthcare system at some point, whether it always you or family members that have relied on that.
To put you in the best possible position.
Anyway, I could ranch about this all the time.
That makes so much sense.
It's really hard to look at the money that is being taken out, but when you explain it like that, it makes sense, and I guess I'm happy about it.
Yeah, Like, let's just look at your take home salary and what we can do with that and stop going, oh my god, but pre tax, it would have been no, pre tax was always pre tax, like tax always existed. Yeah, I'll stop ranting about that because they could go on and on about it for today. But summarizing all of that part of our conversation, the lowest tax rate in Australia is nineteen percent. The highest is forty five percent, which is only charged on income over one hundred and
eighty thousand dollars. In love be nice, So I'm gonna let those people who earn more than one hundred and eighty thousand, I'll pay.
That tax, right, We'll never have to worry about it, exactly.
And most people actually sit in that middle bracket of earning between forty five thousand and one hundred and twenty thousand.
Dollars, you are also taxed.
I feel like this is just a and you're taxed on this and your tax on this, Like I could be the opera of tax, Like can you get a tax and you get your tax, Like.
It just goes on and on.
But you're also taxed on superannuation contributions and earnings. And there are obviously lots of tax benefits for paying money into your super fund. In fact, I've said it before on the podcast, I think super tax right really sexy. It is fifteen percent up until twenty seven five hundred dollars each financial year, which is arguably the closest thing we're going to get to a tax haven here in Australia, Like if you earn enough money to be taxed, it's still lower than that.
Right, But that's pretty good.
So literally, anybody who is earning an income, putting more money towards their superannuation is making a return or making a benefit, is actually getting tax back by putting money into their super. I'm not saying that that strategy is going to be right for you, because I think I've said it before on the podcast. I from my perspective, I'm thirty one. I still think I'm relatively young. I mean, my younger sister would beg to differ. She thinks I'm
really old. But I don't contribute extra amounts of money to my superannuation. And I get asked that all the time.
And the reason I don't is because I have an investment portfolio outside of superranuation, and every intention inside of me says that I would like to retire before the age of sixty five, and right now, if I made heaps of additional contributions to super and had the sexiest super ever, I would still have to work till sixty five to be able to access that properly, right, right, But if I build up my investment portfolio outside of superanuation. I can lean on that until I retire. So yes,
SUPER is absolutely a priority. I pay it for myself, but I'm not going above and beyond because I kind of want to have access to it before then privileged. But I need to talk about why I do that, because if I just said to you, no, Beck, I don't pay additional SUPER, you might deduct from that conversation that to me is not important. Yeah, it's really impactly what to exactly, but it's really important to me. But what's more important to me is my financial freedom at
this point in my life. And at some point, hopefully in the future, I'm going to have the cash flow to be able to like bump it up and you know, make both look really sexy. But at the moment, the entire plan is to not have my entire net wealth sitting in superinuation. It's kind of split between my investment portfolio and my SUPER and when I retire, I'm going to rely on both of those, not just one or the other.
Does that make sense? Very clever? You should be like a financial advice Oh my god, I was one time.
Yeah, it was really fun, and then I decided to just do this.
Yeah, yeah, yeah. Yeah.
But following on from that, the other important point that I have written down here that I think is really important to talk about is that tax rates for foreign residents are substantially higher. But to keep this episode really tight and light and fun, Titan light and fun on a tax episode, good from me, we won't actually go into the situation for non residents because there just isn't enough time today.
Okay, hopefully we do talk about that eventually.
We absolutely will, but I think it'll be an entire podcast on if you are a non resident. Here are all the things that you can do to put yourself ahead, because it's not just about talking about the tax rates.
On that. Let's have a little cheeky break. Go grab a tea. I need a cup of coffee. I need a cup of coffee.
Let's go, Let's go, let's go get a coffee.
Okay, we are Backfee.
I just want to really quickly address something and it's not part of the podcast.
It's not part of it. We can cut this out if we need to.
It that you brought two water bottles this recording. I usually ring four, but you actually don't. I'm so confused then that anyway, carry on.
Well, I just wanted to say that for anyone listening that's outside of Victoria Prep, that you said something that you said before that prep means kindy and preschool comes before kindy, and you're saying prep which means kindy.
That's all I wanted to say.
What so an American term, no in this room is shaking their head. I should know better, you know what, I can't remember. I went to school for prep in Tasmania, so I don't I don't know. I just thought it was called prep.
Yeah, I think it's a Victorian.
I've heard it be called pre k.
Pre k is pre school.
Oh yeah, okay, cool, Well tell me you don't have kids without telling me.
I've just got no idea. Why would I know that? Yeah, that's fair.
Flex only had to do prep once. Oh I think that is a flex.
I'm not too shocked. Now let's get back into it. So we're talking all about tax learn about this in prep? We did learn about this in prep.
I definitely didn't learn, Claire. I was like coloring outside the lines and talking about blocks. Yeah, like you know, probably eating tan buck.
But yeah, but.
If anyone was going to learn about texts in school, I feel like it would have been.
Yeah, my dad is and was an accountant, so oh maybe I did, but I didn't listen subconsciously.
I see, I see, I see, so recap.
Yeah, when calculating your tax is it as simple as say I earn sixty k, I get taxed at thirty two point five percent on that entire sixty k.
No. No, no, okay, no no.
And I think that's where a lot of people get confused, because you might go, tax is really easy. I'm going to take sixty and then minus thirty two point five percent. That makes sense, right, But that's actually not how it works. So what would happen is you would have to make a little chart. I'm really sorry here, but essentially what would happen is you would draw down your income. You go, okay, we're earn sixty grand, but of that sixty thousand dollars
my first eighteen two hundred dollars, no tax, nothing. Put that to the site. The next amount is going to be the second tax bracket we spoke about. So that's going to be where your tax rate is nineteen cents in the dollar. So that would be twenty six eight
hundred dollars. Because you fall, for that amount of money into the income bracket of between eighteen thousand, two hundred dollar and forty five thousand dollars, which on that amount you would pay five thousand and ninety two dollars in tax. And then to top that up to get to the total of sixty thousand dollars, you've got another fifteen thousand
dollars to go. So for that amount of fifteen thousand dollars, you fall into the bracket of forty five thousand and one hundred and twenty thousand dollars, which means that you're paying thirty two point five cents in the dollar on that, which means you get taxed four thousand, eight hundred and seventy five dollars. So on a sixty thousand dollar income, you will pay a total tax amount of nine thousand,
nine hundred and sixty seven dollars. Now, to contextualize that beck before, remember how I said when we're going through that tax table, which is obviously really hard to conceptualize on a podcast. So what I'll do is I'll post it on our Instagram and it will be up today so you can go and have a look at it.
But remember how I was like, okay, well, if you earn between forty five thousand and one hundred and twenty thousand dollars, you'll pay five thousand and ninety two dollars plus that's what that amount came so, as it is being broken down, the five thousand and ninety two dollars, that actually comes from the previous tax bracket, because you will pay the total amount of tax on the amount of money between eighteen thousand, two hundred and forty five
thousand dollars, So that total amount is five thousand and ninety two dollars, which is why we say, okay, you'll pay that five thousand and ninety two dollars, which is you paying nineteen cents in the dollar, and then after that you will pay thirty two and a half cents on the rest of the money that you earn.
Does that make sense? Oh, that makes so much sense.
Which is why from my perspective, we are a supreme tax system because you are not going to go, okay, well far out, I fall into the bracket of earning between forty five thousand and one hundred and twenty thousand dollars, Like, why do I have such a higher tax bracket? If I'm only on fifty grand, like, that doesn't seem fair. I want to be in the previous tax bracket.
Well, for the first.
Forty five thousand dollars you earn, you are already there, are already there, so you're only paying what, from my perspective, is really fair on tax, which is why it's kind of like a stepped tax system instead of a super strict No. Sorry, beck, you earn over forty five thousand dollars, Yes, you will be paying more tax. That is inevitable because the more money you earn, the more tax you pay. It is just how the world works. But you do get to make use of that first tax bracket of
like the tax free threshold. Then you get to max out the second tax bracket and you only have to pay nineteen cents in the dollar for that amount, and then after that you are subjected to all the other tax brackets. Does that make sense?
Yeah, that really makes sense.
So ninety K or one hundred and twenty K or two hundred K sounds like a heap of money because it is.
It actually is a lot. Yeah money. Well, let's look at what you can actually take home after tax.
Yeah, okay, sexy, sexy. I like that you have said to me, all right, I'm gonna have these questions which involve you having to do maths, and I'm like, come at me, bro me, and Grade ten would have been like, are you the devil? Like I don't want to come to play with you? But now I'm right and you're
ready to hear about the tax rates? All right, So if you earn forty grand, you'd pay four thousand, one hundred and forty two dollars in tax, meaning you get to take home thirty five thousand, eight hundred and.
Fifty eight dollars back. Very nice.
If you bump this up, I have chosen the number of ninety two thousand instead of your ninety k, but ninety two thousand dollars because this was actually the average annual salary from the Australian Bureau of Statistics in August twenty twenty two. You'll pay a total of twenty thousand, three hundred and sixty seven dollars in tax, meaning you take home seventy one thousand, six hundred and thirty three dollars.
Is very depressing that that's the average annual salary, is it? I mean, it's not depressing for anyone but myself.
Well, actually, I think that's an important conversation to have because when we say the average salary, that is the average. It is not the median or the mean. And when I say that, it's kind of like if I got you to imagine a bell curve right right, If you've got this big bell and in the middle, you've got what the normal people are earning. I promise you that
is not ninety two thousand dollars. But if I took every single salary in Australia, from people earning unto eighteen thousand dollars all the way up to top CEOs and the billionaires, and I took all their salaries and divided it by the amount of people we have, that's how we get ninety two thousand dollars. That makes so obviously on the top end there are so many really high
income owners. But it's kind of like if I said to you, okay, Beck, take the numbers three, five, ten, and twelve, and then add another number of one hundred and fifty, and then we divide that. Obviously the number is going to be higher because you've got that outlier of one hundred and fifty, right, that's not actually even close to what the three, five and ten are right, right, So that one fifty is really pushing quote the average of the group up. Yep, it's not how the world
actually works. So most people are not earning ninety two thousand dollars, beck, because that's not what most people in Australia earning. That's not what average means, even though you might assume that what we actually want to go for is what's called a median salary, and amedian is what most people in Australia are earning, so median means the most.
So the most people in Australia are actually earning sixty five thousand dollars, which is a lot more reasample, right, And it's a lot more I guess relatable.
So I would hate for you to listen to that and.
Be like, Vie, why did you pick ninety two thousand dollars, Like that's so unrelatable? It's literally because it just works with the tax brackets that I'm trying to explain it. I was just trying to be relatable and show you that I could read the ads website, okay, and I attacked you, Okay, you attacked me, but you've got some information about it as well.
I'm happy about that.
So most people actually earn sixty five thousand dollars, but the average annual salary is ninety two thousand dollars, which means you're going to pay twenty thousand, three hundred and sixty seven dollars and get to take home a sweet, sweet seventy one thousand, six hundred and thirty three dollars
each year. If you bump that up to a salary of one hundred and fifty thousand dollars, which is big dog energy, you are going to pay forty thousand, five hundred and sixty seven dollars in tax and take home a total of one hundred and nine thousand, four hundred and thirty three dollars. Like, you're taking home literally six figures of cash. That's after tals, cash cash, cash money, Like that's so much money.
Yeah.
And then if you earned two hundred grand, just because you mentioned it before, you'd pay sixty thousand, six hundred and sixty seven dollars in tax, and you would take home a total of one hundred and thirty nine thousand, three hundred and thirty three dollars.
Wow.
Keep in mind that doesn't take into consideration like the medicare levy or any deductions that you've got or anything like that. That's just like base maths, my favorite website. If you're trying to work out, you know, oh I forgot this job increase, what would my take home salary be? It's pay calculator dot com dot au and you will put that in the show notes. It's not a government
run website. It's actually just a really fancy calculator where you can like tick different boxes and it will go do you want to include or exclude superannuation or do you have a hex stare And it will actually tell you how much take home pay you'll actually get from a particular income, which I think is really sexy good website. Ten out of ten.
I love that.
Because you don't get shocked when the pacelet comes through, and they don't absolutely not a little bit of a different via coming through. So if I am a low income earner, not if you are not any sorry, that's very true.
You are not allowed to identify as a low income inner anymore.
True.
I feel like spiritually I still am, but no, technically I'm not so you.
Are allowed to spiritually connect with that, okay, but you're not.
No, I'm not.
I can't claim that anymore if I'm a low income earner. Is there any point taking a second job or I just lose it all to tax?
Oh that is such a stereotypical question, and I'm actually really glad you asked.
So many people say, oh my god, it's not worth it.
Til deer it's worth it. But people worry that tax is going to be so high on its second job because you don't get to claim that tax free threshold and it doesn't apply if you are paid. People get genuinely so worried. They're like, oh my gosh, the tax is going to be so high on a second job because the tax free threshold isn't going to apply if you're getting paid in that job. And I guess that's true. You are just going to have to pay standard tax
from the outset though with your second job. However, when you get your tax return completed, you'll actually pay the same amount of tax on your income whether you have
one or multiple incomes. So if you you know, let's say, earned forty thousand dollars and you went and got a side hustle and you're earning an extra ten thousand dollars, You're literally going to pay the same amount of tax as somebody who's on a fifty thousand dollars income, right, Like, it's not going to change because it's the second job. The only I guess, gotcha is that you can't claim the tax free threshold twice.
But no one can.
And if you are claiming it twice, because I've heard people before they're like, oh, if you tick that box, you get paid twice. And it's like, yeah, it's going to come back in your tax return my friends, like it always does that. Also, you're in love with more, but that is not fair and that is not how it works. So I think it's really important to remember that it doesn't actually matter how many jobs you've got.
You could have fifty jobs, and if you earn one hundred thousand dollars from those fifty jobs, you're going to earn exactly the same amount of money as somebody who has one hundred thousand dollars income.
Does that make sase? So you're basically just getting like a pay rise.
Literally you're getting a pay rise, and I mean you're trading your time and energy and effort for money, and you are going to be treated fairly in our tax system. You're not going to be charged above and beyond because it's a second job. You're just not going to be able to claim that tax free threshold. But nobody can anyway,
even if they switch jobs halfway through the year. Right, So, if you're an Australian resident for tax purposes, as we've said before, the first eighteen thousand, two hundred dollars you earn is free, which is a money win, and you usually nominate one employer to be able to claim that tax free threshold, which means they will not take any tax from your earnings before you reach that threshold, which we've talked about already on this episode, but I think
it's really important to reiterate that first amount of eighteen thousand, two hundred dollars is tax free regardless of who you are, whether you earn more than two two hundred thousand dollars or you earn less than twenty thousand dollars, like, you are going to be able to get that for free, because that's how our tax system works. It is stepped. It is not just like okay, cool, well you go in this bucket over here.
Does that make sense? Yeah, that makes sense, that makes sense.
I am hoping at some point, if you haven't done it already, we could do a whole episode on deductibles and like claim your tax. Yeah we did one ages ago, but I think it's time for an update because each and every single year, the tax system changes the rules, just like the superannuation system. Get this complete sidetrack. But since super became a mandatory inclusion for all employees in nineteen ninety two, BECK, there have been hundreds of changes to the superannuation system.
How is that fair? Anyway?
I know it's getting bigger and better and changing for the better, but like, oh my gosh, the tax system is very similar, Like there's just changing rules each year, and each year the ATO kind of like says, hey, guys, this year, we're looking out for this because the world changes. Righteen years ago, were the ATO looking out for influencers claiming their holidays to Disneyland? No, they weren't, because it wasn't a thing. But now they're looking out for it.
So I think it's just interesting to cover. From my perspectives, let's do a p on that idea.
Great thank you.
All right, let's go plan that. I think we're done here today. I feel like this has been short but sweet, but probably not that short because I can go on and on about tax So I hope you guys have a good day, and if you've made it to the end, congratulations.
It's honestly gold star for you. I love you. Have a really good rest of the week, bie, guys.
The advice shared on She's on the Money is general in nature and does not consider your individual circumstances. She's on the Money exists purely for educational purposes and should not be relied upon to make an investment or financial decision.
If you do choose to buy a financial.
Product, read the PDS TMD and obtain appropriate financial advice tailored towards your needs. Victoria Divine and She's on the Money are authorized representatives of Money sherper P T y L t D A B N three two one six four nine two seven seven zero eight a F S L four five one two eight nine