studying and working in australia, and tax (a basic tax guide for international students)

Studying and Working in Australia,and tax

(A basic Tax Guide for International students)

Objectives

What are my Options?

Where do I start from?

Do I need a Tax File Number?Am I Resident for Tax purposes?Employment

Search

Australian Tax

How do I file my Tax?Tax brackets & PAYG Withholding

How Tax Payable is calculated?Assessable IncomeGeneral DeductionsSpecific Deductions

Tax OffsetsMedicare Levy

Medicare Levy SurchargeWork out your Individual Situation (exercise)

ADVISED TO BE DONE AS WE GO ALONG THE PRESENTATION

Types of Employment or Business & what’s best for me?

Full time(38 hours/ wk. and over)

Part timeGuaranteed hours of work every

wk.Up to 38 hours as per contract

Casual work(No minimal guaranteed

hours/ wk.)

Domestic students International students

No restrictions Subject to visa conditions(usually 40 hr/ fortnight)

Check conditions on www.vevo.gov.au

There are many business structures prevalent in Australia

Sole Trader*

Partnership

Company

Trust


Employment Business

Where Do I Start From?

Domestic Students International Students

Resident for Tax purposes?(Note: This is different from Permanent Residency)

Income only having a source in Australia is assessable unless it is exempt

(No Tax threshold; 32.5% on income < $80,000)

Rates Act Schedule 7 Part II

All income having a source in or out of Australia is assessable unless it is exempt

From 1 July 2006, NO Tax is payable on most foreign income if Tax Payer satisfies the requirements of being a temporary resident.

• you hold a temporary visa granted under the Migration Act 1958

• you are not an Australian resident within the meaning of the Social Security Act 1991

• your spouse (if applicable) is not an Australian resident within the meaning of the Social Security Act 1991.

Intention to have employment or business?

YESApply for Tax File Number (TFN)

www.ato.gov.au

Sole Trader needs Australian Business Number (ABN) - www.ato.gov.au

Business may need additional registrations e.g.:

Goods & Services Tax (GST)PAYG Withholding

Fringe Benefit Tax (FBT)

YES NO

DETERMINING RESIDENCY

Are you migrating & settling in Australia?

Resident for Tax Purposes

Are you Australian returning to live in Australia?YES NO

Have you stayed or intend to stay over 6 months?YES

Main purpose of being in Australia?

Full time Education

6 months or more at a particular place? NO Have you been in Australia (in total) 183 days in the income year?YES

https://www.ato.gov.au/calculators-and-tools/are-you-a-resident/are-you-a-resident-tool.aspx?anchor=AreYouAResident#AreYouAResident/questionsCalculate if you are a Resident

YES NO

Finding Employment

CV/Resume + Cover Letter

What you need

Where & How to Find a Job

Your employer MUST make superannuation contribution for you @ 9.5% of wages/salary

Career websites: e.g. www.seek.com.au, www.indeed.com.au, www.gumtree.com.au

Campus Job Boards

Walk-in

Networking forum

Volunteering/ Internship (not considered as Employment)

When you get placed, provide your employer with TFN, ABN (if applicable) and Copy of any other document as may be required (e.g. Visa, Passport etc.)

(Your savings for post retirement period; may also be available at time of leaving Australia permanently)

http://www.seek.com.au/

http://www.indeed.com.au/

http://www.gumtree.com.au/

Revisiting Objectives…




Search

Australian Tax

How do I file my Tax?Tax brackets & PAYG

WithholdingHow Tax Payable is calculated?Assessable IncomeGeneral DeductionsSpecific Deductions



How are we going?


Employed?

Income

Sole Traders

Profit

Company/ Trusts/

Partnership

If you are Running a Business, it is important that you record all

Income & Expenses

And keep copies of all receipts, either physically or electronically

+ [email protected]%

Nominated Superannuation Fund

Tax to the ATO

If you are registered for GST, you will have to lodge Business Activity Statements (BAS) every quarter

AUSTRALIAN TAXFinancial year: 1 July – 30 June

How Do I file Tax?

Registered Tax Agent: 9300 3040

File your own on e-taxwww.ato.gov.au

(Last date: 31st October)

Depending on quantum of activities, Financial Statements may not be required

http://www.ato.gov.au/

Tax Brackets & PAYG Withholding

0 – $18,200 Nil

$18,201 – $37,000 19c for each $1 over $18,200

$37,001 – $80,000 $3,572 plus 32.5c for each $1 over $37,000

$80,001 – $180,000 $17,547 plus 37c for each $1 over $80,000

$180,001 and over $54,547 plus 45c for each $1 over $180,000

e.g. Mr X gets paid wages $ 1,500 per week

Assuming that the annual pay will be $ 1500 x 52 = $ 78,000

How much should he have as tax?

Tax liability (without deductions) $ 3,572 + 32.5% of (78000 – 37000) = $ 16,897

If this tax liability is to be paid equally over 52 weeks, then PAYGW will be calculated at $ 324.94 p/wk

Thus, Mr X’s weekly take home wage = $ (1,500 – 324.94) = $ 1,175.06

At the end of Financial year, when Mr X does his tax, assume he claims $ 5,000 deduction (work-related). Then, his taxable income becomes $73,000, which

means tax liability becomes lower than what has been withheld.

This will result in Tax Refund.

Pay As You Go WithholdingsAn amount withheld by your employer from your pay to deposit to the ATO on your behalf, so that the Tax burden on you at the end of the year is less

P.S. These figures are only indicative & for educational understanding

s4-15(1) Taxable Income = Assessable Income - Deductions

s4-10 (3) Income Tax = (Taxable Income x Rate) - Offset

How Tax Payable is calculated ?

E.g. (Indicative)Taxable Income $45,000 0 – $18,200 Nil

$18,201 – $37,000 19c for each $1 over $18,200




Calculation of Tax Payable $ 6,172(3572 +32.5% (45000-37000)

Less: Tax Offsets (assumed ‘Nil’*) NIL

$ 6,172Add: Medicare Levy ($45,000 x 2%) $ 900

TOTAL TAX PAYABLE $ 7,072

Tax Offset is covered later in the presentation

Medicare Levy has been considered here assuming the Tax Payer has access to Medicare facility. It is covered later in the presentationLess: PAYG Withholding $ xxx

Refund/ Payable

Revisiting Objectives…




Search

Australian Tax

How do I file my Tax?Tax brackets & PAYG

WithholdingHow Tax Payable is calculated?Assessable IncomeGeneral DeductionsSpecific Deductions



How are we getting along?


Characteristics:

Convertibility into money or money’s worthNatural incident of business activities

Regular, recurrent and periodic receipts

Non Cash Business Benefits (as if convertible into cash; exempt up to $300)

Trading Stock

Net Capital Gain

Balancing Adjustment

Asset must be disposed of or its use restricted

Windfall Gain is not assessable incomeCompensation payments, depending on character of loss will be treatedExempt Income (e.g. Bursaries and other educational allowances)


Assessable Income

Ordinary Income Statutory Income

e.g. Salary/ Wages, Bank Interest, business profit


General Deductions

s.8-1 (1) allows deduction for any loss/ outgoing:• Incurred in producing assessable income or• Incurred in carrying on a business producing

assessable income

s.8-1 (2) denies deduction for any loss/ outgoing:• Of capital or of a capital nature• Of private or domestic nature• Incurred in producing exempt income• Not deductible under a provision of the ITAA

Expenses incurred in gaining a qualification prior to obtaining work in that area are not deductible and must be related to a current income earning activity

E.g.- University/ Course/ Convention fees (but not HECS contribution/ HELP)- Subscription to journals, Text books & equipment

- Education related travel expenses- Typing, Stationery, Photocopy costs

General section u/s 8-1 Specific Section u/s 8-5

Home office as place of business (proportionate) if being used

Home studies in the course of performing work (only direct costs can be claimed)

Clothing expenses (Protective/ Non-compulsory corporate/ Compulsory corporate/ Occupation specific uniforms)

Self education incurred for or in connection with prescribed course of education – s (36) 82A excludes first $250 (substantiation needed)

General Deductions continued…Substantiation Rules (Evidence)

Work expenses to be deducted generally require evidence

Substantiation NOT Reqd. if Laundry expense < $150 or Total work expenses < $300

If total work expenses > $300, all need substantiation

If total work expenses > $300, where Laundry < $150, only the balance amount needs to be substantiated

Car Expenses

Not available unless a provision, such as s. 8-1 allows a deduction for the expenseApplies to Individuals only

Methods of Calculation s.28-15 allows Tax Payer to choose from among these four methods

12% of Original Value

Business kms > 5000Substantiation NOT Required

1/3 of Total Expenses

Business kms > 5000Substantiation Required

Log Book

Amount of each car x Business use %ageSubstantiation Required

Cents per Km

Maximum 5000 kmsSubstantiation NOT Required

Road vehicle to carry load of less than 1 tonne or fewer than 9 passengers

Engine capacity Rotary engine Cents/ km

1.6 lt or less 0.8 lt or less 65

1.601 lt- 2.6 lt 0.801 lt – 1.3 lt 76

2.601 lt and more 1.301 and more 77


Specific Deductions

General section u/s 8-1 Specific Section u/s 8-5

Div 25

• Tax Related expenses : For managing Tax Affairs/ ATO disputes etc. • Professional/ Trade/ Business Membership

• Repairs (Non-capital nature) of Plant/ premises to produce assessable income *

• Borrowing Expenses/ Cost of Discharge/ Loss to Business by theft *

• Cost to contest/ be elected for Membership to Parliament (Federal, State or Territory) or Local Government *

*Primarily Business related. Please seek professional advice

Div 30: Donation Value of gift > $2; Must be made to a DGR registered organization

s.290-60: Contribution to eligible Super fund for employees

Tax Losses (97) Division 36 (from previous year)

Tax Offsetss4-15(1) Taxable Income = Assessable Income - Deductions


Low Income Rebate s. 159N – Maximum Rebate of $445 (Calculated by ATO, depending on your taxable income)

Dependent Rebate s.159J – Not available to those receiving certain family benefits or spouse born on or after 1st July 1952; generally applicable only in case of invalid relative/ parent or parent-in-law

Zone Rebate s79A – Available to tax payer who has been physically present in a specified zone > 183 days

Medical Expenses Rebate s159P – Available for unreimbursed medical expenses (UME). Applied @ 20% of UME above threshold of $2,162 (2014/15). Subject to ‘means test’ i.e $88,000 for singles, $176,000 for couples

Private Heath Insurance Offset : Subject to ‘means test’ based on Income levels and age brackets

Other Offsets may include Senior & Pensioners Tax Offset



Revisiting How Tax Payable is calculated ?

Ordinary Income + Statutory Income = xxx

0 – $18,200 Nil

$18,201 – $37,000 19c for each $1 over $18,200




Less: Tax Offsets = xxx

Less: General Deductions + Specific Deduction = xxx

Taxable Income

Multiply by: Relevant rate = xxx

xxx

Add: Medicare Levy = xxx

TOTAL TAX PAYABLE?

Medicare Levy

Normally calculated @ 2% of Taxable Income, subject to reduction for low income earners:

However, No Medicare Levy is applicable if Tax Payer is under the Threshold

• Threshold for Singles : $ 20,542• Threshold for Families : $ 34,367 plus $ 3,156 for each dependent child

Medicare Levy Exemption is also available if:• You were a blind person

• You received sickness allowance from Centrelink

• You were entitled to free medical treatment extended by Government

• You were Foreign resident/ Norfolk Island resident

• You were Temporary Resident without dependents/ with dependents all of who were in exemption category

To claim this exemption, Tax Payer has to Medicare Exemption Certificate, which can applied for at Centrelink

Medicare Levy Surcharge

MLS is designed to reduce the demand on the public Medicare system.

Tax Payer is required to pay MLS if he/ she is above the threshold and does not have adequate Private Health Cover

• Threshold for Singles : $ 90,000• Threshold for Families : $ 180,000

However, Medicare Levy Surcharge is not applicable:

• Family income > $ 180,000 but own income =/< $ 20,896• If you are Exempt from Medicare Levy

Adequate Private Health :Singles: Cover must have an excess of $500 or less.

Couples or families must have an excess of $1,000 or less.

Objectives Achieved?




Search

Australian Tax

How do I file my Tax?Tax brackets & PAYG Withholding

How Tax Payable is calculated?Assessable IncomeGeneral DeductionsSpecific Deductions



Hope you liked doing this!


Thank you

Fortuna Accountants & Business AdvisorsP: 9300 3040

E: [email protected]: www.fortunaadvisors.com.au

mailto:[email protected]

studying and working in australia, and tax (a basic tax guide for international students)

Documents

tax purposesare

tax payer

tax threshold

tax file number

basic tax guide

goods services tax gstpayg

fringe benefit tax fbtyesno

australian resident