Why do I owe money on my tax return in Australia?


If you’re an Australian resident, you’re legally required to pay tax depending on your income. If you’ve recently lodged your tax return and you owe the Australian Tax Office (ATO) money, don’t panic. There are many common reasons as to why you’ve not paid enough tax over the year. 

In this article, we’ll cover everything you need to know about your latest tax audit, how to navigate your tax return, how long you’ve got to pay your return, and why you might owe money to the ATO. 

Let’s get to the following commonly asked questions: 

  • Why does my tax return say I owe money?
  • What happens when you owe the ATO money?
  • Why do I owe money instead of getting a refund?
  • What does tax amount owing to the ATO mean?
  • How long do I have to pay my tax bill in Australia?
  • Owed by ato meaning?

Q1. Why does my tax return say I owe money?

If you receive an unexpected tax bill after your tax return has been processed, it means you still owe money to the ATO. If you receive this it’s likely that you’ve been paying your taxes wrong. This could be because: 

  1. Your employer hasn’t withheld enough tax from your earned income. 
  2. You’re a sole trader and haven’t paid enough self-employment tax over the year. 
  3. You receive an investment income where no tax was paid, for example from real estate.
  4. Your family earns income that has changed at some point in the year and you’re required to pay the Medicare levy or the Medicare levy surcharge. 
  5. There’s a difference between the details in your tax return and the information received through pre-fill data. 

Q2. What happens when you owe the ATO money?

When you receive your tax information with the amount you owe the ATO, you’re required to pay your tax bill after 21 days. If you fail to do this, you’ll be classified as in tax debt and the ATO will begin to take the necessary steps to get you to pay taxes. 

They will: 

  • Charge interest on any unpaid tax debts and contact you reminding you of past due dates.
  • Any previous tax returns or business returns will be claimed back to pay for your debts.
  • If you fail to engage with the ATO to establish payment plans or talk through payment options, they could refer your case to debt collection agencies.
  • The ATO may disclose your business tax debt to credit reporting bureaus that will advise you on what action to take. 
  • If you’re still struggling with paying your bill and you’re unwilling to comply with tax law, you’ll face legal action and could be forced into bankruptcy. This will have a detrimental effect on your personal finance and credit score. 

Q3. Why do I owe money instead of getting a refund?

If you were expecting tax refunds and are instead faced with a bill, you’re probably feeling disappointed and confused. It's possible that you owe money instead of receiving a refund due to a miscalculation of tax deductions or inaccuracies in your tax calculator.

After your tax return is processed, you’ll receive a notice of assessment which should detail the amount of tax you need to pay. You’ve been charged with a tax bill because you haven’t paid enough income tax or you’ve made errors when filing your tax return.

Q4. What does tax amount owing to the ATO mean?

If you have a tax issue and you’re told you have a tax amount owing to the ATO, it simply means you owe the ATO money. This only relates to your income tax liabilities for the financial year and doesn’t register any debts you might owe to other Australian Government agencies. 

Q5. How long do I have to pay my tax bill in Australia?

The ATO gives individuals up to three weeks, or 21 days, to pay a tax bill after their tax assessment is processed unless your bill is from a previous financial year. If you’re struggling to pay this on time, you can file through a tax agent, who will help you extend the pay period and make owing money to the ATO a less stressful experience. 

Q6. Owed by ATO meaning?

If you see “owed by ATO” on your tax return it means you’ve paid too much tax over the financial year and you’re owed money. Your tax code might be wrong, and you’re effectively in a tax credit. After you’ve registered for your refund, the ATO can take up to 50 business days to issue your return.

Summing up

If you owe taxes it can feel overwhelming, especially if you were expecting a return when filling out your tax forms. If you’re struggling to pay back the money owed to the ATO, don’t panic. Speak to a tax expert to discuss your next steps and how you can avoid owing tax debts. You can also talk directly with the taxation office to establish a tax payment plan and rectify your tax code. 

For more money advice, check out the rest of our blog. Alternatively, read our insightful article “How does ATO debt forgiveness work?”

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Disclaimer: The author is not a financial advisor and the information provided is general in nature and was prepared for information purposes only. This article should not be considered to constitute financial advice. Accordingly, reliance should not be placed on this article as the basis for making an investment, financial or other decision. This information does not take into account your investment objectives, particular needs or financial situation.

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