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How Tax Works · She's On The Money

• 0:00
  Speaker 1: Hello, my name's Santasha Nabananga Bamblet. I'm a proud yr
• 0:04
  Speaker 1: the Order Kerni Whoalbury and a waddery woman. And before
• 0:08
  Speaker 1: we get started on She's on the Money podcast, I
• 0:11
  Speaker 1: would like to acknowledge the traditional custodians of the land
• 0:14
  Speaker 1: of which this podcast is recorded on a wondery country,
• 0:18
  Speaker 1: acknowledging the elders, the ancestors and the next generation coming
• 0:22
  Speaker 1: through as this podcast is about connecting, empowering, knowledge sharing
• 0:27
  Speaker 1: and the storytelling of you to make a difference for
• 0:30
  Speaker 1: today and lasting impact for tomorrow.
• 0:33
  Speaker 2: Let's get into it.
• 0:34
  Speaker 3: She's on the Money, She's on the Money.
• 0:57
  Speaker 4: Hello, and welcome to She's on the Money the podcast
• 1:00
  Speaker 4: Millennials who want financial Freedom?
• 1:02
  Speaker 2: You sound so cheap, But this morning I'm in such
• 1:05
  Speaker 2: a good mood. Why are you in such a good mood.
• 1:06
  Speaker 4: You've never gotten up this early ever in my lifetime? Absolutely,
• 1:10
  Speaker 4: what time is it? It's nine to twelve, so.
• 1:13
  Speaker 2: Nine twelve am. And Beck has never been up there.
• 1:15
  Speaker 2: I've never seen the morning sun. It is so gorgeous.
• 1:19
  Speaker 5: Where I'm living at the moment is a fair bit
• 1:21
  Speaker 5: out of the CBD. And obviously I'm a little bit
• 1:23
  Speaker 5: used to having only like a fifteen minute commute. This morning,
• 1:27
  Speaker 5: beck one hour and fifty two minutes to get to
• 1:31
  Speaker 5: the hell yeah, I had to get up before six am,
• 1:33
  Speaker 5: and you're you're talking about nine twelve am being ridiculous.
• 1:37
  Speaker 2: Oh my god, why did it take so long?
• 1:39
  Speaker 5: Traffic? Traffic, very sexy traffic. Did you know what else
• 1:43
  Speaker 5: is sexy? Bet to get this tax.
• 1:46
  Speaker 4: Mid that is kind of sexy and you know, white sexy.
• 1:49
  Speaker 4: Because I have no idea how it works. Yeah, I
• 1:51
  Speaker 4: feel story.
• 1:52
  Speaker 5: Yeah it's not it's not actually a mystery, but I
• 1:55
  Speaker 5: feel like so many of us are just living under
• 1:58
  Speaker 5: a rock when it comes to taxes. Any if you've
• 2:00
  Speaker 5: heard any of my content historically, I genuinely believe it
• 2:03
  Speaker 5: is a privilege to pay tax. And we'll go on
• 2:06
  Speaker 5: and on about that a little bit later because I
• 2:08
  Speaker 5: can't stop myself. But I just think we are so
• 2:11
  Speaker 5: lucky to live in a world where everything is looked after, Like,
• 2:14
  Speaker 5: you know, if someone gets sick, we have a healthcare
• 2:17
  Speaker 5: system that can prop us up. We have you know,
• 2:19
  Speaker 5: roads that are drivable, We have infrastructure that is keeping
• 2:23
  Speaker 5: us safe and has been built safely. There are just
• 2:25
  Speaker 5: so many things in Australia that we should be grateful for.
• 2:29
  Speaker 5: And the amount of times I hear people saying, oh
• 2:31
  Speaker 5: my gosh, I have to pay so much tax the
• 2:33
  Speaker 5: amount of times I snap back and I'm like, okay, cool,
• 2:36
  Speaker 5: So you also make a lot of money. They might
• 2:38
  Speaker 5: be nice, That might be nice for you, but I'm
• 2:41
  Speaker 5: sick of people talking about how much of drag it is.
• 2:44
  Speaker 5: And while we'll get into it, and I know nobody
• 2:46
  Speaker 5: loves paying taxes, we'll talk about how they work.
• 2:49
  Speaker 2: But have you ever heard the.
• 2:50
  Speaker 5: Saying beck that there are only two certain things in love?
• 2:53
  Speaker 2: Yes, live, love and love. No, those are three. Those
• 2:58
  Speaker 2: are three.
• 2:58
  Speaker 5: We're talking about the phrase references too, and those two are.
• 3:02
  Speaker 2: Death and taxis. Ah, yeah, that's really sexy.
• 3:05
  Speaker 5: And obviously this show is all about money, so we're
• 3:08
  Speaker 5: going to be talking about the latter on today's show.
• 3:10
  Speaker 2: Don't worry.
• 3:11
  Speaker 5: But often when something is so universal, we don't actually
• 3:14
  Speaker 5: stop to ask really basic questions about it right. It
• 3:17
  Speaker 5: often becomes a given. And I think that's why our
• 3:20
  Speaker 5: education system has genuinely skipped over financial literacy for so long,
• 3:24
  Speaker 5: because we should just get it right right, And that's
• 3:26
  Speaker 5: not the case at all. But taxes beck just an
• 3:29
  Speaker 5: inevitable thing that we actually have to organize each and
• 3:31
  Speaker 5: every single year.
• 3:32
  Speaker 2: But don't worry.
• 3:33
  Speaker 5: If you've maybe let it slip, it is not the
• 3:35
  Speaker 5: end of the world. We can get you back on track.
• 3:37
  Speaker 5: But very few questions are ever asked. So I thought,
• 3:39
  Speaker 5: why not do an entire episode on the sexy, sexy
• 3:43
  Speaker 5: topic of paying taxes.
• 3:44
  Speaker 2: Let's jump straight in.
• 3:46
  Speaker 5: Oh, you look so psyched. You came in here absolutely cheaper.
• 3:49
  Speaker 5: And then I was like, we're going to talk about
• 3:51
  Speaker 5: tax and You're like, why did I get up this early?
• 3:54
  Speaker 4: All I know about tax so far is that I
• 3:57
  Speaker 4: don't understand how people let it slip?
• 3:58
  Speaker 2: How do they do it late? Because I get so
• 4:00
  Speaker 2: excited July first.
• 4:01
  Speaker 5: You get excited in my tax Yeah, because I don't
• 4:04
  Speaker 5: wonder I let you on this team.
• 4:06
  Speaker 4: I just think that, okay, cool, I'm going to get
• 4:08
  Speaker 4: some money and I'm going to do it as soon
• 4:11
  Speaker 4: as it hits July one, twelve am. I am so
• 4:14
  Speaker 4: excited and I don't know why. I don't know where
• 4:16
  Speaker 4: it's coming from, but I'm going to get some money.
• 4:19
  Speaker 2: Ten out of ten. That sounds like an experience.
• 4:21
  Speaker 5: I would like to sign up for that is your experience,
• 4:24
  Speaker 5: and I don't want to stereotype here. That's your experience
• 4:27
  Speaker 5: because you are a PAYG employee and often over the
• 4:30
  Speaker 5: year you would have recruit a few things that you
• 4:32
  Speaker 5: could have claimed on tax, and you would have submitted
• 4:35
  Speaker 5: in your tax return to say, oh, I can claim
• 4:37
  Speaker 5: ab C and D. But in your PAYG job, you
• 4:40
  Speaker 5: were taxed at the full rate of your marginal tax rate,
• 4:43
  Speaker 5: not including any of the things you could claim back.
• 4:45
  Speaker 5: So then tax time, when it came to submitting your tax,
• 4:48
  Speaker 5: you're going to get a little bit back, which is
• 4:50
  Speaker 5: really sexy and why so many people love doing their taxes,
• 4:53
  Speaker 5: just like you, but also why somebody like me, who's
• 4:56
  Speaker 5: a business owner doesn't love doing it because I have.
• 4:58
  Speaker 2: The opposite problem.
• 5:00
  Speaker 5: The second I submit my tax, often I end up
• 5:04
  Speaker 5: with a little bit more to pay than I had
• 5:06
  Speaker 5: actually anticipated because business financials are not as clean cut
• 5:11
  Speaker 5: as a PAYG employee. So you're side of the table
• 5:14
  Speaker 5: excited about tax. My side of the table not that excited,
• 5:18
  Speaker 5: but also still thinks it's a privilege.
• 5:20
  Speaker 4: Okay, Well, on that, I guess we'll start a base
• 5:22
  Speaker 4: level what is income tax?
• 5:24
  Speaker 2: Sexy question?
• 5:25
  Speaker 5: I like it So income tax is the amount of
• 5:28
  Speaker 5: tax that is applied to your quote taxable income every
• 5:32
  Speaker 5: year and is paid on every single form of income
• 5:35
  Speaker 5: that you derive as an individual. The amount that you
• 5:38
  Speaker 5: pay is going to really depend on how much that
• 5:40
  Speaker 5: you earn and any deductions that you can claim.
• 5:42
  Speaker 2: Or offset that you're entitled to.
• 5:44
  Speaker 5: So if you're an employee, your employee is going to
• 5:47
  Speaker 5: deduct the tax from each pay so you don't need
• 5:49
  Speaker 5: to stress about it. They're going to do it for you,
• 5:51
  Speaker 5: and they're going to send that tax from your pay
• 5:54
  Speaker 5: straight to the ATO or the Australian Taxation Office on
• 5:58
  Speaker 5: your behalf. And that's the pot of money that goes
• 6:00
  Speaker 5: to the taxation office that you're claiming on to say, actually, Hi,
• 6:04
  Speaker 5: I had some deductions, can you give me some of
• 6:06
  Speaker 5: that money back at tax time?
• 6:07
  Speaker 2: And that's why you think it's so sexy.
• 6:09
  Speaker 5: If you're someone who is self employed, or you freelance
• 6:12
  Speaker 5: or you have your own business, this is going to
• 6:14
  Speaker 5: be your responsibility. So you're going to need to set
• 6:17
  Speaker 5: aside money each and every single pay, or each and
• 6:19
  Speaker 5: every single time you derive an income to pay that tax.
• 6:23
  Speaker 5: And if you want some more information and I'm just
• 6:25
  Speaker 5: going to do a not so subtle plug to the
• 6:27
  Speaker 5: Business Bible, our business podcast if you haven't listened to that.
• 6:31
  Speaker 5: On that podcast, I actually break down exactly how I
• 6:34
  Speaker 5: run my business bank accounts, and I think that as
• 6:37
  Speaker 5: a small business owner, that's really important to go have
• 6:39
  Speaker 5: a look at because there is so much confusion over
• 6:42
  Speaker 5: what is right and what is wrong. And I'm not
• 6:44
  Speaker 5: saying I am absolutely right, but it works for me.
• 6:46
  Speaker 5: And tax is not stressful. So at the end of
• 6:50
  Speaker 5: every single financial year, most people need to lodge a
• 6:52
  Speaker 5: tax return with the ATO, and you're actually able to
• 6:55
  Speaker 5: do that yourself, or you're able to enlist the help
• 6:58
  Speaker 5: of an accountant or a tax agent. And I think
• 6:59
  Speaker 5: that's an important question to cover as well, because so
• 7:02
  Speaker 5: many people ask, do I actually need an accountant to
• 7:04
  Speaker 5: do this? And I guess the summary of that is
• 7:07
  Speaker 5: the tax system, from my perspective, is actually quite elite,
• 7:10
  Speaker 5: and they actually want you to file your tax return right.
• 7:12
  Speaker 5: They want you to do that as soon as possible,
• 7:15
  Speaker 5: and their online claiming system is actually super easy. So
• 7:18
  Speaker 5: unless you have a more complicated tax return, if you're
• 7:20
  Speaker 5: just a salaried payg employee who has a very clean
• 7:24
  Speaker 5: cut salary. I don't see why doing it yourself would
• 7:27
  Speaker 5: be too much of an issue.
• 7:28
  Speaker 4: Right right, Okay, Yeah, I do mind myself and I
• 7:31
  Speaker 4: feel like it's not too complicated.
• 7:33
  Speaker 2: It can't be.
• 7:34
  Speaker 5: If you're like me, I don't understand tax but I
• 7:37
  Speaker 5: do my own returns, I'm like, okay, well the system
• 7:39
  Speaker 5: must not be that flawed.
• 7:41
  Speaker 4: Yeah, exactly, it's very very easy to follow the prompts
• 7:44
  Speaker 4: and kind of like add maybe deductions that you really didn't.
• 7:49
  Speaker 5: All right, right backtrack, we would absolutely not do that.
• 7:54
  Speaker 5: You're doing that, and you're going to out yourself on
• 7:56
  Speaker 5: Australia's biggest finance as they might least, just do everything
• 8:02
  Speaker 5: very by the book.
• 8:03
  Speaker 2: Wow, fancy VI.
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  Speaker 4: When you mentioned before that all the income you earn
• 8:08
  Speaker 4: is taxable, what exactly does that mean? What income is taxable?
• 8:13
  Speaker 2: Yeah?
• 8:13
  Speaker 5: Okay, so you actually have to pay tax on any
• 8:16
  Speaker 5: money earned from a lot of different things, so from
• 8:19
  Speaker 5: your job, so from any type of employment. If you
• 8:22
  Speaker 5: have a pension or an annuity, which is something that
• 8:24
  Speaker 5: a lot of people listening to Chees on the Money
• 8:26
  Speaker 5: probably have no experience in.
• 8:27
  Speaker 2: But I'll teach you about that later. Don't worry.
• 8:29
  Speaker 5: Most government payments from any type of investment you have,
• 8:34
  Speaker 5: from any type of capital gains you have. So if
• 8:36
  Speaker 5: you bought and then sold a property and you made
• 8:39
  Speaker 5: capital gain on that property, which means that property increased
• 8:42
  Speaker 5: in value over time, you're going to pay tax on that.
• 8:46
  Speaker 5: You're going to pay tax on some grants and payments
• 8:49
  Speaker 5: that you might receive. You would pay tax on any
• 8:52
  Speaker 5: income that you get from trusts or partnerships or businesses.
• 8:55
  Speaker 5: And you'd also pay tax on foreign income. And I
• 8:58
  Speaker 5: think that that is one of those ones which is
• 9:01
  Speaker 5: a little bit misconstrued because people go, but if I
• 9:04
  Speaker 5: made money in the UK, I shouldn't have to pay
• 9:06
  Speaker 5: tax here because I paid it in the UK, and
• 9:09
  Speaker 5: we actually have to declare it and some of that
• 9:11
  Speaker 5: income could be taxable.
• 9:13
  Speaker 2: Oh okay, and what income isn't taxable? Okay?
• 9:17
  Speaker 5: So get this. The worst of all is lottery wednings.
• 9:21
  Speaker 5: So if you win the lotto or other prizes, you
• 9:23
  Speaker 5: don't have to pay tax on it. But hypothetically, if
• 9:27
  Speaker 5: you are really smart, what you would do with your
• 9:28
  Speaker 5: lottery winnings is invest it. If that investment starts making money,
• 9:32
  Speaker 5: you have to start paying tax on that money. That
• 9:34
  Speaker 5: that money has made. Does that make sense?
• 9:36
  Speaker 2: That makes sense. Yeah, So the lump sum.
• 9:38
  Speaker 5: Absolutely tax free, but anything above and beyond that that
• 9:42
  Speaker 5: that money makes for you is going to be taxable
• 9:44
  Speaker 5: because that's just become an income.
• 9:46
  Speaker 2: Oh okay, so may as well splow.
• 9:50
  Speaker 5: Just just go ahead, buy a new car, get a boat.
• 9:53
  Speaker 2: Do you want to jet skalle? Let's get three? Why not?
• 9:55
  Speaker 1: So?
• 9:55
  Speaker 5: You don't have to pay any tax on lottery winnings
• 9:58
  Speaker 5: or other prizes. How good, things like small gifts and
• 10:01
  Speaker 5: birthday presents. You don't have to pay tax on the
• 10:03
  Speaker 5: fifty bucks that your grandma gave you for Christmas.
• 10:05
  Speaker 2: Imagine if you did, Oh my gosh, it would literally
• 10:07
  Speaker 2: be the worst.
• 10:10
  Speaker 5: You don't have to pay tax on some specific government
• 10:12
  Speaker 5: grants and payments. You don't have to pay tax thankfully
• 10:16
  Speaker 5: on child support.
• 10:17
  Speaker 1: Good.
• 10:17
  Speaker 2: You don't have to pay.
• 10:18
  Speaker 5: Tax on the tax free portion of a redundancy payout.
• 10:22
  Speaker 5: So if you haven't gone through the redundancy process before,
• 10:25
  Speaker 5: it actually could be quite confusing, and it's something that
• 10:28
  Speaker 5: I do think we all should understand because it could happen.
• 10:31
  Speaker 5: But essentially, if you get made redundant in your role,
• 10:34
  Speaker 5: you will accrue a lump some payment to be paid
• 10:37
  Speaker 5: out of, and it will depend on how long you've.
• 10:39
  Speaker 2: Worked for that business.
• 10:40
  Speaker 5: So if you've worked there for twelve months, it won't
• 10:42
  Speaker 5: be that chic, but if you've worked there for like
• 10:44
  Speaker 5: ten plus years, it could look really sexy. And then
• 10:47
  Speaker 5: the government looks at that lump some payment and says, okay,
• 10:51
  Speaker 5: we're only going to tax a certain portion of that
• 10:53
  Speaker 5: and the.
• 10:53
  Speaker 2: Rest of that is tax free, which is just good
• 10:55
  Speaker 2: to know.
• 10:56
  Speaker 5: Yeah, it's not essential information for absolutely everybody, but I
• 11:00
  Speaker 5: think that if you're going through that process, just a
• 11:02
  Speaker 5: little fyi to keep it in check. And if you
• 11:05
  Speaker 5: are going through that process and it is a nice
• 11:07
  Speaker 5: amount of money, please have a chat with your accountant
• 11:09
  Speaker 5: to make sure that you're in the best possible position.
• 11:11
  Speaker 5: Because I don't mean to be rude, but not every
• 11:14
  Speaker 5: single employer is going to get the calculations correct because
• 11:18
  Speaker 5: it's not all that often that people, you know, do
• 11:20
  Speaker 5: redundancy payouts for employees, right, right, And then you don't
• 11:24
  Speaker 5: need to pay tax on government super co contributions, which
• 11:27
  Speaker 5: is very nice.
• 11:29
  Speaker 4: Super co contributions that's when you pay a certain amount,
• 11:32
  Speaker 4: like a small amount, and the government matches it matches.
• 11:35
  Speaker 5: Matches it or adds something else for you, if.
• 11:37
  Speaker 2: You are on a low income, or for anyone, for anyone,
• 11:40
  Speaker 2: it's a co contribution.
• 11:42
  Speaker 5: And so essentially, if you're getting a co contribution, you
• 11:44
  Speaker 5: probably meet the criteria of being able to get that
• 11:47
  Speaker 5: co contribution. If you're making millions to probably not get
• 11:49
  Speaker 5: the co contribution.
• 11:52
  Speaker 2: I see, I see.
• 11:53
  Speaker 4: So my next question is why do taxes even exist?
• 11:57
  Speaker 4: And where are our taxes going?
• 12:00
  Speaker 5: So let's just do a little preparation for our next
• 12:03
  Speaker 5: trivia and I beck I'm pretty sure we're on the
• 12:06
  Speaker 5: same page. We've never done this before, but like, I reckon,
• 12:08
  Speaker 5: you and I would be a really good trivia team,
• 12:10
  Speaker 5: do you think so? I reckon, I reckon because we
• 12:13
  Speaker 5: have such an eclectic knowledge between us, Like there's no
• 12:16
  Speaker 5: way I know everything that you know, and like I'm
• 12:18
  Speaker 5: just technically intelligent, Like I'm just not street smart, you know,
• 12:21
  Speaker 5: Like you're like the street smart one in our relationship
• 12:24
  Speaker 5: and I'm like in books smart one, and so like
• 12:26
  Speaker 5: together we could take over the trivia.
• 12:28
  Speaker 1: Well.
• 12:28
  Speaker 4: I got to tell you, though, there is no question
• 12:31
  Speaker 4: in the history of trivia that asks about street smarts.
• 12:34
  Speaker 2: And I am usually quite terrible.
• 12:36
  Speaker 5: Yeah, well, but when it comes to book smarts, here's
• 12:38
  Speaker 5: some hot tips for you. So the federal income tax
• 12:41
  Speaker 5: was first introduced in nineteen fifteen in order to help
• 12:45
  Speaker 5: fund Australia's war effort in the First World War. So
• 12:48
  Speaker 5: it hasn't been around forever and ever and ever. But
• 12:51
  Speaker 5: essentially the ATO or the Australian government collects taxes and
• 12:55
  Speaker 5: they actually fund community services.
• 12:57
  Speaker 2: I feel like taxes.
• 12:58
  Speaker 5: Get a really bad rap some times because people are like, ah,
• 13:01
  Speaker 5: we're just funding dull bloodgers. Yep, cool, really glad that
• 13:05
  Speaker 5: we can support people in our community that need it.
• 13:08
  Speaker 5: There is always, always always going to be a very
• 13:11
  Speaker 5: small group of people who wrought a system. There is
• 13:14
  Speaker 5: always going to be a very small group of people
• 13:16
  Speaker 5: who take advantage of any system that exists. And for
• 13:19
  Speaker 5: you to crucify absolutely everybody else who is making use
• 13:23
  Speaker 5: of a system that is from my perspective, absolutely essential,
• 13:27
  Speaker 5: that is wildly unfair.
• 13:28
  Speaker 2: Absolutely we wilieve it at that.
• 13:30
  Speaker 5: But as you know, like it doesn't matter what it is,
• 13:32
  Speaker 5: like people wrought in the system, it coals when they
• 13:34
  Speaker 5: do their self checkout. Like absolutely every system has people
• 13:39
  Speaker 5: who are like na ah, I'm going to do it differently,
• 13:41
  Speaker 5: and I'm going to take advantage. But just because people
• 13:44
  Speaker 5: do that does not mean we should throw the entire
• 13:46
  Speaker 5: system out right. Yeah, But essentially, the ATO collecs taxes
• 13:50
  Speaker 5: to pay for things like our healthcare, our education system,
• 13:55
  Speaker 5: our emergency services, roads and then train lines and trammed
• 14:00
  Speaker 5: and stuff like that. It pays for the Australian Defense Force.
• 14:03
  Speaker 5: It also pays for welfare and disaster relief. So there
• 14:06
  Speaker 5: are so many things that our taxes pay for which
• 14:10
  Speaker 5: ultimately put us in a very privileged and better off position.
• 14:15
  Speaker 2: I'm very very grateful for that, so am I.
• 14:17
  Speaker 5: I just I hate this concept that people are like, oh,
• 14:20
  Speaker 5: I'm paying tax for what for them to live their
• 14:23
  Speaker 5: best life? It's like, do you know what if you
• 14:25
  Speaker 5: genuinely believe that someone is living their best life on
• 14:29
  Speaker 5: less than minimum wage, you've got something else coming. Yeah,
• 14:33
  Speaker 5: you have rocks in your head because that is not
• 14:35
  Speaker 5: easy or from my perspective, a best life.
• 14:39
  Speaker 2: Like, Yeah, that.
• 14:40
  Speaker 5: Income is about two hundred and fifty dollars a week,
• 14:44
  Speaker 5: and most people who are utilizing that system are definitely
• 14:47
  Speaker 5: needing more than two hundred and fifty dollars a week
• 14:50
  Speaker 5: to live. They might have kids, they might have other commitments,
• 14:53
  Speaker 5: doesn't leave anything for saving or investing or creating a
• 14:55
  Speaker 5: dream life. Like in a way, it blows my mind
• 14:58
  Speaker 5: that people would go taxes because such a small percentage
• 15:01
  Speaker 5: of it goes towards welfare. Like, no, I love that
• 15:04
  Speaker 5: system and I want to support it to the nth degree.
• 15:07
  Speaker 2: I love it as well.
• 15:08
  Speaker 4: And if they maybe touch would ever had to be
• 15:11
  Speaker 4: in a situation where they needed that assistance, then I'm
• 15:14
  Speaker 4: sure they'd be very, very grateful that they had paid
• 15:17
  Speaker 4: tax I.
• 15:18
  Speaker 2: Couldn't agree more.
• 15:19
  Speaker 5: And then also to further that, it's funny because Sony
• 15:22
  Speaker 5: and I could go on and on about this, but
• 15:24
  Speaker 5: we're going to do an entire episode on the cost
• 15:27
  Speaker 5: of care soon about how much a cost to live
• 15:29
  Speaker 5: with disability and the insurances you need to cover that.
• 15:32
  Speaker 5: But I also think it's kind of hypocritical because here
• 15:34
  Speaker 5: in Australia we are the most underinsured country in the
• 15:38
  Speaker 5: entire world. And the main argument people have when they're like, oh,
• 15:42
  Speaker 5: I don't need insurance back, it doesn't matter, like I
• 15:44
  Speaker 5: don't need to waste my money on income protection. It's
• 15:47
  Speaker 5: what the government's therefore, that's what I paid taxes for
• 15:49
  Speaker 5: But then on the flip side, they're crucifying people who
• 15:52
  Speaker 5: are actually making use of those systems, And it just
• 15:55
  Speaker 5: is this crazy juxtaposition where they're like, I don't want
• 15:58
  Speaker 5: to pay taxes because people are abusing the system and
• 16:01
  Speaker 5: I'm working so that they can live their free life.
• 16:04
  Speaker 5: And then on the flip side they're like, by the way,
• 16:05
  Speaker 5: I also don't want to get insurances because if anything
• 16:08
  Speaker 5: would happen to me, I could just go on the doll.
• 16:11
  Speaker 2: Yeah exactly, you little hypocrites. You kick a lane.
• 16:14
  Speaker 4: Maybe exactly on the topic of picking a lane, Yeah,
• 16:19
  Speaker 4: what lane.
• 16:20
  Speaker 2: Do we fit in? What is a tax bracket? What
• 16:22
  Speaker 2: are the rates?
• 16:22
  Speaker 1: Yeah?
• 16:22
  Speaker 5: All right, So a tax bracket is basically the range
• 16:25
  Speaker 5: of income that you fall into, which then determines how
• 16:28
  Speaker 5: much tax you're going to have to pay. It's kind
• 16:31
  Speaker 5: of like buckets. And from my perspective, Australia has a
• 16:33
  Speaker 5: very progressive tax system, which actually means the higher your income,
• 16:37
  Speaker 5: the more tax you are going to pay. So beck,
• 16:39
  Speaker 5: you can earn up to eighteen two hundred dollars in
• 16:42
  Speaker 5: a financial year and not pay one cent of tax.
• 16:45
  Speaker 2: Very sexy. That is very sex very sexy.
• 16:47
  Speaker 5: This is known as the tax free threshold, and after
• 16:50
  Speaker 5: which the tax rate then kicks in. So you would
• 16:53
  Speaker 5: have come up against a conversation or even just a
• 16:55
  Speaker 5: one sided conversation with you and some tax papers when
• 16:58
  Speaker 5: you join a new job whether you want to claim
• 17:01
  Speaker 5: the tax free threshold or not.
• 17:03
  Speaker 2: And a lot of people are like, I want a
• 17:05
  Speaker 2: tax free threshold.
• 17:06
  Speaker 5: Of course they do, So you might be really tempted
• 17:09
  Speaker 5: if you get a second job in the same financial year,
• 17:12
  Speaker 5: to go and tick that again and be like, yeah,
• 17:14
  Speaker 5: I'll claim it again. And basically, when you're ticking the
• 17:16
  Speaker 5: box that says claim the tax free threshold, you're notifying
• 17:20
  Speaker 5: your employer that you have not made eighteen thousand, two
• 17:24
  Speaker 5: hundred dollars this year, and they're then going to pay
• 17:27
  Speaker 5: you eighteen thousand, two hundred dollars in full before starting
• 17:31
  Speaker 5: to apply your tax rate. Because you know how before
• 17:33
  Speaker 5: I said, your boss goes and takes your income, sends
• 17:37
  Speaker 5: a portion of the income off to the taxman, and
• 17:40
  Speaker 5: then gives you the money that you can spend the
• 17:42
  Speaker 5: responsibilities on them. That's telling them that the responsibility on
• 17:46
  Speaker 5: them is to make sure that you get your eighteen thousand,
• 17:48
  Speaker 5: two hundred dollars tax free, no worries and carry on.
• 17:52
  Speaker 5: But if you've already claimed that before at a previous
• 17:55
  Speaker 5: job and then you're claiming it at your second job,
• 17:57
  Speaker 5: your second job has no idea what your previous job
• 17:59
  Speaker 5: pays you.
• 18:00
  Speaker 2: It's all about disclosure.
• 18:02
  Speaker 5: So what's gonna happen is they're gonna pay you, and
• 18:04
  Speaker 5: you're gonna get your tax free threshold twice, and then
• 18:08
  Speaker 5: come tax time, you're gonna have to pay it back
• 18:11
  Speaker 5: and you're gonna get bit in the bottom when it
• 18:13
  Speaker 5: comes to paying tax, and you're not going to understand why,
• 18:16
  Speaker 5: because you'll be like, well, I didn't understand what tax
• 18:18
  Speaker 5: free threshold men in the first place. I thought it
• 18:21
  Speaker 5: would have all been automatically calculated. And that's not actually
• 18:24
  Speaker 5: the case, because your employer has no idea what other
• 18:28
  Speaker 5: tax you've paid, because you haven't submitted a tax return yet,
• 18:31
  Speaker 5: has it all been added up. No one's calculated it
• 18:34
  Speaker 5: for you. They'll let you make use of that system
• 18:36
  Speaker 5: twice because they don't know any different. So what we
• 18:39
  Speaker 5: actually need to understand is one what the tax free
• 18:42
  Speaker 5: threshold is, and two, if you've already earned more than
• 18:45
  Speaker 5: eighteen two hundred dollars. Don't tick that box because you're
• 18:48
  Speaker 5: going to end up having to pay that tax back
• 18:50
  Speaker 5: when tax time comes, and that can be quite painful.
• 18:52
  Speaker 2: So on a real side notes.
• 18:55
  Speaker 4: So just hypothetically, yeah, I make twenty thousand dollars a year, Yes,
• 19:00
  Speaker 4: tick the tax three threshold box.
• 19:02
  Speaker 2: I only pay tax.
• 19:04
  Speaker 4: On one thousand, eight hundred dollars.
• 19:07
  Speaker 5: Do Yeah, So what would happen is up until eighteen thousand,
• 19:11
  Speaker 5: two hundred dollars you'd pay absolutely no tax, not one cent.
• 19:14
  Speaker 5: And then for every dollar you earn over eighteen thousand dollars,
• 19:18
  Speaker 5: you would pay nineteen percent tax. Okay, because you've only
• 19:22
  Speaker 5: earned twenty thousand dollars, So that takes you into the
• 19:26
  Speaker 5: first I guess bucket of tax.
• 19:27
  Speaker 2: And so that's a good segue.
• 19:29
  Speaker 5: I suppose let's go through what those marginal tax rates
• 19:32
  Speaker 5: look like. I feel like the word marginal's just so unnecessary,
• 19:34
  Speaker 5: but that's okay. So essentially, the tax rates for the
• 19:37
  Speaker 5: twenty twenty one and twenty twenty two year, which you
• 19:39
  Speaker 5: would have just submitted last year, and the twenty twenty
• 19:43
  Speaker 5: two slash twenty twenty three financial year are actually the same.
• 19:48
  Speaker 5: That is important because sometimes the tax rates change, So
• 19:51
  Speaker 5: that is what we're talking about today. So, as we
• 19:53
  Speaker 5: said before, no tax if you're earning eighteen thousand, two
• 19:57
  Speaker 5: hundred dollars or under. But the second you get to
• 19:59
  Speaker 5: eight eighteen thousand, two hundred and one dollars all the
• 20:02
  Speaker 5: way up to forty five thousand dollars, you're going to
• 20:05
  Speaker 5: pay nineteen percent of any dollar over that eighteen thousand,
• 20:09
  Speaker 5: two hundred dollars. That's the second bucket. So third bucket
• 20:13
  Speaker 5: is forty five thousand and one dollar all the way
• 20:16
  Speaker 5: up to one hundred and twenty thousand dollars. Now, this
• 20:19
  Speaker 5: is a relatively new tax bracket. It used to be smaller,
• 20:22
  Speaker 5: so the forty five thousand dollar bracket went up to
• 20:24
  Speaker 5: about eighty thousand dollars, and I'm really glad that this
• 20:26
  Speaker 5: is expanded a little bit. So you're now on a
• 20:29
  Speaker 5: lower tax bracket if you earn up to one hundred
• 20:31
  Speaker 5: and twenty thousand dollars, which I think is really sexy.
• 20:34
  Speaker 5: But essentially what happens when you earn over forty five
• 20:37
  Speaker 5: thousand dollars is you now have a two component tax rate.
• 20:41
  Speaker 5: You pay what's called a base amount, and then you
• 20:44
  Speaker 5: pay a percentage amount, and it's not confusing. I promise,
• 20:47
  Speaker 5: it's just a set amount. If you earn more than
• 20:50
  Speaker 5: forty five thousand dollars, you'll pay five thousand and ninety
• 20:53
  Speaker 5: two dollars in tax, and on top of that, you
• 20:56
  Speaker 5: will then pay thirty two and a half percent of
• 21:00
  Speaker 5: the excess over forty five thousand dollars.
• 21:02
  Speaker 2: Does that make sense?
• 21:03
  Speaker 5: So you've kind of got a base amount that you
• 21:05
  Speaker 5: owe the government as a you know, it doesn't matter
• 21:07
  Speaker 5: what it is. You might earn forty six thousand dollars. Yeah,
• 21:11
  Speaker 5: but you will always owe that five thousand and ninety
• 21:13
  Speaker 5: two to begin with, and then you pay a percentage
• 21:16
  Speaker 5: of every dollar over that.
• 21:18
  Speaker 4: Okay, so if I'm making one hundred and ten thousand dollars,
• 21:21
  Speaker 4: I'll still pay the base five thousand, yeah ninety two. Yeah,
• 21:24
  Speaker 4: it doesn't change whether you're earning that one hundred and
• 21:26
  Speaker 4: ten or you're earning fifty grand.
• 21:28
  Speaker 5: It's exactly the same tax rate, which is why it
• 21:30
  Speaker 5: kind of I want to say sucks in a way,
• 21:33
  Speaker 5: but it's actually a very fair and equitable tax system
• 21:36
  Speaker 5: from my perspective, comparing it to every other tax system
• 21:39
  Speaker 5: around the world. The next bracket will be nice to
• 21:43
  Speaker 5: be in. This tax bracket is the fourth bucket. And
• 21:46
  Speaker 5: this fourth bucket is from one hundred and twenty thousand
• 21:48
  Speaker 5: and one dollar up to one hundred and eighty thousand dollars,
• 21:52
  Speaker 5: in which case your base amount of tax payable that
• 21:56
  Speaker 5: jumps significantly. So the base amount of tax payable is
• 21:59
  Speaker 5: twenty nine thousand, four hundred and sixty seven.
• 22:03
  Speaker 2: Dollars, oh my gosh, plus.
• 22:05
  Speaker 5: Thirty seven percent of excess over one hundred and twenty
• 22:08
  Speaker 5: thousand dollars. And then the fifth bucket, which is the
• 22:12
  Speaker 5: highest marginal tax rate here in Australia, is anyone who
• 22:16
  Speaker 5: earns more than one hundred and eighty thousand dollars pays
• 22:19
  Speaker 5: a minimum amount of fifty one thousand, six hundred and
• 22:22
  Speaker 5: sixty seven dollars in tax plus forty five percent of
• 22:26
  Speaker 5: excess over one hundred and eighty thousand dollars. Oh that's
• 22:30
  Speaker 5: a lot of money. It is a lot of money.
• 22:31
  Speaker 5: And I guess, contextualizing this a little bit, none of
• 22:35
  Speaker 5: us were born before nineteen fifteen, Like, it's just it's
• 22:39
  Speaker 5: not possible, right, So Beck, when you were born, this
• 22:42
  Speaker 5: tax system existed. In fact, this tax system was not
• 22:45
  Speaker 5: as sexy as it is now. It's a better, more
• 22:48
  Speaker 5: equitable tax system today than it was when you were born,
• 22:51
  Speaker 5: right and you grew up and you were told you're
• 22:53
  Speaker 5: going to get a job, and you're going to grow
• 22:55
  Speaker 5: and learn and develop, and once you get your full
• 22:57
  Speaker 5: time job, you're going to pay tax. Like it has
• 22:59
  Speaker 5: always been a given. This is not something that has
• 23:03
  Speaker 5: been put on you as a surprise, like you didn't
• 23:04
  Speaker 5: get your first job and someone went, oh, by the way,
• 23:06
  Speaker 5: have you heard of tax? And you're like no, what,
• 23:09
  Speaker 5: Like this is something that has existed the entire time.
• 23:12
  Speaker 5: And I think it's really important to remember when we're
• 23:15
  Speaker 5: looking at salary packages or what we're going to have
• 23:18
  Speaker 5: in take home salary, is that we always talk if
• 23:21
  Speaker 5: we are an employee about post tax earnings because at
• 23:25
  Speaker 5: the end of the day, you have always been in
• 23:27
  Speaker 5: a position where if you wanted to work in Australia,
• 23:29
  Speaker 5: you would pay tax, full stop, end of story. You
• 23:32
  Speaker 5: have always known that it doesn't matter if you didn't
• 23:35
  Speaker 5: understand the tax system or how it works, like nobody
• 23:37
  Speaker 5: is expecting that of you. If you were in prep,
• 23:39
  Speaker 5: it is not going to count. But we've always known that,
• 23:42
  Speaker 5: so why are we now acting like tax is such
• 23:45
  Speaker 5: a big burden and you didn't see it coming and
• 23:47
  Speaker 5: you hadn't taken it into consideration when it's been there
• 23:50
  Speaker 5: all along. Like to me, it's about only considering your
• 23:54
  Speaker 5: post tax take home salary and making sure that that
• 23:57
  Speaker 5: puts you in a good financial position, because tax is
• 24:00
  Speaker 5: just a given. It literally gets taken out of your
• 24:02
  Speaker 5: salary before you even see it, like you can't take
• 24:05
  Speaker 5: it home and then you know you have to pay
• 24:07
  Speaker 5: the taxman later it doesn't come into your account and
• 24:09
  Speaker 5: you create some kind of emotional relationship with it and
• 24:11
  Speaker 5: you know, go, oh my gosh, but you know that
• 24:14
  Speaker 5: twenty nine thousand, four one hundred and sixty seven dollars
• 24:16
  Speaker 5: that I have to pay in tax I was actually
• 24:18
  Speaker 5: going to buy a new car with or that was
• 24:19
  Speaker 5: going to be my home deposit. It never was going
• 24:22
  Speaker 5: to be that for you. So I think that we
• 24:24
  Speaker 5: really need to reframe how we view tax as it's
• 24:28
  Speaker 5: the amount of money that you earn to put you
• 24:30
  Speaker 5: in the best possible position, and that is being in
• 24:33
  Speaker 5: the privileged position of working and living in Australia. Right,
• 24:37
  Speaker 5: Like I just think from my perspective, I get so
• 24:40
  Speaker 5: confused when people are like, oh my god, I just
• 24:42
  Speaker 5: I didn't know this, Like, if you didn't understand the process,
• 24:45
  Speaker 5: I get it. But to act like tax is such
• 24:48
  Speaker 5: a burden on you and stops you from living your
• 24:50
  Speaker 5: best life, that's not the case at all. In fact,
• 24:52
  Speaker 5: it helps you leave your best life and is usually
• 24:55
  Speaker 5: the reason why you're actually able to drive an income
• 24:58
  Speaker 5: because most of us relied on the public education system
• 25:01
  Speaker 5: or their healthcare system at some point, whether it always
• 25:04
  Speaker 5: you or family members that have relied on that, to
• 25:07
  Speaker 5: put you in the best possible position. Anyway, I could
• 25:10
  Speaker 5: ranch about this all the time.
• 25:11
  Speaker 2: That makes so much sense.
• 25:12
  Speaker 4: It's really hard to look at the money that is
• 25:14
  Speaker 4: being taken out, but when you explain it like that,
• 25:17
  Speaker 4: it makes sense, and I guess I'm happy about it.
• 25:19
  Speaker 5: Yeah, Like, let's just look at your take home salary
• 25:22
  Speaker 5: and what we can do with that and stop going,
• 25:24
  Speaker 5: oh my god, but pre tax, it would have been no,
• 25:27
  Speaker 5: pre tax was always pre tax, like tax always existed. Yeah,
• 25:32
  Speaker 5: I'll stop ranting about that because they could go on
• 25:34
  Speaker 5: and on about it for today. But summarizing all of
• 25:37
  Speaker 5: that part of our conversation, the lowest tax rate in
• 25:40
  Speaker 5: Australia is nineteen percent. The highest is forty five percent,
• 25:43
  Speaker 5: which is only charged on income over one hundred and
• 25:46
  Speaker 5: eighty thousand dollars in loveing nice. So I'm gonna let
• 25:50
  Speaker 5: those people who earn more than one hundred and eighty thousand, I'll.
• 25:52
  Speaker 2: Pay that tax, right, We'll never have to worry about it, exactly.
• 25:54
  Speaker 5: And most people actually sit in that middle bracket of
• 25:57
  Speaker 5: earning between forty five thousand and one hundred and twenty thousand.
• 26:00
  Speaker 2: Dollars, you are also taxed.
• 26:03
  Speaker 5: I feel like this is just a and you're taxed
• 26:04
  Speaker 5: on this, and your tax on this, like I could
• 26:06
  Speaker 5: be the opera of tax, like can you get a
• 26:08
  Speaker 5: tax and you get your tax, Like.
• 26:10
  Speaker 2: It just goes on and on.
• 26:11
  Speaker 5: But you're also taxed on superanuation contributions and earnings. And
• 26:15
  Speaker 5: there are obviously lots of tax benefits for paying money
• 26:18
  Speaker 5: into your super fund. In fact, I've said it before
• 26:21
  Speaker 5: on the podcast, I think super tax right really sexy.
• 26:24
  Speaker 5: It is fifteen percent up until twenty seven five hundred
• 26:28
  Speaker 5: dollars each financial year, which is arguably the closest thing
• 26:33
  Speaker 5: we're going to get to a tax haven here in Australia,
• 26:36
  Speaker 5: Like if you earn enough money to be taxed, it's
• 26:39
  Speaker 5: still lower than that.
• 26:41
  Speaker 2: Right, That's pretty good.
• 26:42
  Speaker 5: So literally, anybody who is earning an income, putting more
• 26:47
  Speaker 5: money towards their superannuation is making a return or making
• 26:51
  Speaker 5: a benefit, is actually getting tax back by putting money
• 26:54
  Speaker 5: into their super. I'm not saying that that strategy is
• 26:58
  Speaker 5: going to be right for you, because I think I've
• 27:00
  Speaker 5: said it before on the podcast. I from my perspective,
• 27:03
  Speaker 5: I'm thirty one. I still think I'm relatively young. I mean,
• 27:05
  Speaker 5: my younger sister would beg to differ. She thinks I'm
• 27:09
  Speaker 5: really old. But I don't contribute extra amounts of money
• 27:12
  Speaker 5: to my superannuation. And I get asked that all the time.
• 27:15
  Speaker 5: And the reason I don't is because I have an
• 27:18
  Speaker 5: investment portfolio outside of superranuation, and every intention inside of
• 27:22
  Speaker 5: me says that I would like to retire before the
• 27:25
  Speaker 5: age of sixty five, and right now, if I made
• 27:28
  Speaker 5: heaps of additional contributions to super and had the sexiest
• 27:31
  Speaker 5: super ever, I would still have to work till sixty
• 27:33
  Speaker 5: five to be able to access that properly, right, right,
• 27:36
  Speaker 5: But if I build up my investment portfolio outside of superanuation.
• 27:41
  Speaker 5: I can lean on that until I retire. So, yes,
• 27:43
  Speaker 5: SUPER is absolutely a priority. I pay it for myself,
• 27:46
  Speaker 5: but I'm not going above and beyond because I kind
• 27:48
  Speaker 5: of want to have access to it before then privileged.
• 27:51
  Speaker 5: But I need to talk about why I do that,
• 27:54
  Speaker 5: because if I just said to you, no, Beck, I
• 27:56
  Speaker 5: don't pay additional SUPER, you might deduct from that conversation
• 27:59
  Speaker 5: that to me is not important. Yeah, it's really importantly
• 28:01
  Speaker 5: what exactly, But it's really important to me. But what's
• 28:05
  Speaker 5: more important to me is my financial freedom at this
• 28:07
  Speaker 5: point in my life. And at some point, hopefully in
• 28:10
  Speaker 5: the future, I'm going to have the cash flow to
• 28:12
  Speaker 5: be able to like bump it up and you know,
• 28:14
  Speaker 5: make both look really sexy. But at the moment, the
• 28:17
  Speaker 5: entire plan is to not have my entire net wealth
• 28:20
  Speaker 5: sitting in superinuation. It's kind of split between my investment
• 28:23
  Speaker 5: portfolio and my SUPER and when I retire, I'm going
• 28:26
  Speaker 5: to rely on both of those, not just one or
• 28:28
  Speaker 5: the other.
• 28:29
  Speaker 2: Does that make sense? Very clever? You should be like
• 28:31
  Speaker 2: a financial advice Oh my god, I was one time.
• 28:33
  Speaker 5: Yeah, it was really fun, and then I decided to
• 28:35
  Speaker 5: just do this.
• 28:36
  Speaker 2: Yeah, yeah, yeah, yeah.
• 28:37
  Speaker 5: But following on from that, the other important point that
• 28:40
  Speaker 5: I have written down here that I think is really
• 28:42
  Speaker 5: important to talk about is that tax rates for foreign
• 28:44
  Speaker 5: residents are substantially higher. But to keep this episode really
• 28:49
  Speaker 5: tight and light and fun, Titan light and fun on
• 28:52
  Speaker 5: a tax episode, good from me, we won't actually go
• 28:55
  Speaker 5: into the situation for non residents because there just isn't
• 28:58
  Speaker 5: enough time today.
• 28:59
  Speaker 2: Okay, hopefully we do talk about that eventually.
• 29:01
  Speaker 5: We absolutely will, but I think it'll be an entire
• 29:04
  Speaker 5: podcast on if you are a non resident. Here are
• 29:08
  Speaker 5: all the things that you can do to put yourself ahead,
• 29:10
  Speaker 5: because it's not just about talking about the tax rates.
• 29:12
  Speaker 2: On that. Let's have a little cheeky break. Go grab
• 29:15
  Speaker 2: a tea. I need a cup of coffee. I need
• 29:17
  Speaker 2: a cup of coffee.
• 29:18
  Speaker 5: Let's go, Let's go, let's go get a coffee.
• 29:24
  Speaker 2: Okay, we are Backfee.
• 29:26
  Speaker 4: I just want to really quickly address something and it's
• 29:29
  Speaker 4: not part of the podcast.
• 29:30
  Speaker 2: It's not part of it. We can cut this out
• 29:32
  Speaker 2: if we need to do it.
• 29:32
  Speaker 5: That you brought two water bottles this recording. I usually
• 29:37
  Speaker 5: ring four, but you actually don't. I'm so confused then
• 29:39
  Speaker 5: that anyway, carry on well, I just wanted to say
• 29:42
  Speaker 5: that for anyone listening that's outside of Victoria Prep, that
• 29:46
  Speaker 5: you said something that you said before that prep means
• 29:49
  Speaker 5: kindy and preschool comes before kindy, and you're saying prep
• 29:54
  Speaker 5: which means kindy.
• 29:56
  Speaker 2: That's all I wanted to say.
• 29:57
  Speaker 5: What so an American term, no in this room is
• 30:04
  Speaker 5: shaking their head. I should know better, you know what,
• 30:07
  Speaker 5: I can't remember. I went to school for prep in Tasmania,
• 30:10
  Speaker 5: so I don't I don't know. I just thought it
• 30:13
  Speaker 5: was called prep.
• 30:14
  Speaker 2: Yeah, I think it's a Victorian.
• 30:15
  Speaker 5: I've heard it be called pre k.
• 30:18
  Speaker 2: Pre k is pre school.
• 30:20
  Speaker 5: Oh yeah, okay, cool, Well tell me you don't have
• 30:23
  Speaker 5: kids without telling me.
• 30:25
  Speaker 2: I've just got no idea. Why would I know that? Yeah,
• 30:28
  Speaker 2: that's fair.
• 30:28
  Speaker 5: Flex only had to do prep once. Oh I think
• 30:31
  Speaker 5: that is a flex.
• 30:33
  Speaker 2: I'm not too shocked. Now let's get back into it.
• 30:35
  Speaker 2: So we're talking all about tax learn about this in prep?
• 30:40
  Speaker 2: We did learn about this in prep.
• 30:41
  Speaker 5: I definitely didn't learn, Claire. I was like coloring outside
• 30:45
  Speaker 5: the lines and talking about blocks. Yeah, like you know,
• 30:47
  Speaker 5: probably eating tan buck.
• 30:49
  Speaker 2: But yeah, but.
• 30:50
  Speaker 4: If anyone was going to learn about texts in school,
• 30:52
  Speaker 4: I feel like it would have been.
• 30:54
  Speaker 5: My dad is and was an accountant. So oh, maybe
• 30:57
  Speaker 5: I did, but I didn't listen subconsciously.
• 31:00
  Speaker 2: I see, I see, I see, so recap.
• 31:02
  Speaker 4: Yeah, when calculating your tax is it as simple as
• 31:06
  Speaker 4: say I earn sixty k, I get taxed at thirty
• 31:09
  Speaker 4: two point five percent on that entire sixty k.
• 31:12
  Speaker 2: No. No, no, okay, no no.
• 31:15
  Speaker 5: And I think that's where a lot of people get
• 31:18
  Speaker 5: confused because you might go, tax is really easy. I'm
• 31:20
  Speaker 5: going to take sixty and then minus thirty two point
• 31:23
  Speaker 5: five percent. That makes sense, right, But that's actually not
• 31:26
  Speaker 5: how it works. So what would happen is you would
• 31:28
  Speaker 5: have to make a little chart. I'm really sorry here,
• 31:31
  Speaker 5: but essentially what would happen is you would draw down
• 31:34
  Speaker 5: your income. You go, okay, I earn sixty grand, but
• 31:37
  Speaker 5: of that sixty thousand dollars my first eighteen two hundred dollars,
• 31:41
  Speaker 5: no tax, nothing. Put that to the site. The next
• 31:44
  Speaker 5: amount is going to be the second tax bracket we
• 31:46
  Speaker 5: spoke about. So that's going to be where your tax
• 31:49
  Speaker 5: rate is nineteen cents in the dollar. So that would
• 31:51
  Speaker 5: be twenty six eight hundred dollars. Because you fall for
• 31:55
  Speaker 5: that amount of money into the income bracket of between
• 31:58
  Speaker 5: eighteen thousand, two hundred dollar and forty five thousand dollars,
• 32:02
  Speaker 5: which on that amount you would pay five thousand and
• 32:04
  Speaker 5: ninety two dollars in tax, and then to top that
• 32:08
  Speaker 5: up to get to the total of sixty thousand dollars,
• 32:10
  Speaker 5: you've got another fifteen thousand dollars to go. So for
• 32:13
  Speaker 5: that amount of fifteen thousand dollars, you fall into the
• 32:16
  Speaker 5: bracket of forty five thousand and one hundred and twenty
• 32:19
  Speaker 5: thousand dollars, which means that you're paying thirty two point
• 32:21
  Speaker 5: five cents in the dollar on that, which means you
• 32:24
  Speaker 5: get taxed four thousand, eight hundred and seventy five dollars.
• 32:28
  Speaker 5: So on a sixty thousand dollar income, you will pay
• 32:31
  Speaker 5: a total tax amount of nine thousand, nine hundred and
• 32:34
  Speaker 5: sixty seven dollars. Now, to contextualize that beck before, remember
• 32:39
  Speaker 5: how I said, when we're going through that tax table,
• 32:42
  Speaker 5: which is obviously really hard to conceptualize on a podcast.
• 32:45
  Speaker 5: So what I'll do is I'll post it on our
• 32:47
  Speaker 5: Instagram and it will be up today so you can
• 32:49
  Speaker 5: go and have a look at it. But remember how
• 32:51
  Speaker 5: I was like okay, Well, if you earn between forty
• 32:53
  Speaker 5: five thousand and one hundred and twenty thousand dollars, you'll
• 32:55
  Speaker 5: pay five thousand and ninety two dollars plus that's what
• 32:59
  Speaker 5: that amount came so, as it is being broken down,
• 33:03
  Speaker 5: the five thousand and ninety two dollars, that actually comes
• 33:06
  Speaker 5: from the previous tax bracket, because you will pay the
• 33:08
  Speaker 5: total amount of tax on the amount of money between
• 33:12
  Speaker 5: eighteen thousand, two hundred and forty five thousand dollars, So
• 33:15
  Speaker 5: that total amount is five thousand and ninety two dollars,
• 33:18
  Speaker 5: which is why we say, okay, you'll pay that five
• 33:21
  Speaker 5: thousand and ninety two dollars, which is you paying nineteen
• 33:24
  Speaker 5: cents in the dollar, and then after that you will
• 33:27
  Speaker 5: pay thirty two and a half cents on the rest
• 33:30
  Speaker 5: of the money that you earn.
• 33:31
  Speaker 2: Does that make sense? Oh, that makes so much sense.
• 33:33
  Speaker 5: Which is why from my perspective, we are a supreme
• 33:37
  Speaker 5: tax system because you are not going to go, okay,
• 33:41
  Speaker 5: well far out, I fall into the bracket of earning
• 33:43
  Speaker 5: between forty five thousand and one hundred and twenty thousand dollars, Like,
• 33:46
  Speaker 5: why do I have such a higher tax bracket if
• 33:48
  Speaker 5: I'm only on fifty grand, Like, that doesn't seem fair.
• 33:51
  Speaker 5: I want to be in the previous tax bracket.
• 33:53
  Speaker 2: Well, for the first.
• 33:54
  Speaker 5: Forty five thousand dollars you earn, you are already there,
• 33:58
  Speaker 5: are already there, so you're only paying what, from my perspective,
• 34:02
  Speaker 5: is really fair on tax, which is why it's kind
• 34:05
  Speaker 5: of like a stepped tax system instead of a super
• 34:09
  Speaker 5: strict No. Sorry, Beck, you earn over forty five thousand dollars, Yes,
• 34:13
  Speaker 5: you will be paying more tax. That is inevitable because
• 34:16
  Speaker 5: the more money you earn, the more tax you pay.
• 34:18
  Speaker 5: It is just how the world works. But you do
• 34:21
  Speaker 5: get to make use of that first tax bracket of
• 34:23
  Speaker 5: like the tax free threshold. Then you get to max
• 34:25
  Speaker 5: out the second tax bracket and you only have to
• 34:27
  Speaker 5: pay nineteen cents in the dollar for that amount, and
• 34:30
  Speaker 5: then after that you are subjected to all the other
• 34:32
  Speaker 5: tax brackets.
• 34:33
  Speaker 2: Does that make sense? Yeah, that really makes sense.
• 34:35
  Speaker 4: So ninety K or one hundred and twenty K or
• 34:37
  Speaker 4: two hundred k sounds like a heap of money because
• 34:40
  Speaker 4: it is.
• 34:41
  Speaker 2: It actually is a lot. Yeah money. Well, let's look
• 34:43
  Speaker 2: at what you can actually take home after tax.
• 34:45
  Speaker 5: Yeah, okay, sexy sexy. I like that you have said
• 34:48
  Speaker 5: to me, all right, I'm gonna have these questions which
• 34:51
  Speaker 5: involve you having to do maths, and I'm like, come
• 34:53
  Speaker 5: at me, bro me, and Grade ten would have been like,
• 34:56
  Speaker 5: are you the devil? Like I don't want to come
• 34:57
  Speaker 5: to play with you? But now I'm right and you're
• 35:00
  Speaker 5: ready to hear about the tax rates? All right, So
• 35:02
  Speaker 5: if you earn forty grand, you'd pay four thousand, one
• 35:05
  Speaker 5: hundred and forty two dollars in tax, meaning you get
• 35:08
  Speaker 5: to take home thirty five thousand, eight hundred and.
• 35:10
  Speaker 2: Fifty eight dollars back. Very nice.
• 35:12
  Speaker 5: If you bump this up, I have chosen the number
• 35:14
  Speaker 5: of ninety two thousand instead of your ninety k, but
• 35:17
  Speaker 5: ninety two thousand dollars because this was actually the average
• 35:20
  Speaker 5: annual salary from the Australian Bureau of Statistics in August
• 35:24
  Speaker 5: twenty twenty two. You'll pay a total of twenty thousand,
• 35:27
  Speaker 5: three hundred and sixty seven dollars in tax, meaning you
• 35:31
  Speaker 5: take home seventy one thousand, six hundred and thirty three dollars.
• 35:34
  Speaker 4: Is very depressing that that's the average annual salary, is it?
• 35:38
  Speaker 4: I mean, it's not depressing for anyone but myself.
• 35:41
  Speaker 5: Well, actually, I think that's an important conversation to have
• 35:44
  Speaker 5: because when we say the average salary, that is the average,
• 35:49
  Speaker 5: it is not the median or the mean. And when
• 35:51
  Speaker 5: I say that, it's kind of like if I got
• 35:54
  Speaker 5: you to imagine a bell curve right right, If you've
• 35:56
  Speaker 5: got this big bell and in the middle, you've got
• 35:58
  Speaker 5: what the normal people are earning. I promise you that
• 36:02
  Speaker 5: is not ninety two thousand dollars. But if I took
• 36:05
  Speaker 5: every single salary in Australia, from people earning unto eighteen
• 36:09
  Speaker 5: thousand dollars all the way up to top CEOs and
• 36:12
  Speaker 5: the billionaires, and I took all their salaries and divided
• 36:15
  Speaker 5: it by the amount of people we have, that's how
• 36:17
  Speaker 5: we get ninety two thousand dollars. That makes so obviously
• 36:20
  Speaker 5: on the top end there are so many really high
• 36:23
  Speaker 5: income owners. But it's kind of like if I said
• 36:25
  Speaker 5: to you, okay, Beck, take the numbers three, five, ten,
• 36:29
  Speaker 5: and twelve, and then add another number of one hundred
• 36:33
  Speaker 5: and fifty, and then we divide that. Obviously the number
• 36:36
  Speaker 5: is going to be higher because you've got that outlier
• 36:38
  Speaker 5: of one hundred and fifty right, that's not actually even
• 36:41
  Speaker 5: close to what the three, five, and ten are right, right,
• 36:45
  Speaker 5: So that one fifty is really pushing quote the average
• 36:48
  Speaker 5: of the group up. Yep, it's not how the world
• 36:52
  Speaker 5: actually works. So most people are not earning ninety two
• 36:55
  Speaker 5: thousand dollars, beck, because that's not what most people in
• 36:59
  Speaker 5: Australia earning. That's not what average means, even though you
• 37:02
  Speaker 5: might assume that what we actually want to go for
• 37:05
  Speaker 5: is what's called a median salary, and amedian is what
• 37:09
  Speaker 5: most people in Australia are earning, so median means the most.
• 37:13
  Speaker 5: So the most people in Australia are actually earning sixty
• 37:16
  Speaker 5: five thousand dollars, which is a lot more reasable, right,
• 37:19
  Speaker 5: And it's a lot more I guess relatable. So I
• 37:22
  Speaker 5: would hate for you to listen to that and be like, VI,
• 37:24
  Speaker 5: why did you pick ninety two thousand dollars, Like that's
• 37:26
  Speaker 5: so unrelatable. It's literally because it just works with the
• 37:28
  Speaker 5: tax brackets that I'm trying to explain it. I was
• 37:30
  Speaker 5: just trying to be relatable and show you that I
• 37:32
  Speaker 5: could read the ads website, Okay, and I attacked you, Okay,
• 37:35
  Speaker 5: you attacked me but you've got some information about it
• 37:38
  Speaker 5: as well.
• 37:38
  Speaker 2: I'm happy about that.
• 37:39
  Speaker 5: So most people actually earn sixty five thousand dollars, but
• 37:42
  Speaker 5: the average annual salary is ninety two thousand dollars, which
• 37:45
  Speaker 5: means you're going to pay twenty thousand, three hundred and
• 37:47
  Speaker 5: sixty seven dollars and get to take home a sweet,
• 37:49
  Speaker 5: sweet seventy one thousand, six hundred and thirty three dollars
• 37:53
  Speaker 5: each year. If you bump that up to a salary
• 37:56
  Speaker 5: of one hundred and fifty thousand dollars, which is big
• 37:58
  Speaker 5: dog energy, you are going to pay forty thousand, five
• 38:01
  Speaker 5: hundred and sixty seven dollars in tax and take home
• 38:03
  Speaker 5: a total of one hundred and nine thousand, four hundred
• 38:06
  Speaker 5: and thirty three dollars. Like, you're taking home literally six
• 38:08
  Speaker 5: figures of cash. That's after tals, cash cash, cash money.
• 38:13
  Speaker 2: Like that's so much money. Yeah.
• 38:15
  Speaker 5: And then if you earned two hundred grand, just because
• 38:17
  Speaker 5: you mentioned it before, you'd pay sixty thousand, six hundred
• 38:21
  Speaker 5: and sixty seven dollars in tax and you would take
• 38:23
  Speaker 5: home a total of one hundred and thirty nine thousand,
• 38:26
  Speaker 5: three hundred and thirty three dollars.
• 38:29
  Speaker 1: Wow.
• 38:29
  Speaker 5: Keep in mind. That doesn't take into consideration like the
• 38:32
  Speaker 5: medicare levy or any deductions that you've got or anything
• 38:35
  Speaker 5: like that. That's just like base maths, my favorite website.
• 38:38
  Speaker 5: If you're trying to work out, you know, oh I
• 38:40
  Speaker 5: forgot this job increase, what would my take home salary be?
• 38:43
  Speaker 5: It's pay Calculator dot com dot au and you will
• 38:46
  Speaker 5: put that in the show notes. It's not a government
• 38:49
  Speaker 5: run website. It's actually just a really fancy calculator where
• 38:52
  Speaker 5: you can like tick different boxes and it will go
• 38:55
  Speaker 5: do you want to include or exclude superannuation or do
• 38:57
  Speaker 5: you have a hex stare and it will actually tell
• 38:59
  Speaker 5: you how much take home pay you'll actually get from
• 39:03
  Speaker 5: a particular income, which I think is really sexy. Good website.
• 39:06
  Speaker 5: Ten out of ten.
• 39:07
  Speaker 2: I love that.
• 39:08
  Speaker 4: Because you don't get shocked when the pacelet comes through,
• 39:10
  Speaker 4: and they don't absolutely not a little bit of a
• 39:13
  Speaker 4: different via coming through. So if I am a low
• 39:17
  Speaker 4: income earner, not if you are not any sorry, that's
• 39:22
  Speaker 4: very true.
• 39:23
  Speaker 5: You are not allowed to identify as a low income
• 39:25
  Speaker 5: inner anymore.
• 39:25
  Speaker 2: True.
• 39:26
  Speaker 4: I feel like spiritually I still am, but no technically
• 39:30
  Speaker 4: I'm not.
• 39:30
  Speaker 5: So you are allowed to spiritually connect with that. Okay,
• 39:33
  Speaker 5: but you're not.
• 39:34
  Speaker 2: No, I'm not.
• 39:35
  Speaker 4: I can't claim that anymore if I'm a low income earner.
• 39:38
  Speaker 4: Is there any point taking a second job or I
• 39:40
  Speaker 4: just lose it all to tax?
• 39:41
  Speaker 5: Oh that is such a stereotypical question, and I'm actually
• 39:44
  Speaker 5: really glad you asked.
• 39:45
  Speaker 2: So many people say, oh my god, it's not worth it.
• 39:48
  Speaker 5: Til dear, it's worth it. But people worry that tax
• 39:52
  Speaker 5: is going to be so high on its second job
• 39:53
  Speaker 5: because you don't get to claim that tax free threshold
• 39:56
  Speaker 5: and it doesn't apply if you are paid. People get
• 39:59
  Speaker 5: genuinely so worried. They're like, oh my gosh, the tax
• 40:01
  Speaker 5: is going to be so high on a second job
• 40:04
  Speaker 5: because the tax free threshold isn't going to apply if
• 40:07
  Speaker 5: you're getting paid in that job. And I guess that's true.
• 40:10
  Speaker 5: You are just going to have to pay standard tax
• 40:12
  Speaker 5: from the outset though with your second job. However, when
• 40:15
  Speaker 5: you get your tax return completed, you'll actually pay the
• 40:18
  Speaker 5: same amount of tax on your income, whether you have
• 40:20
  Speaker 5: one or multiple incomes. So if you you know, let's say,
• 40:24
  Speaker 5: earned forty thousand dollars and you went and got a
• 40:26
  Speaker 5: side hustle and you're earning an extra ten thousand dollars.
• 40:29
  Speaker 5: You're literally going to pay the same amount of tax
• 40:32
  Speaker 5: as somebody who's on a fifty thousand dollars income, right, Like,
• 40:34
  Speaker 5: it's not going to change because it's the second job.
• 40:37
  Speaker 5: The only I guess, gotcha is that you can't claim
• 40:40
  Speaker 5: the tax free threshold twice.
• 40:42
  Speaker 2: But no one can.
• 40:44
  Speaker 5: And if you are claiming it twice, because I've heard
• 40:46
  Speaker 5: people before they're like, oh.
• 40:47
  Speaker 2: If you tick that box, you get paid twice.
• 40:50
  Speaker 5: And it's like, yeah, it's going to come back in
• 40:52
  Speaker 5: your tax return my friends, like it always does that. Also,
• 40:54
  Speaker 5: you're in love with more, but that is not fair
• 40:56
  Speaker 5: and that is not how it works. So I think
• 40:58
  Speaker 5: it's really important to remember that it doesn't actually matter
• 41:01
  Speaker 5: how many jobs you've got. You could have fifty jobs,
• 41:03
  Speaker 5: and if you earn one hundred thousand dollars from those
• 41:05
  Speaker 5: fifty jobs, you're going to earn exactly the same amount
• 41:07
  Speaker 5: of money as somebody who has one hundred thousand dollars income.
• 41:10
  Speaker 2: Does that make sase? So you're basically just getting like
• 41:12
  Speaker 2: a pay rise.
• 41:13
  Speaker 5: Literally you're getting a pay rise, and I mean you're
• 41:15
  Speaker 5: trading your time and energy and effort for money, and
• 41:18
  Speaker 5: you are going to be treated fairly in our tax system.
• 41:21
  Speaker 5: You're not going to be charged above and beyond. Because
• 41:23
  Speaker 5: it's a second job, you're just not going to be
• 41:25
  Speaker 5: able to claim that tax free threshold. But nobody can anyway,
• 41:29
  Speaker 5: even if they switch jobs halfway through the year. Right, So,
• 41:32
  Speaker 5: if you're an Australian resident for tax purposes, as we've
• 41:35
  Speaker 5: said before, the first eighteen thousand, two hundred dollars you
• 41:38
  Speaker 5: earn is free, which is a money win, and you
• 41:40
  Speaker 5: usually nominate one employer to be able to claim that
• 41:44
  Speaker 5: tax free threshold, which means they will not take any
• 41:47
  Speaker 5: tax from your earnings before you reach that threshold, which
• 41:50
  Speaker 5: we've talked about already on this episode, but I think
• 41:52
  Speaker 5: it's really important to reiterate that first amount of eighteen thousand,
• 41:56
  Speaker 5: two hundred dollars is tax free regardless of who you are,
• 41:59
  Speaker 5: whether you earn more than two two hundred thousand dollars
• 42:01
  Speaker 5: or you earn less than twenty thousand dollars, like, you
• 42:04
  Speaker 5: are going to be able to get that for free,
• 42:06
  Speaker 5: because that's how our tax system works. It is stepped.
• 42:09
  Speaker 5: It is not just like okay, cool, well you go
• 42:11
  Speaker 5: in this bucket over here.
• 42:12
  Speaker 2: Does that make sense? Yeah, that makes sense, that makes sense.
• 42:15
  Speaker 4: I am hoping at some point, if you haven't done
• 42:19
  Speaker 4: it already, we could do a whole episode on deductibles
• 42:23
  Speaker 4: and like claim your tax. Yeah, we did one ages ago,
• 42:27
  Speaker 4: but I think it's time for an update because each
• 42:29
  Speaker 4: and every single year, the tax system changes the rules,
• 42:31
  Speaker 4: just like the superannuation system. Get this complete sidetrack. But
• 42:36
  Speaker 4: since super became a mandatory inclusion for all employees in
• 42:40
  Speaker 4: nineteen ninety two, BECK, there have been hundreds of changes
• 42:43
  Speaker 4: to the superannuation system.
• 42:44
  Speaker 2: How is that fair? Anyway?
• 42:46
  Speaker 5: I know it's getting bigger and better and changing for
• 42:48
  Speaker 5: the better, but like, oh my gosh, the tax system
• 42:50
  Speaker 5: is very similar, Like there's just changing rules each year,
• 42:53
  Speaker 5: and each year the ATO kind of like says, hey, guys,
• 42:56
  Speaker 5: this year, we're looking out for this because the world changes.
• 42:59
  Speaker 5: Righteen years ago, were the ATO looking out for influencers
• 43:03
  Speaker 5: claiming their holidays to Disneyland? No, they weren't because it
• 43:06
  Speaker 5: wasn't a thing. But now they're looking out for it.
• 43:08
  Speaker 5: So I think it's just interesting to cover. From my perspectives,
• 43:11
  Speaker 5: let's do a p on that idea. Great, Thank you all, right,
• 43:14
  Speaker 5: let's go plan that. I think we're done here today.
• 43:16
  Speaker 5: I feel like this has been short but sweet, but
• 43:18
  Speaker 5: probably not that short because I can go on and
• 43:20
  Speaker 5: on about tax So I hope you guys have a
• 43:22
  Speaker 5: good day, and if you've made it to the end, congratulations,
• 43:25
  Speaker 5: it's honestly gold star for you.
• 43:27
  Speaker 2: I love you. Have a really good rest of the week, bie, guys.
• 43:35
  Speaker 5: The advice shared on She's on the Money is general
• 43:38
  Speaker 5: in nature and does not consider your individual circumstances. She's
• 43:42
  Speaker 5: on the Money exists purely for educational purposes and should
• 43:45
  Speaker 5: not be relied upon to make an investment or financial decision.
• 43:49
  Speaker 5: If you do choose to buy a financial product, read
• 43:51
  Speaker 5: the PDS TMD and obtain appropriate financial advice tailored towards
• 43:56
  Speaker 5: your needs. Victoria Divine and She's on the Money are
• 43:59
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• 44:02
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• 44:08
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