Your Tax File Number is as important as your birthdate.
In use in Australia for more than 80 years, a TFN is assigned by the Taxation Commissioner.
It serves a purpose similar to the American Social Security number, but the use of a TFN is strictly limited by law.
A TFN is an important piece of personal identification which should not be lost and never revealed to anyone unless they are authorised to ask for it.
Gunnar Kaebisch, a manager at one of Australia’s largest accounting and taxation firms, BDO, says the Tax File Number is a key tool for the government to collect a fair share of revenue from everybody’s income.
“Everybody who works in Australia, basically will have to pay tax.”
The money that the government collects with a Tax File Number, is put to good use, says Stephanie Ceredes from the Tax Institute.
“The money is used by the government to provide a whole lot of different services. The roads and the infrastructure and that sort of thing that we see but also things like Medicare services, hospitals, etc. So if you find yourself in need of those services, your taxes have already been a contribution to those and you can access those services usually for free.”
…and it’s not difficult to get a Tax File Number.
Foreign passport holders, permanent residents and temporary visitors can all apply for a TFN online.
“It’s very straightforward and the Taxation Office will cross check your information with the data from the Immigration Office showing that you are in Australia, so that’s quite easy.”
Australian residents can apply for a TFN at participating Australia Post retail outlets and attend an interview.
There is no fee for lodging a TFN application.
Once the application process has been completed and there are no complications, a TFN will be mailed to the Australian address provided by the applicant within 28 days.
New arrivals who want to start their own business also need a Tax File Number, explains Gunnar Kaebisch..
“He does need a Tax File Number because he would either get employment with the company – so he would get paid wages or salaries or he could be an individual company called a ‘sole trader’ – and get payments with that and then he would need to lodge a tax return as well and need a Tax File Number.”
Stephanie Ceredes from the Tax Institiute says not providing a Tax File Number to an employer is not an offence but there is a penalty to pay.
“If you don’t give them a Tax File Number, they have to take out a whole lot more tax – maybe at a penalty rate – but in the meantime you have less money in your pocket than what you might have otherwise had, had you given that employer a Tax File Number in the first place.”
Gunnar Kaebisch agrees.
He says not supplying a Tax File Number is not a small matter and could mean losing almost half your earnings.
“…and if you don’t supply one to your employer, for example, they would legally be required to withhold tax on the payment to be made to you at the highest tax rate which is 47 per cent. You probably don’t want that so you’d be well advised to have a Tax File Number.”
Having several jobs at the same time and changing jobs frequently is no problem.
There is no need to apply for a new Tax File Number with every new employer, says Stephanie Ceredes.
“Once you get a Tax File Number, that’s yours for your working life or for the time that you’re in Australia here working. So you get one for your life and for every employer that you might have. You give them your Tax File Number and they will report tax that has to be paid on your behalf to the Australian Tax Office.”
As the Tax File Number is every person’s unique reference number in the tax and super systems, it’s important to stick to the name used on the original application, says Laurie Nowell from settlement agency, AMES Australia.
“One of the things we find is that sometimes family and first names can either be transposed or have multiple spellings especially where it’s a language where the Latin spelling is not used so this can trip people up when they are using a Tax File Number, say in filing a return or a business activity statement and lots of other ways as well. If the name and details don’t match the ones that are already on record with the tax office or the bank it can cause problems. So it is important to get those details right and keep them consistent.”
Laurie Nowell points out that the Tax Office is not really concerned if the family name is placed first or last on a Tax File application. Whatever the order, he says, it should be used consistently.
“You know the Tax Office don’t really care whether you put your family name first or last, they just want to see it the same way every time you apply for something or every time you use it.”
The same care and diligence should be applied when entering a Tax File Number into other documents.
TFNs consists of a nine digit number, and Laurie Nowell says, it’s very important to enter all digits in the right order.
“Make sure you get the tax number right. Sometimes when you key in numbers you can transpose figures. So it is important to make sure you get your number correct and you keep it consistent and every time you file something you use the same number.”
More information about the Tax File Number is available on the Australian Taxation Office website, .
