Navigating the Australian tax system as an international student can be complex. This guide provides essential information to ensure you comply with tax regulations before you start earning, understand your residency status for tax purposes, and take advantage of deductions and offsets available to you. Whether you're working part-time or full-time, this guide will help you manage your tax obligations effectively.
Essential Tax Compliance Before Earning in Australia
Before you start earning in Australia, it’s crucial to understand your tax obligations:
Tax File Number (TFN): Every individual working in Australia must have a TFN.
Australian Business Number (ABN): If you are working as a contractor or in any form of business, you must register for an ABN.
Work Rights for Visa Holders: International student visa holders can work up to 40 hours per fortnight. To check your work rights, use the Visa Entitlement Verification Online (VEVO).
Are You an Australian Resident for Tax Purposes?
According to the Australian Taxation Office (ATO), if an international student is enrolled in a course that lasts for six months or more, they are considered an Australian resident for tax purposes. This status means that you are subject to the same tax obligations as other residents.
Note: Higher tax rates apply for non-residents, such as working holiday visa holders.
Understanding the Fiscal Year
In Australia, the financial year starts on 1st July and ends on 30th June the following year. For example, FY 2020 refers to the period from 1st July 2019 to 30th June 2020.
Tax Return and Tax Refund
From July to September each year, over 50% of Australian residents lodge their annual tax returns with the ATO. Your tax return includes:
Annual Income: Earnings from various sources (TFN and ABN).
Work-Related Deductions: Expenses related to your job.
Tax Offset: Government-provided benefits that reduce your taxable income.
Medicare Levy: Additional tax applied to fund the public healthcare system.
Income Details
Your income includes all earnings from employment and business activities throughout the fiscal year. This encompasses salary, contractor income, and other sources of revenue.
PAYG Withholding Amount
When you work using your TFN, your employer will deduct PAYG (Pay As You Go) tax from your income. This compulsory deduction is based on your income and work type. If you’ve paid more tax than required, you will receive a tax refund; if less, you will owe additional tax.
Deductions to Minimize Tax Liability
You can claim various deductions to reduce your tax liability, including:
Work Uniform: Up to $300 can be claimed without receipts.
Transportation: Costs of travel between workplaces, with specific methods for calculating car expenses.
Mobile Phone: A percentage of your bill if used for work calls.
Union Fees and Agent Costs: Fees for union membership and registered tax agent services.
Self-Education Expenses: If related to your current employment sector.
Tax Offsets
Tax offsets are additional benefits that directly reduce your tax payable. International students may be eligible for:
Low Income Tax Offset (LITO): Up to $445 for incomes below $37,000.
Low and Middle Income Tax Offset (LMITO): Up to $1,080, depending on income.
Medicare Levy
International students are generally exempt from the Medicare Levy, which is up to 2% of your annual income. To qualify, obtain a Medicare Entitlement Statement (MES) from your myGov account. Please read our article for more information about obtaining MES.
Payment Summary or Group Certificate
Your employer provides a summary of your income, PAYG tax withheld, and other reportable amounts. From FY 2021, payment summaries are available in your myGov account due to the STP system.
How We Can Help
Precent Tax & Accounting Services is a registered tax agent in Australia (#26001935), certified to prepare and lodge tax returns on behalf of individuals and businesses. We’ve assisted over 5,000+ international students with their tax returns.
Our Services Include:
Affordable Fees: Starting from $50.
Online Tax Return Form: Fill it here.
Free Tax Calculator: Estimate your refund here.
Contact Us:
Website Chat
Phone: 02 8317 1281
Email: hello@precent.com.au
For more information or assistance, please contact us or browse our website.
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