If you are looking for answers on international student tax in Australia, then you have come to the right place.
Filing tax returns or paying taxes in Australia may seem daunting at first, but once you understand the process, you will be entitled to several benefits like tax offsets, the tax-free threshold, lower tax rates, and more.
The financial year in Australia runs from July 1 every year to June 30 the next year.
Here’s everything you need to know about how does tax work in Australia.
1. Are you an Australian Tax Resident?
If you are an international student and have been living in Australia for more than six months, you will be considered an Australian resident for tax purposes.
According to the ATO (Australian Taxation Office), by residing in Australia for over six months, your routines and behaviour become consistent with a person living in the country for tax purposes.
If you are unsure whether you are a tax resident or not, you can get in touch with a registered tax agent or visit the ATO’s website for more clarification.
2. What Happens If You Are a Tax Resident in Australia?
Assuming that you are a tax resident in Australia, you will have to consider some critical tax implications. If your taxable income is $18,200 or below, you will be entitled to a tax-free threshold, and you won’t have to pay any income tax for the year ending on June 30.
Additionally, you can also apply for a refund. For instance, you had a part-time job, and you received a salary from which your employer deducted the income tax.
If the total taxable income from your part-time job was $18,200 or less, you could apply for a refund for the deducted amount from your salary.
Furthermore, no matter where you earn your income from, you will be liable to pay tax in Australia on all your assessable income for the year ending on June 30.
And if inadequate income tax has been deducted from your salary, or you receive other assessable income for which you owe tax, you will be legally required to file a return and pay tax.
3. How to Lodge a Tax Return?
You can file a tax return at the end of tax year in Australia. Your employer will provide you with a summary that will show the total income you have earned and the amount of tax deducted.
The ATO will check how much amount was deducted from your salary and will send you back a notice of assessment and your tax refund if you are eligible for it.
For international students, the easiest and the most secure way to lodge a tax return is online through the ATO’s website. However, you can also file a tax return through a tax agent using a paper form.
Remember, the tax year in Australia ends on June 30 and the deadline to file your tax return is October 31.
When you lodge your tax return, make sure to apply for all deductions, including computers, clothing, phones, books, and more.
4. What Are the Requirements for Lodging a Tax Return?
Everyone, including international students who file an income tax return, need a TFN (Tax File Number). Without a TFN, any income you receive (including bank account interest) might get taxed at the highest rate.
To apply for the TFN online, you can go to the ATO website. If you are not applying online, you can fill out the application forms available at the Australian Taxation Office and then submit the documents at any tax office.
You will also need to collect other information, which includes the following:
Bank Statements: showing the interest you have received.
Payment Summary: issued by the employer at the end of each financial year, showing how much tax was withheld and the total income you earned.
Dividend Slips: showing payments made by the organisations you have your shares in.
Photo ID: like your passport.
Other invoices, receipts, and work-related expenses.
Most time, international students who take up low-income jobs or work part-time end up paying more tax than required. Lodging international student tax return in Australia ensures that they get a tax refund.
Note: If you are expecting a tax refund, you need to have your bank account information ready so that your tax refund gets deposited immediately.
5. What Types of Income Are Included in Your Return?
As you file your tax return, you need to show all the taxable income you have received in the financial year. You can generate income from several sources, which may include the following:
Wages and salaries as a part-time, full-time or casual employee.
Income from bank interest.
Bonuses and allowances.
Government allowances and payments like Austudy payments, Youth Allowance, Newstart Allowance, and more.
Gratuities and tips earned while working.
Income received as an independent contractor.
Capital gains through the sale of assets.
Business income, which does not include fees received from a hobby.
Distributions received as a partner in a partnership.
Bear in mind that any self-education expenses, work-related deductions, and personal deductions can reduce the total amount of assessable income.
6. What Form of Deductions Can You Claim?
You can reduce your total taxable income through deductions. These are amounts you can claim for a few expenses that are directly related to earning your income.
Deductions are basically of three types — self-education expenses, work-related deductions, and personal deductions.
Here are some of the most common forms of deductions you can claim:
Work-related phone and internet expenses.
Costs for compulsory work uniforms or protective clothing.
Vehicle and travel expenses between work sites. This does not include the costs of travel between work and home.
Home office running expenses. It incorporates the costs of everything, including printers, computers, furniture, heating, cooling, lighting, and more.
Work-related subscription and union fees.
You may also be able to claim work-related deductions for the cost of briefcases, tools of the trade, and calculators that cost less than $300. Remember, you can only claim these expenses if you have kept the relevant receipts, invoices, and bank statements.
7. Is it Better to Do Your Own Tax or Use a Tax Agent?
International students can easily do their taxes in Australia themselves by using the ATO’s myTax product. However, if you need additional expertise, you can take help from a registered tax agent who usually charges a fee to lodge returns.
Some of the agents even deduct the amount they charge directly from the tax returns you claimed. This way, you do not need to hand them over the money physically. Here are a few benefits of hiring a tax agent:
They make sure to include all the deductions that you are eligible for.
A tax agent or an accountant will also ensure the accuracy of your returns.
You can claim the cost of hiring a tax agent along with the tax returns for the next fiscal year.
8. When can you Claim Self-education Costs?
If you are studying a course in Australia along with your current job to improve or maintain your skills, you are eligible to claim the cost of your study.
Not only that, but you can also claim the costs of your textbooks, travel costs, stationery, course fees and reduction in the costs of items like tablets, laptops, and printers.
Note: Check out Taxation Ruling by the ATO to see some clear examples of when you can and cannot claim self-education costs.
9. How to Claim Tax Returns if You are Leaving Australia?
If you are an international student who worked in Australia and have decided to leave the country before the financial year ends, you can lodge your tax returns early. In this situation, you need to file a paper return, which might take some time.
However, if you have no time to lodge a paper return, there is another option of getting it done online from your home country after June 30.
10. How Long Does it Take to Get Your Refund?
If you file your tax online, you will get your refund within two weeks. And it might take approximately six weeks to receive your refund by mail.
11. Where to Find More Help?
If you need help with anything related to tax in Australia, the best place you can visit is the ATO website where you will find answers to every question.
Your university’s financial or student services might also be able to give you some advice on how to pay tax in Australia.
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