Employee rights and obligations
When you're working as an employee, you must pay income tax on payments you receive from your employer. Your employer deducts tax from your pay and sends those amounts to us.
Your rights and obligations may change, if you:
- leave or change jobs
- have income from more than one job
- work overseas
- are a working holiday maker
- leave the workforce (retire).
At the end of the income year, you need to lodge a tax return. When you lodge a tax return you include how much money you earn (income) and any expenses you can claim as a deduction.
You may receive a refund after claiming any deductible expenses.
Starting your job
When you start a job, you need to make sure that you:
- have or apply for a tax file number (TFN) – without a TFN you pay more tax on your income
- complete a TFN declaration
- choose a super fund where your employer can pay your super contributions.
We produce tax tables and calculators to help your employer work out how much to withhold from your payments. You can also use the Tax withheld calculatorThis link opens in a new window to check how much tax should be withheld from your pay.
What your employer must do
Your employer withholds tax on your behalf from your salary or wages and, in most cases, pays super into your super account. Your employer uses your TFN declaration to work out how much tax to withhold from your pay.
Most employers now report your income, tax and super information at the same time they pay you. This reporting is called Single Touch Payroll (STP).
Your income statement will include the tax and super information your employer reports to us. Most employers have until 14 July to finalise their data, they will let you know if there are any delays in the finalisation of your income statement.
You need to link your myGov account to the ATO to access your income statement. If you don’t have a myGov account you will be able to contact us for a copy.
Some employees receive fringe benefits as part of a salary sacrifice arrangement. Fringe benefits are a non-cash benefit either you or an associate, such as your spouse or children, receive because of your employment. Your employer usually provides these benefits or sometimes your employer's associate or a third party under an arrangement with your employer provide the benefit.
Your employer should provide a workplace free of unlawful discrimination and promote diversity. If you’re a working parent, have carer responsibilities or a disability, you should discuss ways your employer can support you. To find out more about these responsibilities, see Australian Human Rights Commission.External Link
Paying tax on your income
You pay income tax on most sources of income including:
- your salary and wages
- most Centrelink payments
- investment income you receive from rent, bank interest or dividends
- profits from selling shares or property
- income from your business.
The amount of income tax and the tax rate you pay depends on your circumstances and how much you earn. The more you earn, the higher your rate of tax.
Your employer and other payers use the information you provide on your tax file number declaration to work out how much tax to withhold.
A simple way of working out how much tax should be withheld from your pay is to use the Tax withheld calculatorThis link opens in a new window.
You can also use the PAYG withholding tax tables to calculate the amount that should be withheld from your pay.
If you're an Australian resident, the first $18,200 you earn is usually tax free. You can choose to claim the tax-free threshold when you complete your TFN declaration.
If you earn income from more than one source (for example, from a second job or a taxable pension) you need to tell your second payer to withhold tax at the higher rate. You can tell the payer by selecting the 'no tax-free threshold' rate on the TFN declaration. If you don’t have tax withheld at the higher rate you might have a tax debt (bill) to pay when you lodge your tax return.
If you want to know the amount of tax you will be liable for over the full year, see Tax rates – Australian residents.
Australian residents may also pay the Medicare levy. This is generally 2.0% of your taxable income in addition to the tax withheld from your income. The Medicare levy helps fund some of the costs of Australia's public health system known as Medicare.
You also need to include on your TFN declaration if you have a debt for a:
- Higher Education Loan Program (HELP)
- Student Start-up Loan (SSL)
- Australian Apprenticeship Support Loan (AASL) (formerly Trade Support Loan (TSL))
- VET Student Loan (VSL)
- Student Financial Supplement Scheme (SFSS).
Depending on how much you earn, you may have to make repayments on this debt as part of your income tax payment.
Most employees need to lodge a tax return each year. You may be eligible to claim deductions for expenses you directly incur in earning your employment income. However, you can't claim the cost of normal domestic or private expenses.
Super contributions
Your employer may also need to pay super contributions into your super account for you.
When you start working you should:
- choose a super fund where your employer can pay your super contributions
- make sure that your super fund has your TFN, this will
- minimise the tax you pay on your super contributions
- ensure they accept the contribution payments
- make it easier for you and them to keep track of your super accounts.
If you’re eligible to choose a super fund, you can do so using the Superannuation (super) standard choice form. Your employer may give you this form when you start employment.
From 1 November 2021, your employer may have an extra step to take to comply with choice of fund rules if you don’t choose a super fund. They may need to request details of a 'stapled super fund' from the ATO.
A stapled super fund is an existing super account which is linked, or 'stapled', to an individual employee so that it follows them as they change jobs.
If you change jobs or have more than one job, be sure to keep track of your super. Having multiple super accounts could mean you are paying fees you are unaware of, which could reduce your retirement savings.
Use the YourSuper Comparison Tool to compare super products and choose a super fund that meets your needs.
While you are working
While you are working your day to day working arrangements may include understanding and making choices about:
- receiving cash for the work you do
- salary sacrifice arrangements
- employee share schemes
- workplace giving programs.