Your Tax File Number (TFN) is an ID number you’ll receive from the government for different business and official transactions. It’s a reference number that you’ll use to file your tax return, receive benefit payments and receive superannuation services. The 9-digit TFN you’ll receive is as private as your credit card’s PIN. Except for some cases, you should never reveal it to other people. In the wrong hands, your TFN can be a tool for malicious individuals to commit identity theft or fraud under your name.
Why do I need a TFN?
Before you start working at any job, you’ll need to register for a TFN. It’s necessary to present this to your employer on your first day at work to streamline all your future payment procedures. If you don’t have a TFN to provide, your employer could tax your salary at a higher rate. You could end up losing 47% of any payment of unused leaves until you present a valid TFN to your employer.
You’ll need to input your TFN on a Tax File Number Declaration Form provided by your employer. Besides your TFN, you’ll also need to input other information like your residency status and other tax-related queries. Your employer uses this data to work out how much data you should receive.
Besides employment purposes, you’ll also need your TGN for other reasons. You will need to present it when claiming government allowances, such as Centrelink payments and Family Tax Benefits. It’s also necessary to input it for bank account applications.
How do I apply for a TFN?
The TFN application process is relatively straightforward since you have the option of doing it in person or by visiting the government’s myGov website. Filling up the application won’t require any fees. The Australian Taxation Office (ATO) will then notify you of your TFN’s application from 10 to 28 days with an official letter addressed to your mailing address.
Presenting your TFN is necessary for different business and legal transactions, which is why losing the original letter with your TFN can be problematic. It’s not uncommon for people to misplace this document when handling paperwork or moving residences. Thankfully, you can use etax.com.au to log into your account. From there, you’ll see your Tax File Number on top of your tax return forms.
What benefits will I receive through my TFN?
Every year, you’re entitled to earn a tax-free amount of $18,200. However, you can end up paying more tax than necessary if you don’t tick the box that asks whether you want to claim this threshold from your employer. Keep in mind that individuals working several jobs can only claim the tax-free threshold from one employer at a given year. Claiming it from multiple employers could result in a higher tax bill to pay back during taxation deadlines.
The last thing you’ll want as a taxpayer is to have issues with taxation agencies on missed payments and late payments on tax bills. This is why having a TFN is both an advantage and a responsibility. Your TFN is mostly geared towards employees. However, you’ll still need to apply for one if you’re a self-employed individual. Besides your TFN, you’ll need to apply for an Australian Business Number (ABN) to register your entrepreneurship as a separate business entity.
Managing multiple accounts on your own will be challenging, especially if you don’t fully grasp all the taxation rules you need to observe.
Many individuals nowadays have side businesses to increase their monthly income. Since eCommerce markets have a relatively low entry level, almost anyone can set up an online shop and earn a little extra capital. If you’re looking for an accountant for an online business in Australia, book a strategy session with our expert accountants today!