It’s the end of the Australian financial year and if you are currently working in Australia, you know what this means: It’s time to do your tax return.
And if you are currently not in Australia, this is probably not the first topic that comes to mind when you are thinking about coming here. However, if you intend to work here, unfortunately, this is something you will have to deal with.
But don’t worry, we got you! This guide takes you step-by-step through all the essentials, so that you have more time to spend on the things that are more fun.
Residency
In order to know how much you will be taxed, you first need to figure out your residency status. You are either considered non-resident or resident for tax purposes depending on your visa status.
This means you can be considered a resident for tax purposes even if you are not an Australian resident.
If you are on a working holiday visa (417 or 462), you are considered non-resident.
If you are on a student visa (500), your residency status depends on the length of your stay. If you are staying in Australia for more than 6 months, you are considered a resident for tax purposes. If you are staying less than 6 months, you are considered non-resident.
Take this test to find out your residency.
Tax File Number
You need to provide your employer with a Tax File Number (TFN). Otherwise, you will be taxed at 45%.
Apply for a TFN only on the official Australian Tax Office (ATO) website for free. Some other websites offer to do the application for you for a fee. Don’t use these services because they are expensive and you can easily do it yourself. You just need a valid passport and an Australian address, as it will be sent to you per mail. The TFN will be sent to you within 28 days. You will keep the same TFN for your whole life.
Starting Work
Registered employer
If you are on a working holiday visa (417 or 462), make sure that you only work with an employer who is registered for working holiday makers, otherwise you will be taxed at a much higher rate. If your employer is not registered yet, you can advise him to register here.
TFN Declaration
When you start a new job, you need to provide your employer with your TFN within 28 days, otherwise you will be taxed at 45%. So, make sure you apply for your TFN as soon as possible. Your employer needs to give you a TFN declaration that you fill out and give back to him.
Tax-free threshold
If you are considered resident for tax purposes, you are eligible to apply for a tax-free threshold. This means that you don’t pay taxes for the first $18,200 of your yearly income. However, if you are considered non-resident, you are not eligible for the tax-free threshold.
This means that working holiday makers (417 or 462) are not eligible.
If you are on a student visa (500) staying longer than 6 months, you are eligible. But if you are on a student visa (500) staying less than 6 months, you are not eligible.
If you have multiple jobs, you can only apply for the tax-free threshold at one employer. You can apply for it on the tax declaration that you are given by your employer.
Medicare Levy
Australian residents as well as residents for tax purposes from the following countries:
UK, Northern Ireland, Italy, Malta, Sweden, Netherlands, Finland, Norway, Belgium, Slovenia
pay a Medicare Levy at 2% from their taxable income on top of taxes in order to access healthcare. However, if you are considered non-resident (even if you come from a country listed above), or you are a resident for tax purposes from another country than listed above, you do not have to pay the levy. If it still gets deducted from your salary, you can apply for an exemption letter when you do your tax return.
Here you can find a list of all exemption categories.
Tax Rates
The tax rate for working holiday makers is 15% on all earnings up to $45,000. They are not eligible for a tax-free threshold.
| Taxable income | Tax on this income |
|---|---|
| 0 – $45,000 | 15% |
| $45,001 – $120,000 | $6,750 plus 32.5 cents for each $1 over $45,000 |
| $120,001 – $180,000 | $31,125 plus 37 cents for each $1 over $120,000 |
| $180,001 and over | $31,125 plus 37 cents for each $1 over $120,000 |
The tax rate for other non-residents, including visitors on a student visa (500) who stay less than 6 months, is 32.5% on all earnings up to $120,000. They are not eligible for a tax-free threshold.
| Taxable income | Tax on this income |
|---|---|
| 0 – $120,000 | 32.5% |
| $120,001 – $180,000 | $39,000 plus 37 cents for each $1 over $120,000 |
| $180,001 and over | $61,200 plus 45 cents for each $1 over $180,000 |
The tax rate for residents for tax purposes includes visitors on a student visa (500) who stay more than 6 months. They are eligible for a tax-free threshold.
| Taxable income | Tax on this income |
|---|---|
| 0 – $18,200 | Nil (tax-free threshold) |
| $18,201 – $45,000 | 19 cents for each $1 over $18,200 |
| $45,001 – $120,000 | $5,092 plus 32.5 cents for each $1 over $45,000 |
| $120,001 – $180,000 | $29,467 plus 37 cents for each $1 over $120,000 |
| $180,001 and over | $51,667 plus 45 cents for each $1 over $180,000 |
You can also find these tables on the official ATO website.
Lodge a Tax Return
The period of the Australian income year runs from the 1st July to the 30th June. The deadline to lodge a tax return is the 31st October. If you leave Australia permanently before the 30th June, you can lodge your tax return early.
If you are a working holiday maker, you do not have to lodge a tax return if you earned less than $45,000 in the income year, but it is recommended if Medicare Levy has been deducted from your salary or if you want to claim deductions in order to get a refund.
Deductions
When you complete your tax return, you can claim some work-related expenses, for example working clothes or travel expenses to get a tax refund. In order to claim these expenses, you must have spent your own money and have not been reimbursed for it. You also need to have proof for these expenses, for example an invoice or receipt.
The most common expenses that you can claim as deductions are:
- Car usage:
- If you are using your car to travel from your normal workplace to an alternative workplace, conference or meeting.
- If you have to carry bulky equipment that you need for work and can’t leave it at your workplace.
- If you have to collect supplies or deliver items.
- Travel expenses:
- If in the course of your work, you have to travel and stay overnight away from your home.
- These expenses include costs for accommodation, meals and transport.
- Work clothing:
- If it is protective or a compulsory uniform that is unique to your occupation.
- You can’t claim the costs for clothes that are not specific to an employer, like a business suit or white shirt.
- You can also claim laundry expenses.
You can find a detailed list of all expenses that you can claim here.
Hopefully you have a clearer understanding about this topic now and are ready to either start working in Australia or file your tax return, if you are already working here.
