Tax compliances before you earn your first salary in Australia
- Every Individuals working in Australia must have individual Tax File Number (TFN).
- If you start working as a contractor or in any form of business, you must register for Australian Business Number (ABN).
- International Student visa holder can work upto 40 hours per fortnight. If you are confused about your work rights, you can check it online at Visa Entitlement Verification Online (VEVO)
Are you Australian Resident for Tax Purpose??
As per the ATO, if an International Student is enrolled to study in Australia in a course that lasts for six months or more, he or she is regarded as Australian resident for the tax purpose and the tax obligations for the earnings, have to be fulfilled as the other residents.
Higher tax rates applies for non-residents such as working holiday visa holders.
Fiscal year
A fiscal year stands for the year as reckoned for taxing and accounting purpose and is also known as Financial Year. In Australia, financial year starts from 1st of July and ends on 30th of Jun following year.
For example – FY 2020 means Financial Year 2020 from 01 Jul 2019 to 30 Jun 2020.
Tax Return or Tax Refund
You will hear these words quite often from Jul till Sept every year. Because it’s the time when more than 50% of Australian residents lodge their annual tax return with ATO.
Tax Return consists of following sections occured in the given fiscal year.
- Your Annual Income from various sources
- Work related Deductions
- Tax Offset
- Medicare Levy
Income
This includes the amount earned by the individual from various sources (both TFN and ABN) within a year. It includes total salary income, contractor income and any other income earned during the fiscal year.
PAYG Withholding Amount
When you work as an employee using your TFN, your employers deduct certain amout of PAYG Tax amoutn from your income. This is compulsory deduction and is based on your income and work type. PAYG stands for Pay As You Go which means you pay your tax as earn your income during the year.
During the tax return, if you have paid more tax than your actual tax obligations, then you will get tax refund. Similarly, if you have paid less tax than your actual tax obligation, then you have additonal tax payable.
Deductions
There are various kinds of deductions which can minimize the tax liability of the students and few of them are enlisted below;
- Work Uniform: The amount up to $300 can be claimed without any receipts or proof of purchase.
- Transportation: The cost of travel between two workplace can also be claimed. If you are using your own car, the amount can be calculated using two methods which is effective from July,2015; Cents per kilo meter and log book method
- Mobile phone: You can claim a percentage of your mobile phone bill if you use your mobile for work related phone calls
- Union fees and agent cost: You are eligible to claim for the union fees if you are linked with the work related unions and organisation. Also the agent fees for the tax return can also be claimed if it has been done through the registered tax agents
- Self Study Education Cost: This is one of huge deduction that can be claimed if you are working on the same sector that is directly related to your study
Tax Offset
Tax Offsets are the additional tax benefits provided by the Australian government to Individuals and Businesses during tax return, that directly reduces the amount of tax payable on your taxable income, but they can’t get you refund.
As an international student, you might be eligible for Low Income Tax Offset (LITO) up to $445 if you income is below $37,000. In additional, you might be also eligible for Low and Middle Income Tax Offset (LMITO) up to $1,080 depending on your income.
Medicare Levy
International Students in Australia are not required to pay Medicare Levy, which is up to 2% of your annual income. However, as a student, you need to have Medicare Levy Exemption certificate from Department of Human Services in order get exempted from Medicare Levy charges. To get started with Medicare Exemption, please submit your details here or please call us at 02 8317 1281 or email us at [email protected].
Payment Summary or Group Certificate
Payment Summary or Group Certificate is the summary of income provided by your employer which contains your Annual Gross Income amount, PAYG Tax withheld amount and any other reportable income from that employers. If you have worked for multiple employers during fiscal year, you will get multiple payment summaries.
From FY 2021, it is less likely that you will receive payment summary from your employer as many of them have started following STP system and hence your payment summary is directly available in your myGov account.
How we can help?
Precent Tax & Accounting Services is registered Tax Agent Agent in Australia with Agent number #26001935. This means, we have been certified by Australian Government to prepare and lodge individual or business tax compliances on behalf of our customer.
We have helped more than 3000 international students with their tax return and it’s growing every day. Our tax fees starts from only $50.
Just fill this form – https://precent.com.au/tax-return-form/ and we will get your tax done with deductions and tax offsets. If you would like to know about your refund estimate, please feel free to use our free tax calculator – https://precent.com.au/tax-calculator/.
If you need any help, we are also available on website chat, phone – 02 8317 1281 or email – [email protected].