The only things certain in this world...

... are death and taxes. Or are they? They certainly happen, that's for sure. I've been learning the ins and outs of the "interesting" Australian tax system and felt like having a good old long-overdue whinge about the Inland Revenue.

"In this world nothing is certain but death and taxes," so said oh-wise-one Benjamin Franklin. Well, the former I can't much speak of being, as I am, still very much alive and most of the people I know are also still alive, thankfully. Who knows what the future of technology will do to the inevitability of death. Certainly, the chances of dying have diminished significantly since the onset of modern medicine, which is why there are so many old people around these days. Don't get me wrong, I love old people. I wish there were more of them. It's just they cost money and who has to pay? Yes, that's right. You, the tax-payer which is all well and good so long as there are more tax-payers than old people.

Certainly taxes have seemed very certain in my world of late. Take 2003, for example. Having never submitted a tax return in my life I was suddenly required to submit two; one for the Inland Revenue, who somehow managed to track me down by hassling my parents, and the other for the Australian Tax Office, which was bizarre as I had earned approximately $5 that year! It appears that everyone has to submit a tax return in Australia and an interesting process it is. The tax return for the Inland Revenue was less interesting and more what you might call Painful (notice the capital P).

Painful, and some might argue unnecessary, Inland Revenue tax return process.

Firstly, I had very little warning of having to submit the return. I wasn't expecting it and when they first contacted me I thought, "oh well, I'll just fill in a form telling them I'm not currently residing in the UK, that'll throw them off". But no! Only now they had my address in Australia! So they kept sending me forms and reminder letters and by this time there was no way I was going to get it done and sent off in time, as they like you to do these things by the end of December which everyone knows is a crazy time of year.

I decided that I'd do it all online because then I'd have until the end of January. When I logged on, however, I soon discovered that nothing is that simple as I had to apply for a password, which they then had to take 7-10 days to get around to sending out, ironically by post, and then add on time for postage to Australia. Eventually I got it and logged on. It asked for my National Insurance number which I was organised enough to have at the ready. Then it asked for some other piece of information which I did not have. No worries, I thought, I'll just fill in what I can, email all the stuff I need to my Dad who can check my papers and get back to me. But no! They wouldn't let me move on until I'd given them that specific piece of information. A few days later, after Dad had rummmaged through the loft to find my papers and emailed me back I completed that page only to find that I couldn't answer the question on the next page without further info from my files at home. And I couldn't move past this page either. And so it went on and finally after a few weeks I got the thing submitted.

That didn't satisfy the good old In Rev though who continued to pester me for tax returns for the next two years, despite me having earned nothing in the UK, until eventually I wrote to them and said "Please stop asking me to fill in tax returns. I don't have any reason to. I earn no money and I don't live there any more. Please, leave me in peace" and thankfully they agreed.

Interesting Australian tax system with smarty-pants eTax software.

The Australian tax system is a bit different. Basically, from what I can see, everyone rorts it. They don't bother to tell you that you're supposed to fill a return in, you just have to know these things. It has to be submitted four months after the start of the new tax year, pretty quickly compared with the Inland Rev's eight months, nine if you're submitting online. One great thing about the Australian Tax Office is their electronic tax return system, eTax, which is basically like an accountant on your computer. It works like an interview process and does all your calculations for you. It's really easy to use... it's just that tax is quite hard to understand. A lot of Australians pay between eighty and two hundred dollars for an accountant to do their tax return for them. This is because accountants know all these nifty little tricks to get you more money and some people manage to double or triple the amount they can get back. A lot of this is telling little "white" lies about how much money you earned or spent or whatever throughout the year in order to get the tax office to give you money back.

Now, I don't condone this. I consider it "cheating a bit". Others call it "working the system" and I have to admit those crazy little rules that all the accountants know about must be there for a reason. Whatever, I quickly realised the benefit of knowing these things when I discovered that our combined house-hold income took us just over the threshold beyond which we would have to start paying a Medicare Levy Surcharge.

Emergency-treatment-only Reciprocal-medical-care-my-bottom Medicare Levy Surcharge Rip-off

The Medicare Levy Surcharge is a strange and mysterious creature. Let me try to explain. Medicare is Australia's version of the NHS, only some argue not as good and, as my tax return is evidence of, not as free. Whereas in the UK we pay a pittance of National Insurance towards NHS, in Australia you get charged a Medicare Levy. I would expect this to come out of my PAYE tax but it didn't seem to happen this year. Now, if you earn over a certain amount and don't have a private health fund then you also have to pay a Medicare Levy Surcharge. Confused? Me too. Even if you do have a private health fund you still have to pay the Medicare Levy, I guess because emergency healthcare is operated by Medicare and you never know when you might need it. However, if you are a temporary resident, as I was for 4 months of the last tax year, then you are not entitled to Medicare, unless you're from a country with reciprocal healthcare, such as UK, in which case you're entitled to emergency treatment but not doctors bills or anything like that. But you still have to pay the levy (because you are entitled to emergency treatment) and, if you earn over a certain amount, the surcharge. Sound fair? I didn't think so.

I don't actually earn over that amount, or at least I didn't last tax year. And I really couldn't understand why I was being charged the levy surcharge as Toby's income plus mine didn't push us over the threshold. I was very annoyed as it meant I was going to have to pay $400 extra to the tax office, which I hadn't planned on doing. All for a service I'd hardly used and wasn't entitled to full use of all year anyway, and I couldn't understand it as my tax return last year had a very different outcome.

Reducing taxable income, sometimes known as rorting understanding the tax system

After spending hours looking at it and tweaking some figures I finally figured out what it was. The interest I had earned on my savings account, plus my salary, plus Toby's took us a few dollars over the threshold. What to do? The interest was less than the amount I was going to have to pay the tax office. It didn't seem fair but I really wasn't sure about not claiming it. I went back and looked over my deductions. This is the interesting thing about Australian tax. You can actually reduce your taxable income by claiming deductions and if your "other work-related expenses" are less than $300 then you don't have to produce receipts, which just seemed crazy to me. You can also claim donations to charities. I had already depreciated my laptop and claimed for some PC magazines that were sitting on my shelf. I then remembered I'd bought software to run on my laptop and figured I could probably add that in, and what if I'd bought magazines earlier in the year but had since chucked them out? I made a quick calculation as to how many there may have been and before I knew it had worked out that I had $298 worth of work-related expenses. And what do you know? It brought us back down to below the threshold and all of a sudden the tax office owed me $77!! Now I know why it's worth investing in an accountant. Goodness knows what else they would have thought of.

So the craziness is that just over $300 of interest was going to cost me almost $400 in tax, but less than $100 extra of expenses saved me about $500 in total. Tax sure is a crazy and complicated affair.

And just before I go I'd like to get back to the original statement, "in this world nothing is certain but death and taxes". On the ATO eTax interview there's a question as to whether you will have to submit a tax return next year. This raises some interesting points, not least of which is, does that mean that tax is not a certainty? Also, are there many Australians who can actually see into the future? And, if I say "no" does that mean it will become the case? Maybe I should have tried it.