Basic australian tax guide for international students ppsx

Studying and Working in Australia,
and tax
(A basic Tax Guide for International students)


Objectives
What are my
Options?
Types of Employment or Business
& what’s best for me?
Australian Tax

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

Employment
Search

Where do I
start from?
Do I need a Tax File Number?
Am I Resident for Tax purposes?

How Tax Payable is calculated?
Assessable Income
General Deductions
Specific Deductions
Tax Offsets
Medicare Levy
Medicare Levy Surcharge
Work out your Individual Situation (exercise)

ADVISED TO BE DONE AS WE GO ALONG THE PRESENTATION


What are my Options?
Employment

Business
There are many business
structures prevalent in Australia

Full time

(38 hours/ wk. and over)

Part time

Guaranteed hours of work
every wk.
Up to 38 hours as per contract

Casual work

(No minimal guaranteed
hours/ wk.)

Sole Trader*
Partnership

Domestic students

No restrictions

International students

Company
Trust

Subject to visa conditions
(usually 40 hr/ fortnight)
Check conditions on www.vevo.gov.au


Where Do I Start From?
Intention to have employment or business?

Domestic Students

International Students

YES
Apply for Tax File Number (TFN)
www.ato.gov.au

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

Resident for Tax purposes?

(Note: This is different from Permanent Residency)

YES
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.

NO
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

Business may need additional registrations
e.g.:
Goods & Services Tax (GST)
PAYG Withholding
Fringe Benefit Tax (FBT)


DETERMINING RESIDENCY
Are you migrating & settling in Australia?
Resident for Tax
Purposes

YES
YES

NO
Are you Australian returning to live in Australia?

NO

Have you stayed or intend to stay over 6 months?

YES
Main purpose of being in Australia?
Full time Education

YES

6 months or more at a particular place?

NO

Have you been in Australia (in total) 183 days in the income year?

Calculate if you are a Resident
/>

Finding Employment
What you need
CV/Resume + Cover Letter

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

Where & How to Find a Job
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 employer MUST make superannuation contribution for you @ 9.5% of wages/salary


Revisiting Objectives…
What are my
Options?
Types of Employment or Business
& what’s best for me?
Australian Tax

How do I file my Tax?
Tax brackets & PAYG
How Tax Withholding
Payable is calculated?

Employment
Search

Where do I
start from?
Do I need a Tax File Number?
Am I Resident for Tax purposes?

Assessable Income
General Deductions
Specific Deductions
Tax Offsets
Medicare Levy
Medicare Levy Surcharge
Work out your Individual Situation (exercise)
How are we going?


AUSTRALIAN TAX
Financial year: 1 July – 30 June
Profit

Tax to the
ATO

Income + %
Nominated
Superannuation Fund

Employed?
Sole Traders
Depending on quantum of activities, Financial
Statements may not be required

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

How Do I file Tax?
Company/ Trusts/
Partnership

Registered Tax Agent:
9300 3040

File your own on e-tax
www.ato.gov.au
(Last date: 31st October)

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


Tax Brackets & PAYG Withholding
e.g. Mr X gets paid wages $ 1,500 per week
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

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
Pay As You Go Withholdings
An 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
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.

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

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


How Tax Payable is calculated ?
s4-15(1) Taxable Income = Assessable Income - Deductions
s4-10 (3) Income Tax = (Taxable Income x Rate) - Offset
E.g. (Indicative)

Taxable Income
Calculation of Tax Payable
(3572 +32.5% (45000-37000)

$45,000
$ 6,172

Less:
Tax Offsets (assumed ‘Nil’*)
Add:
Medicare Levy ($45,000 x 2%)

NIL

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

$ 6,172
$

TOTAL TAX PAYABLE

$ 7,072

Less: PAYG Withholding

$ xxx

900

Refund/ Payable

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 presentation


Revisiting Objectives…
What are my
Options?
Types of Employment or Business
& what’s best for me?
Australian Tax

How do I file my Tax?
Tax brackets & PAYG
How Tax Withholding
Payable is calculated?

Employment
Search

Where do I
start from?
Do I need a Tax File Number?
Am I Resident for Tax purposes?

Assessable Income
General Deductions
Specific Deductions
Tax Offsets
Medicare Levy
Medicare Levy Surcharge
Work out your Individual Situation (exercise)

How are we getting along?


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

Ordinary Income
Characteristics:
Convertibility into money or money’s worth
Natural incident of business activities
Regular, recurrent and periodic receipts
e.g. Salary/ Wages, Bank Interest, business profit

Statutory Income
Non Cash Business Benefits
(as if convertible into cash; exempt up to $300)
Trading Stock
Net Capital Gain
Balancing Adjustment

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

Asset must be disposed
of or its use restricted


General Deductions

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

General section u/s 8-1
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

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)

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


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

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

Engine capacity

Rotary engine

Cents/
km

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

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

Methods of Calculation

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

Cents per Km

12% of Original Value

Maximum 5000 kms
Substantiation NOT Required

Business kms > 5000
Substantiation NOT Required

1/3 of Total Expenses

Log Book

Amount of each car x Business use %age
Business kms > 5000
Substantiation Required
Substantiation Required


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

General section u/s 8-1

Specific Section u/s 8-5
Div 25

*Primarily Business related.
Please seek professional advice

•

Tax Related expenses

•

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 *

Div 30: Donation

: For managing Tax Affairs/ ATO disputes etc.

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 Offsets
s4-15(1) Taxable Income = Assessable Income - Deductions
s4-10 (3) Income Tax = (Taxable Income x Rate) - Offset
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 ?
s4-15(1) Taxable Income = Assessable Income - Deductions
s4-10 (3) Income Tax = (Taxable Income x Rate) - Offset

Ordinary Income

+ Statutory Income = xxx

Less:
General Deductions + Specific Deduction = xxx
Taxable Income
Multiply by: Relevant rate
Less: Tax Offsets

= xxx

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

= 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?
What are my
Options?
Types of Employment or Business
& what’s best for me?
Australian Tax

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

Employment
Search

Where do I
start from?
Do I need a Tax File Number?
Am I Resident for Tax purposes?

How Tax Payable is calculated?
Assessable Income
General Deductions
Specific Deductions
Tax Offsets
Medicare Levy
Medicare Levy Surcharge
Work out your Individual Situation (exercise)
Hope you liked doing this!


Thank you
Fortuna Accountants & Business Advisors
P: 9300 3040
E:
W: www.fortunaadvisors.com.au