Follow this simplified tax return guide for international students in Australia – Am I a resident for tax purposes? Do I need to do a tax return? What expenses can I claim? Do I need a tax agent?
We’ll start with the most important rule: If you’ve been living in Australia working part-time according to your student visa restrictions and earning over $18,200, you’ll need to do a tax return at the end of the financial year. For Australia, the tax year is July 1st to June 30th. You then have until 31st October of that year to lodge your tax return.
It can seem scary to lodge your tax return as an international student, especially if it’s your first time filing your tax. But we’ve compiled the most asked questions about the process to produce a simple guide on the ins and outs of your Australian tax return. It’s never a fun task, but it’s one bit of adulting you’ll never get out of. So hold tight, follow these steps and it’ll be done in no time.
#1 Am I a resident for tax purposes?
Although the rules are a little ambiguous, if you’ve been studying in Australia for more than 6 months, it is more than likely that you are a resident for tax purposes. This means that the tax you pay on your earnings is the same as other residents in Australia. Plus you’re entitled to benefits such as the tax free threshold and tax offsets. If you’re unsure about what those terms mean, here’s a quick overview:
Tax Free Threshold – This means that everything you earn up until AUD$18,200 is tax free. Anything you earn over this amount will be taxed according to the tax brackets set by the ATO. However, if you’ve had tax deducted from your pay slips and earned less than the threshold over the tax year, you can now lodge a tax return and claim a refund from the ATO (Australian Tax Office).
Hot Tip: When you apply for your tax file number, you will be asked if you wish to claim the ‘tax-free threshold’ for money you earn. Answering ‘yes’ to this question allows your employer to withhold tax only for income over the tax-free amount. This way, the ATO won’t take money that you’d otherwise get back at tax time. However, you can only claim the tax free threshold from one employer at a time. So if you’re working several jobs, your second job’s pay will be taxed from the first cent you earn.
Tax Offsets – These are purchases and expenses directly related to your income that then won’t be taxed. For example, work related travel, costs for compulsory work uniform, home office expenses, charitable donations and self learning. You can find a full list of tax deductions here.
If you’ve been studying in Australia for less than 6 months by the end of the financial year, you’ll be considered as a foreign resident for tax purposes and therefore will be taxed at a higher rate. If you’re still unsure as to which category you fall under, have a look at some examples here.
#2 What will I need to lodge my Tax Return?
In order to lodge your tax return, you will need a few documents and details handy:
- Your TFN (Tax File Number). You will have gotten a tax file number when you started working. If you’re unsure, check with your employer and they should be able to give it to you.
Note: If you are working under contract as your own business, as a sole trader or as a freelancer, you’ll also need your ABN (Australian Business Number).
- Your PAYG Summary. This is often sent straight to the ATO from your employer and/or sent to you at the end of the financial year.
- Receipts, invoices and evidence of deductions you want to claim as tax offsets.
- Photo ID. If you’re getting your tax return lodged by a tax agent, you’ll need to show them some photo ID such as a passport or driving license.
#3 What is the Medicare Levy and do I need to pay it?
The Medicare Levy helps the Government to fund some of the costs of the public healthcare system – Medicare.
As an international student, you do not have to pay the Medicare Levy as you are not entitled to Medicare benefits in Australia. In order to guarantee this exemption, you will have to apply for a Medicare Entitlement Statement here. This will tell you information such as the period you were ineligible for Medicare.
#4 How do I lodge my Tax Return?
There are three main ways you can lodge your tax return:
- You can file your tax return yourself online via myTax on the ATO website. For this you will need a myGov account. It is possible to lodge your tax return via a paper form, however it is likely that if you’re eligible for a refund, you’ll receive it much more quickly by completing your return online.
- You can get aid from the Tax Help Program. A free service provided and run by the ATO where trained volunteers help you make your lodgement over the phone, online or face-to-face.
- You can use a registered tax agent to help you lodge your tax return. Luckily, you’re then able to claim the fee you pay as a tax offset. Bonus!
It’s completely up to you as to whether you file your tax return by yourself online or get help. Often some tax cases are more simple than others so are easy to do by yourself. And sometimes complications mean it is easier to let the professionals give you a hand.
#5 How are taxes calculated in Australia?
In order to calculate your tax, the Australian government has tax brackets for each level of taxable income for residents. The tax rates for foreign residents are different and can be found here.
Your tax is calculated per pay period. For example, if you’re being paid every fortnight, the tax free amount is $18,200 divided by 26 (the number of times a year you’re getting paid) i.e. $700. If you earn less than $700 in a fortnight, you do not need to pay tax in that fortnight. If you pick up an extra shift and earn $850, you’ll be taxed for that particular pay.
#6 How long does it take to get my refund?
How long is a piece of string?
If you file your tax return online, you should receive your refund much quicker. The ATO advises that most tax refunds are issued within 50 days of lodgement, but can be in your account as quickly as 2 weeks.
#7 How do I lodge my tax return if I have left Australia?
If you’re an international student who, for example, worked until February and then returned to your home country, you can lodge your tax return before the financial year ends. However you can only do this via a paper return, which can take some time to process.
Alternatively you can lodge your tax return online via myTax after the financial year ends at the end of June.
#8 What happens if I don’t lodge my tax return?
Whether it’s a case of not lodging your tax return on time, or even not lodging it at all, you can face penalties – even if you don’t have any tax payable. It may also have an impact on your future via applications, so we advise against leaving your tax return to the last minute.
Make a reminder for the end of June and get it out of the way as soon as possible. That way it’s likely you’ll also get a bit of money back which is always a nice bonus!
We hope this makes lodging your tax return as an international student in Australia a breeze! Just remember – get it done early, try to lodge online and contact your university or the ATO for any guidance you may need.