“The hardest thing in the world to understand is the income tax.”
– Albert Einstein

Education systems all over the world cover all sorts of academic subjects and topics, however, many of them miss out on teaching children the most important life skills in the modern world, such as understanding and filling out your tax returns. As a result most young adults struggle at filling out their tax forms.

This is why most international students pay tax in Australia incorrectly, and fail to include important information which can grant them a fair amount of tax return. It is because of two reasons, namely most international students from all over the world do not have the basic understanding of how taxes work in their own country. The other is that most international students pay tax in Australia, have inadequate information regarding the various regulations set by the Australian Government.

This article provides you detailed information you need to fully understand how international students pay tax in Australia. We will cover everything from basic information like where you can fill out your tax returns and what kind of tax deductible income should you claim in order to maximise your tax returns.

You can find all the information present in this article on the official ATO website, but of course it’s quite a hassle to go through a plethora of the links present in the government website. You don’t have to worry about that because we have done the hard work for you and done extensive research in compiling this list for you.

first take in to consideration the time of the year when you have to file in your tax returns on all your taxable income. In Australia, the financial year starts from 1^st July and ends on 30^th June in the following year. It means you have to lodge in all of your taxable income you have earned during this time.  The government allows you a period of 4 months to recover all the information and file your taxes by 31^st October, which is the final deadline.

Now that you know when you need to lodge your taxes, the next requirement is to know where you have to pay. The Australian Taxation Office handles all affairs related to taxes for all individuals living in Australia. You can file your tax returns in two ways, either through filling the physical form at the various ATO offices or online through the official ATO website.

It is very important for international students to pay tax in Australia, that they have a clear understanding of their residency status. This is because the tax rates are different for national and international students, and not only that there are various sub categories which you must be familiar with in order to lodge your taxes accurately.

For international students who have been living in Australia for duration of more than 6 months, all their earnings are liable for tax purposes. Any foreign, individual who is studying a course in Australia that requires them to stay in the country for more than 6 month are categorised as ‘Australian residents for tax purposes’. This simply means that you will be required to pay a tax amount similar to that of Australian residents.

Whereas, students living in Australia for less than 6 months do not have this benefit and have to pay a higher amount of taxes. It is so as they are considered as foreign nationals and hence are required to pay a tax amount higher than those who are considered Australian residents for tax purposes.

 It is also important to know your residence status for tax purposes, as the Australian government has established a tax-free threshold of $18,200, which means if your earnings for the financial year are below this amount then you may be eligible for a tax refund.

Most students studying in Australia do not earn more than this amount, because they are only allowed to work for 20 hours per week, and it is highly unlikely that a student earns more than $18,200 with that little working hours. In order for international students to pay tax in Australia, it is important to fill in their correct residency status for tax purposes while getting a job with their employer. This is because they have a Pay As You Go framework, as per which, international students pay tax in Australia every time they get their pay cheque. This means it is the duty of their employers to deduct their taxable amount from their salaries or wages each time they get paid.

Now, as international students usually earn less than the tax free threshold during a financial year, therefore they are eligible for returns on their taxes. Provided they have no tax withheld.

One other point to be kept in mind is that, if you earn under the tax free threshold and have not paid taxes, you are still required to send a non-lodgement of tax to the ATO, to notify them that you are earning under the threshold. This allows being clear of any unnecessary dues and penalties. You are also required to provide full disclosure of any income that you derive during your stay in Australia, from employment in Australia as well as overseas.

Types of Taxable Income when international students pay tax Australia

Withholding your total income form the government can have serious legal consequences under the Tax laws. This is why all individuals staying in Australia must include all of their income from all sources while lodging their taxes. This includes:

• Any income you earn from your part-time or full-time employment.
• Any bonuses received during your employment, including tips.
• Any benefits you gain from being in a partnership in any form of business transactions.
• Any monetary gain from sale of assets, such as property, jewellery or any other commodity.
• Profits earned from being a sole proprietor or beneficiary of a business, or entrepreneurial venture.
• Interest received from banks
• The various Allowances such as Youth Allowance or Newstart Allowance are required to be reflected while lodging your taxes as well.

There is no doubt, that it hurts to see your hard earned money go to someone else, but it is your right to know where your tax money is being spent. This is why you must keep up with the news as it allows you to learn about the country of your residence, and also keeps you updated with the changing laws related to taxations and visa, which can come handy when international students pay tax in Australia.

How international students can pay less taxes in Australia

However, most international students are not fully aware of their liabilities and obligations and end up paying a lot more taxes than they are required to do. There are a lot of tax deductible income sources and expenses which must be taken into consideration when international students pay tax in Australia. Such deduction claims on your tax have to be supported with proof, but they can save you some amount on your taxes, these are:

1. You are liable to claim tax deductions on any form of union fees or work related subscriptions that you are a part of, or you are paying for out of your pocket. This amount must be filled in when you lodge your taxes, as it can offer you significant tax returns.
2. Any kind of travel related expense which you had to bear while travelling between job sites. Such as going to different construction project sites, or Ad-shoots or any other such work related travels.

This amount can be claimed as tax deductible when international students pay tax in Australia. Keep mind that this amount does not include the expenses while traveling to and from work place to your residence.

3. Expense made for any work related internet and mobile network services provider can also be included into your deductibles.

This expense is especially important to consider, since most of the people in Australia are required to work from home due to the spread of the corona virus.

4. If your office has been settled inside your home then the cost and expenses for all office supplies such as furniture, air conditioning, computers, lightings, peripherals etc. in your designated office space can be used for deductions in taxes.
5. In case your part –time or full-time job requires you to purchase and wear a uniforms or any sort of protective gear such as gum boots etc. Its expenses can be included in your deductibles as well.
6. You may also be entitled to tax returns on any donations you have made to charitable organisations and causes. So make sure to include that in your tax returns as well.
7. And lastly, you can claim tax returns on Australia’s public Medicare system. Medicare is the publicly funded healthcare benefits which is provided to all Australian citizens. Since you’re an international student studying in Australia, you will not have access to Medicare, except you will be entitled healthcare benefits from a different provider as your visa requirement. This means that you will not be liable to pay the tax amount which is deducted from Australian citizens for Medicare which is around 2% of their pay cheques.

You will have to get a Medicare entitlement certificate, which would imply you are not liable to pay taxes for Medicare and hence the sum shall be deducted from your total taxable amount.

Lodging your taxes can be a complicated and scary thing. This is why you need to take your time and make full disclosure of your taxable income and not make any false claims for your tax returns. You must save all receipts and invoices as proof of purchase and payment when you add anything as your tax deductibles. Making a false claim while lodging taxes can invite unnecessary penalties. This is why you must make sure that you have the evidence and proof to back up your claims when international students pay tax in Australia and have all the receipts to show for it.  

But saving receipts for all your transactions can be quite a tedious task which most of us can’t keep up with. Since the world is moving online and most of the transactions come with an online receipt, you can directly save the receipts on your mobile phone. There are various apps that allow you to just snap a photo of the receipts and keep it saved on your account.

Another app which you can use to make your tax lodgement process a lot more smooth and convenient is the myGov which has been created by the ATO. It has all the information you need regarding your taxes and helping filing your tax returns through easy online forms.

If in any case the whole process of lodging your taxes still seems too daunting to you or if you have a particularly varied nature of income or deductibles, then you can hire certified accountants and Tax agents who can help you in filling out your tax forms accurately. Make sure you only get your taxes calculated by a registered tax agent. An agent can accurately fill your forms and guide you in making informed decisions and incorporating all of your expenses on which you are entitled for a refund. These agents are quite familiar with the Australian tax laws and have years of experience in calculating and submitting taxes for clients with large portfolios. Most agents do charge a fee for helping international students pay tax in Australia.

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