Frequently Asked Questions – Tax Preparation at HDQ

Frequently Asked Questions (FAQs) Tax Preparation at HDQ

1. What Is the PAYG Instalment System, and How Does It Work?
2. Division 293 Tax: How Can I Pay It Directly from My Super Fund
3. Why Doesn’t a Negatively Geared Property Guarantee a Tax Refund
4. Why Is My Tax Refund Lower This Year Compared to Last Year?
5. How Can I Sign Documents Electronically Using Xero Sign?
6. When Will I Receive My Refund?
7. Why Should You Get Private Health Insurance with Hospital Cover?
8. Why Doesn’t HDQ Use a Client Trust Account?

Navigating tax time can be overwhelming, and as accountants, we often receive questions from clients about specific processes and expectations. To make things easier, we’ve compiled answers to some of the most frequently asked questions about tax preparation in Australia.

1. What Is the PAYG Instalment System, and How Does It Work?
The Pay-As-You-Go (PAYG) Instalment System helps taxpayers meet their tax obligations by prepaying income tax throughout the year. Instalments are calculated by the ATO based on your most recent tax return or income estimate.

If you earn income outside of a regular salary (e.g., from investments or business activities), PAYG instalments reduce the risk of a large tax bill by spreading payments over the year. If your income fluctuates, you can vary your instalments via your BAS.

2. Division 293 Tax: How Can I Pay It Directly from My Super Fund?
Division 293 Tax applies to high-income earners whose income and super contributions exceed $250,000. It imposes an additional 15% tax on concessional contributions.

To pay this tax directly from your super fund, follow these steps:

– Access your Division 293 Tax notice in your MyGov account linked to the ATO.
– Select the option to pay using your super fund.
– Complete and submit the Release Authority form, allowing the ATO to withdraw the tax directly from your superannuation.

3. Why Doesn’t a Negatively Geared Property Guarantee a Tax Refund?
Negative gearing occurs when your rental property expenses (e.g., interest, maintenance, and depreciation) exceed the rental income, resulting in a loss. While this loss reduces your taxable income, it doesn’t automatically guarantee a refund.

Your tax outcome depends on:
– Your overall taxable income.
– How much tax was withheld by your employer.
– Other deductions or offsets available to you.

Negative gearing reduces your taxable income—it doesn’t directly translate to a refund. Additionally, the long-term benefit of negative gearing is often tied to property appreciation rather than immediate cash flow.

4. Why Is My Tax Refund Lower This Year Compared to Last Year?
There are several reasons why your refund may be lower this year, including:

– Higher Income: Increased earnings can push you into a higher tax bracket or reduce offsets.
– Fewer Deductions: If you had fewer work-related or investment deductions, it could result in a lower refund.
– Changes in PAYG Withholding: If your employer withheld less tax this year, your refund would decrease, or you may owe tax.
– Policy Changes: Adjustments to tax rates, thresholds, or offsets by the government can also impact your refund.

5. How Can I Sign Documents Electronically Using Xero Sign?
Using Xero Sign to review and sign tax documents is quick and easy:

Log in to Xero with your email (e.g., yourname@email.com) and set a password if it’s your first time.
– Review the documents awaiting your signature.
– Follow the prompts to add your electronic signature.
– Submit the signed documents.

Once completed, our team will receive a notification and proceed with lodgement to the ATO. If you need assistance, don’t hesitate to reach out.

6. When Will I Receive My Refund?
Refund processing times depend on when your tax return is lodged and whether additional checks are required by the ATO. Generally:

– Electronic Lodgements: Refunds are processed within 2–3 weeks.
– Paper Lodgements: Refunds can take up to 6–8 weeks.

If your return is flagged for a review or audit, processing times may be delayed.

7. Why Should You Get Private Health Insurance with Hospital Cover?
If you earn over $93,000 (for singles) or $186,000 (for families), you may be liable to pay the Medicare Levy Surcharge (MLS) if you do not have private hospital cover. The surcharge ranges from 1% to 1.5% of your taxable income, depending on your income tier.

By obtaining private health insurance with hospital cover, you can avoid the MLS, which may cost more than the insurance premium itself. Additionally, private health insurance gives you access to private hospitals and reduces waiting times for elective treatments. There is no benefit in exchange for paying MLS.

8. Why Doesn’t HDQ Use a Client Trust Account?
At HDQ, we do not operate a client trust account, meaning your tax refunds are paid directly into your nominated account by the ATO. Any fees or payments for our services will need to be settled separately.

This ensures clarity and transparency, allowing you to manage your refunds independently while we focus on delivering professional accounting services.

For more information, feel free reach out to info@hdqaccountants.com.au and our team will be in touch to assist.