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Last Updated on November 14, 2023 by Ozlinks Education
Most international students are unaware of how the Australian tax system operates. Australia has a progressive tax system, which means that the more money you make, the more tax you have to pay. You can earn up to $18,200 in a financial year without paying taxes. This is referred to as the tax-free threshold, after which tax rates apply. Those with low-wage occupations, as well as those working part-time, pay more than the law demands. By filing a tax return, you ensure that you receive the tax refund that you are entitled to. Here’s what international students should know.
What does it mean to be a temporary resident?
If you are an international student studying in Australia for 6 months or more on a temporary student visa, you may be regarded as a temporary resident for individual tax purposes. In general, if you are a temporary resident, which means you are an Australian resident for individual tax purposes, you need to declare all income you’ve earned both in Australia and overseas on your Australian tax return. This means you pay tax on your earnings at the same rate as other residents.
What does it mean to be a foreign resident?
If the total length of your registered course is shorter than six months and you intend to leave Australia after it is finished, then you will most likely be considered a foreign resident of Australia for the purposes of Australian tax purposes. You will still be required to submit a tax return stating any Australian income you made while you were in Australia, but you will no longer be eligible for the tax-free threshold. As a foreign resident, you will be subject to the higher tax rates that apply to non-residents.
What is the meaning of tax withholding?
In Australia, tax withholding refers to the money that an employer deducts from an employee’s gross salary and pays directly to the Australian Taxation Office (ATO). This is known as PAYG withholding, and it aims to keep employees from owing a big amount of tax at the end of the financial year.
What is a Medicare Levy?
The Medicare levy is an additional sum that must be paid in addition to the tax you pay on your taxable income. The Medicare levy contributes to the funding of some of the costs of Medicare, which is Australia’s public health system. The Medicare levy is 2% of your taxable income.
Is an overseas student required to pay for Medicare levy?
In addition to the tax, you pay on your taxable income, the Medicare levy is 2% of your taxable income. You are not required to pay a Medicare levy as an international student since you are not eligible for Medicare benefits in Australia.
If you’re eligible, you can claim an exemption when you lodge a tax return at the end of the financial year. You will need to apply for a Medicare Entitlement Statement from Services Australia (servicesaustralia.gov.au). Check with your charter accountant to learn more about the Medicare levy.
What is the tax-free threshold?
As an international student who is eligible to be an Australian resident for tax purposes for the entirety of a calendar year, you are exempt from paying tax on the first $18,200 of your taxable income. This is what is known as the tax-free threshold.
About tax rates for Australian residents
The following table is for Australian residents to use when calculating their individual tax liability.
Resident tax rates 2023–24 |
|
|
Taxable income |
Tax on this income |
|
0 – $18,200 |
Nil |
|
$18,201 – $45,000 |
19c for each $1 over $18,200 |
|
$45,001 – $120,000 |
$5,092 plus 32.5c for each $1 over $45,000 |
|
$120,001 – $180,000 |
$29,467 plus 37c for each $1 over $120,000 |
|
$180,001 and over |
$51,667 plus 45c for each $1 over $180,000 |
The above rates do not include the Medicare levy of 2%.
Does an international student need to lodge a tax return?
An international student who qualifies as an Australian resident for tax purposes and whose yearly income is more than $18,200 is obligated by law to lodge a tax return. Your tax return covers the income year from 1 July to 30 June. If you need to lodge a tax return, you must do so by October 31.
When you lodge a tax return, you include your gross income and any expenses you can claim as a deduction. Your accountant can assist you in determining the costs you can claim as income tax deductions and calculating the amount you can claim.
Do I need to lodge a tax return if my income under $18,200?
An international student who qualifies as an Australian resident for tax purposes. If your total income less than the tax-free threshold $18,200 and pay tax of $1 or more, you can claim a refund. Lodging a tax return allows you to reclaim any taxes deducted from your salary throughout the year. The tax-free level of $18,200 indicates that you do not have to pay any tax on income up to that amount.
Are you looking for skill assessment assistance?
Ozlinks Education Career Services assists migrants and international students who need skills assessment for visa application purposes. Our proficiency in document verification assures that they fit the criteria for skills assessment. The key to attaining a positive skill assessment result is to select an ANZSCO occupation that is relevant for your degrees and work experience. If you require assistance with your skills assessment application, contact Ozlinks Education.
Disclaimer:
Although every effort has been made to provide complete and accurate information. While every effort is made to keep all information up to date, some recent changes might not yet be reflected in this section. We assume no liability or responsibility for any errors or omissions in the information contained in this blog.
Information under this section is published in accordance with a Creative Commons Attribution 2.5 Australia licence guideline, and the original source can be accessed on the ato.gov.au website.
