If your tax bill caught you off guard last year, you are not alone. Every year, I speak with business owners and professionals who are genuinely surprised when their assessment arrives. No one enjoys a tax shock. It can seem sudden, frustrating, and often unfair. However, in most cases, nothing has gone wrong. The outcome was simply not planned for early enough. The good news is that when you start planning ahead, these results are entirely predictable. And when something is predictable, it can be prepared for or even avoided. Below are some of the most common tax surprises I see and why early planning makes all the difference.
1. HECS / HELP Unexpectedly Increasing Your Tax Payable
If you’re employed and you have a HECS or HELP balance, it’s critical that you tick the relevant box on your TFN declaration for every employer you work for. This tells payroll to withhold additional amounts during the year to cover your compulsory repayment. If you don’t tick the box, no extra withholding occurs, which means the shortfall shows up at tax time.
Where this becomes particularly problematic is for low-income earners who didn’t tick the box, and historically, it hasn’t mattered. Their income may have been below the repayment threshold, so no issue arose. Then they receive a significant pay rise, change roles, take on additional hours or receive bonuses. Suddenly, they are over the repayment threshold, and no additional tax has been withheld. The result is a tax bill they weren’t expecting.
It becomes even more complex if you have more than one job. You should only claim the tax-free threshold from the employer that pays you the highest income. Claiming it from multiple employers can result in insufficient tax being withheld across the year, creating another unexpected shortfall.
Even when the HECS or HELP box is correctly ticked, I have seen professionals get caught out where employee share schemes are involved. Shares that are taxed upfront can increase your taxable income significantly. That higher income then increases your HECS or HELP repayment rate. Without planning, the additional repayment can feel severe and disproportionate.
2. Investment Income Not Factored Into Your Tax Outcome
Dividends, trust distributions, ETF income, bank interest, and capital gains are among the most overlooked drivers of unexpected tax bills. Investment income is frequently forgotten in PAYG planning because your employer only withholds tax based on your salary.
Payroll has no visibility over your share portfolio, managed funds, property gains or trust distributions! While your wages may be perfectly taxed throughout the year, your additional income quietly accumulates in the background.
That extra income can push you into a higher marginal tax bracket, reduce offsets, increase your Medicare Levy exposure and ultimately create a shortfall when your return is lodged.
I often see clients assume their refund will look similar to prior years, only to find that investment earnings have significantly changed the outcome. There is nothing incorrect about the result. It is simply unmodelled. If you are investing, particularly as your portfolio grows or becomes more diversified, your tax planning must take it into account. Ignoring investment income does not make the liability disappear. It simply defers the surprise until assessment time.
3. High Income + No Compliant Hospital Cover = Medicare Levy Surcharge
If your income for Medicare Levy Surcharge purposes (which includes taxable income and certain other reportable amounts) exceeds the Medicare Levy Surcharge thresholds and you don’t hold compliant private hospital cover, an additional surcharge can apply. For the 2025–26 income year, singles earning above about $101,000 and families above about $202,000 may pay an extra 1% MLS if they don’t have the right cover, and that rate increases to 1.25% or 1.5% at higher income tiers. The surcharge isn’t small when you consider it’s applied to your entire taxable income, not just the portion above the threshold, so for many higher earners, it can translate into a meaningful additional tax cost if it hasn’t been factored into planning ahead of time.
4. One Spouse Covered. The Other Isn’t.
The Medicare Levy Surcharge thresholds for families are based on combined income, not individual income, which is where many couples are caught off guard. Once your combined income exceeds the family threshold, both adults must hold compliant private hospital cover for the relevant period of the year. If one partner does not have appropriate cover for part or all of the year, MLS can apply for those uninsured days. It’s not enough for one person in the household to be covered. The rules operate on combined income and individual cover status, and small misunderstandings about policy type, start dates or insured days can result in an unexpected surcharge at assessment time. This particular issue often arises when new partners move in together and don’t revisit their private health insurance positions. What previously worked when assessed individually may no longer be sufficient once incomes are combined.
5. Division 293 – Extra Tax on Super Contributions
For higher income earners, super contributions aren’t always taxed at just 15%. If your income for Division 293 purposes, which includes your taxable income plus certain adjustments and your concessional super contributions, exceeds the $250,000 threshold for the 2025–26 income year, an additional 15% tax applies to part of those concessional contributions. This isn’t a penalty; it’s simply how the legislation works for higher earners, but it often arrives as an unexpected ATO notice months after lodgement. The key is knowing it’s coming and understanding what triggers it. When clients are aware in advance, there’s no panic because Division 293 assessments allow you to elect to have the liability released from your super fund rather than paying it from personal cash flow, provided that the election is made within the required timeframe. We warn our clients about this each year and model it where relevant, yet we still get the occasional surprised call. What’s worse is when someone doesn’t check their MyGov notifications, misses the election deadline, and then has to personally fund the liability. Division 293 isn’t complicated when it’s anticipated. It only becomes stressful when it’s ignored.
The Common Theme
None of these issues are errors. They are entirely legitimate tax outcomes.
When planning early, you can:
• Adjust PAYG withholding
• Time income and deductions strategically
• Review super contribution levels
• Confirm private health cover positions
• Model outcomes before decisions are made
This is the difference between reacting to a tax bill and controlling it.
Tax Planning Opens 1 March
Each year from 1 March, we open structured tax planning for eligible clients.
This allows us to:
• Model your expected income
• Identify exposure areas
• Forecast your tax position
• Implement strategies before year-end
Avoid tax shocks.
Keep more cash.
Plan early.
If you would like to discuss tax planning this year, please reach out so we can assess whether it is suitable for you.
