If you are just entering the workforce for the first time, you will need to provide your employer with your Tax File Number (TFN). Being your first job, you may not already have a TFN, so this article will explain a little bit about what your Tax File Number does and why you need one, and how to go about getting one.
First of all, your TFN is a handy identification reference for all of ypour tax and superannuation records throughout your life – yes, you will keep the same number for life. Whether you change your name, change your address (even overseas) or change jobs, your TFN will allow you and the ATO to ensure that they keep track of the right person. Imagine how many people with the same or very similar names are changing jobs and addresses every year across Australia and you start to get an idea of why it is necessary to have a single unique identifier for your tax and super records.
In addition to providing easy identification, your TFN also ensures you pay the correct tax rate. You don’t have to have a TFN when you are earning an income, but the ATO will then tax your income at the maximum rate, which is currently 49%. Why? Because if you can’t be identified accurately, there is the possibility that you may be earning income elsewhere that would put you in a higher tax bracket, so you get charged the maximum.
What impact could the tax penalty have on your in-hand pay? If you are a first-time worker, chances are you are starting on a modest wage (lets use $35,000 for this example). If you have a TFN, you would pay nothing on the first $18,200 (the tax-free threshold) and nineteen cents per dollar for everything above $18,200 (in this example, that would be $16,800). As a result you would pay $3,192 in tax for the year and be left with $31,808. If you don’t have a TFN, you pay forty-nine cents per dollar on all your income, which means you will pay $17,150 in tax and be left with $17,850. Your fortnightly income would drop from $1,223 if you have a TFN to $660 without a TFN.
If the tax benefits weren’t enough incentive by themselves, you would also be unable to apply for government benefits and couldn’t use the electronic filing service that the ATO offers.
You can apply for a TFN at Australia Post, a Centrelink or Veteran’s Affairs office, or by post. For more details, visit: https://www.ato.gov.au/Individuals/Tax-file-number/Apply-for-a-TFN/
By Jennifer Lowe