The ultimate guide to tax returns for international students in Australia
“Nothing is certain except Death and Taxes”.
While we can’t give you a guide about the first one, we can certainly give some information regarding taxes and tax returns for international students in Australia.
It’s that time of the year again when we all have to worry about our taxes and doing your tax return is never a fun thing. So we have compiled a list of very frequently asked questions about tax returns for international students in Australia.
Here is everything you need to know about tax returns for international students in Australia:
🧑🎓 Are international students considered as foreign or Australian resident for tax purposes?
It’s important to understand the international students who are studying for 6 months or more in Australia are considered as an Australian resident for tax purposes.
It means you are paying the same amount of taxes as local Australians. Also, you get benefits of claiming tax -free thresholds, tax offsets and lower tax rates.
Luckily, international students are not considered as foreign resident because foreign residents usually get taxed at much higher rates.
However, if you are studying for less than 6 months, then your income will be taxed as a foreign resident.
🤑 Do I need to report my income from my home country?
As an international student in Australia, you are regarded as a temporary resident, so you don’t need to report most of your income you earn overseas and you will not be taxed on it.
You will only need to report any income you earn in Australia plus any income you earn from employment performed overseas for short periods while you are a temporary resident of Australia.
💻 Do I need to lodge a tax return?
There are 3 most common scenarios for answering this question:
1️⃣ You must lodge a tax return if you have worked a part-time job in Australia and you have earned more than the tax-free threshold ($18,200) during the financial year.
2️⃣ If you haven’t earned more than the tax-free threshold but paid some taxes, then you should lodge a tax return for getting a refund for the taxes paid.
3️⃣ If you haven’t earned more than the tax-free threshold and you didn’t pay any taxes, you may not need to lodge a tax return but you may still need to advise ATO (Australian Taxation Office) about the non-lodgment.
It is done to let ATO that you don’t need to lodge the tax return for this year. You will need to complete non-lodgment advice which can be done online through a myGov account.
You can also check a tool on ATO’s website for finding out if you need to lodge a tax return or not.
📅 When do I need to lodge my taxes in Australia?
Australian financial year runs from 1st July to 30th June.
If you are doing your own tax return, you will need to complete and lodge it any time between 1st July to 31st October.
However, registered tax agents have a special lodgment program and can lodge the tax return even after the 31st October deadline as well.
📃 What do I need to file my tax return?
In order to lodge your tax return to Australia as an international student, you will need few things:
✅ TFN – The first you need is your Tax File Number
✅ ABN – If you worked as a contractor, then you need an Australian Business Number.
✅ PAYG – If you worked as an employee, then you will need a payment summary also known as PAYG summary. You usually get them at the end financial year from your employer.
✅ Invoices – If you worked as a contractor, you will need to keep your invoices.
✅ Receipts, Invoices – You’ll also need to keep the receipts for the tax-deductible expenses.
✅ Photo ID – If you’re getting taxes done from an accountant, you will also need to bring some sort of an ID like your passport or your driving license.
💵 What types of income are included in my tax return?
It is important that you report any taxable income that you earn during the financial year in your tax return. Some of the common type of income that international students report might include (but not limited to):
👉 Wages and salaries from part-time jobs
👉 Income earned as a contractor
👉 Business income
👉 Bonus or commission earned
👉 Government payments/ allowances
👉 Non-government scholarships, grants or awards
👉 Bank Interest
👉 Other investment incomes like shares, cryptocurrencies etc
🧾 What type of expenses can I claim as a deduction?
You can claim your work-related expenses as a deduction in your tax return. Here are some examples of expenses that you might be able to claim in your taxes (but not limited to):
👉 Uniform and laundry expenses
👉 Travel between the jobs (not including commute from home)
👉 Work-related phone and internet expenses
👉 Home office expenses
👉 Cost of managing tax affairs ( eg. tax accountant fee)
👉 Union fees
👉 Charitable donations
It is very important that you keep records like receipts, invoices etc. of all the expenses you make during the year. If you don’t keep the appropriate records to substantiate your claims, then you can face penalties if you get audited by the taxation office.
🩺 Do I need to pay a Medicare levy?
Medicare levy helps fund some of the costs of Australia’s public health system known as Medicare. The Medicare levy is 2% of your taxable income, in addition to the tax you pay on your taxable income
As an international student, you don’t need to pay a Medicare levy as you are not entitled to Medicare benefits in Australia.
To get an exemption from paying Medicare levy, you will need to apply for a Medicare Entitlement Statement from Services Australia here. This statement will tell you the period you were ineligible for Medicare.
It can take a few weeks to get this statement so we suggest you apply for this nice and early.
🤷♀️ How to lodge my tax return?
You can file the tax return at the end of the financial year. Usually, your employer will provide you with a payment summary (PAYG summary) that will summarise all the income you have earned during the year and tax deducted from your salary.
You will use this document to lodge your taxes. Sometimes, this information is also pre-filled in myTax already.
Once you lodge the tax return, ATO will verify the details, process your return and send you back a notice of assessment and your tax refund if you are eligible for that.
There are various methods of lodging your tax return:
1️⃣ You can do it yourself online by using myTax (you will need myGov account for this).
2️⃣ You can also do a paper-based tax return as well. It’s especially useful when you are doing an early lodgment if you are planning to leave the country.
3️⃣ You can use Tax Help Program, a free service run by ATO-trained volunteers to help you lodge your taxes using myTax.
️️You can also use the services of a registered tax agent who can assist you in preparing and lodging your tax return. It’s very important to make sure that your agent is a registered tax agent.
Check the step-by-step guide on how to lodge your taxes as an international student below:
🤔 How the taxes are calculated?
It is important for you to understand how the tax is calculated on your income.
Here is a very simple formula that shows how the taxes are calculated in Australia:
If your taxable income is below $18,200 (tax-free threshold) then you may get 100% of your taxes back.
If your taxable income is more than $18,200 (tax-free threshold) then you may be taxed for income above that threshold.
Here is a table for tax brackets in Australia for the year 2021-22:
You can get more information from the ATO’s resources in various languages here.
⏳ How long will it take to process my tax return?
Usually, ATO is very quick with the turnaround of your tax return.
If you have lodged your tax return online, then it can take only up to 12 working days for getting the results of your tax return lodgment.
Although, for paper-based tax returns, it can take around 10 weeks.
Please keep in mind, if ATO has some suspicion for the tax return lodged, it may take even few months to process it.
🛑 What happens if I don’t lodge my tax return?
If you have earned taxable income and you don’t lodge the tax return in time, then you can potentially face penalties and it can also have an impact on your future visa applications.
ATO can even apply penalties even where there is no tax payable. So we highly recommend you to lodge your taxes in time.
😀 Will I get all my taxes back?
Now there is a bit of misconception about this question in the international student community.
Many international students usually earn than less than the tax-free threshold ($18,200) so they usually get all the taxes back during the year.
But, if your taxable income is more than the tax-free threshold ($18,200) in a year, you may not get all your tax back as you may need to pay some taxes based on the income you have earned.
In Australia, we pay taxes based on our progressive income tax system, so basically the more money you earn, the more taxes you need to pay.
ℹ️ Where can I get more help?
If you need further information regarding taxes or tax return, then you should check ATO (Australian Taxation Office) website.
If you like to have a quick summary for this information, then you might this infographic useful.
Also, to know more about taxes and superannuation, check our guide for that here.
We hope this guide about tax return for international students in Australia helps you in claiming your tax refunds back. All the best with your taxes.