Jack's first payslip

Jack is 16 and starts his first job in March: a casual position at a local cafe, $26.55 an hour, 12 hours a week across Saturday and Sunday. On his first day he fills in the paperwork but leaves the TFN declaration blank, because he has never applied for a tax file number and does not want to admit it. He figures it cannot matter much.

Payslip one

• Hours: 12 at $26.55 per hour
• Gross pay: $318.60
• Tax withheld: $149.74
• Net pay: $168.86
• Employer super contribution (paid into his fund, not taken from his pay): $38.23

Jack stares at the payslip. He worked out on the bus that 12 hours at $26.55 should be $318.60, and the gross line agrees. But nearly half of it is gone. The tax withheld line shows $149.74, which is 47% of his gross: the top marginal rate of 45% plus the 2% Medicare levy. Because he gave no TFN declaration, the law required the cafe to withhold at the top rate, as if he were a mystery person earning over $190,000 a year. The super line, at least, makes sense: 12% of $318.60 is $38.23, and it was paid on top of his wage into a super fund, not taken out of his pay.

The fix

That night Jack applies for a TFN on the ATO website. It is free and takes 15 minutes. The number arrives by post two weeks later, and he hands the cafe a completed TFN declaration, ticking yes to claiming the tax free threshold, since this is his only job. His next payslip looks different: gross $318.60, tax withheld $0.00, net $318.60, super $38.23. Nothing is withheld because $318.60 a week is below the weekly equivalent of the $18,200 tax free threshold. The whole wage lands in his account.

The year adds up

Jack works his 12 hours every week from March until the income year ends on 30 June: 18 weeks in total. His gross for the year is 18 times $318.60, which is $5,734.80. Only that first payslip ever had tax withheld, so his total tax withheld for the year is $149.74. His employer has also contributed about $688.18 to his super fund across those 18 weeks.

July

In late July, Jack lodges his first tax return through myGov, linked to the ATO. It takes ten minutes, because almost everything is prefilled: the cafe's income statement already shows $5,734.80 earned and $149.74 withheld. The maths is simple. His income is far below the $18,200 tax free threshold, so his income tax for the year is zero, and he earns too little for the Medicare levy to apply. The ATO was holding $149.74 of his money as a credit, and since he owed nothing, all of it comes back. Twelve days later a refund of $149.74 lands in his account, the missing chunk of that first payslip finally arriving four months late.

Jack's takeaway, which he shares with everyone at work: the system returned his money, but only because he lodged a return, and only months after the shifts he earned it in. The TFN declaration on day one would have meant never losing it at all.

The number Jack almost ignored

There is one more figure worth following, and it is not the tax. Across those 18 weeks Jack's employer paid about $688.18 of super into his fund, on top of every wage and never out of it. That money does not sit still. It is invested, and because Jack is 16, it has roughly 50 years to compound before he can reach it. At an illustrative 7% return, left untouched, that first year of super could grow to somewhere around $20,000 by the time he retires, without Jack adding another cent. He barely glanced at the super line while he was staring at the tax withheld line in a panic, yet over a whole working life it is the quiet number that ends up mattering most.