ATO applied seemingly incorrect rate bracket to taxable income?

[#1]

Hello!  

The ATO has made the following calculation in both the estimate which I received from mytax just prior to lodging my return, and identically in the Notice of assessment that I have received.  Both listed my taxable income as an amount within $100 of $36,000  (I understand I can't give financial data so hopefully a $200 range will suffice!), and my tax on taxable income as within $20 of $3,775. The ATO website lists the rates brackets for the relevant FY(16-17) [ https://www.ato.gov.au/Rates/Individual-income-tax-rates/ ].  The table shows that $36,000 is clearly in the second bracket (19c on the $1), whereas the tax on taxable income amount provided appears to indicate the third bracket has applied, as the max tax under the second bracket is: $3,572.  

Can you please help me understand what has happened? Has the ATO made an error, or else what other information are they processing and not showing me?  It seems one of the numbers MUST be incorrect because they aren't consistent within the ATO's tables. 

Thanks

[#2 · Accepted solution]

Hi @tim123,

Thanks for posting! It's a little tricky to explain your notice of assessment without having access to it, so we'll try to give you some general information which might apply.

There are a few things to consider in the situation you've described:

1. For the purposes of these calculations, we've used the following assumptions:
   - you are an Australian resident for tax purposes;
   - your taxable income is $36,000;
   - you're not eligible for any offsets or deductions and
   - you don't have any dependants.
   A change in any of these factors changes the equation and changes how much tax you may need to pay.
    
2. You've mentioned that you fall within the $18,201-$37,000 tax bracket, and that you're pretty confident that you should only be paying tax at 19c on every dollar earned over $18,201. Basing the calculation on $36,000:
   36000-18201 = 17799 * 0.19 = 3381.81 or $3,381.81
    
3. We then need to consider whether the Medicare Levy applies in your situation. You haven't mentioned that you're exempt from the levy, so we'll guesstimate your levy payment as well. We've used $36,000 as your taxable income, which means gives us:
   36000*0.02 = 720.00 or $720.
    
4. Without any additional deductions or offsets, your total tax bill is:
   3381.81+720.00 = 4101.81 or $4101.81.
    
5. You'd then take away how much tax your employer has withheld on your behalf and the remainder would be any tax refundable to or payable by you. For simplicity's sake, we'll say you received $1400.00 a fortnight as salary and wages, which (with the tax free threshold) means $160.00 will be withheld each pay, bringing your take-home to $1240.00.
   160.00 * 26 = 4160.00 or $4160
   4160 - 4101.81 = $58.19 refund.

As we mentioned, all of this is based on the simplest possible return, and may not reflect your actual situation. If you'd like to talk with someone about how your tax return was calculated, phone us on 13 28 61 between 8:00am and 6:00pm Monday to Friday - we can verify your details over the phone and access your notice of assessment so we can walk you through it.

Thanks!