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November 22, 2022

An International Student’s Guide to Tax Returns in Australia

If you are an international student in Australia and have been pursuing your educational course that lasts for six months or more, there is a probability that you will become a resident of Australia for tax purposes. This makes you liable to pay tax on your earned Australian income similar to that of the other residents of Australia.

The students are required to complete a tax return declaring their Australian income. They are entitled to the benefits of the Australian Tax System such as the tax-free threshold, tax offsets and lower tax rates than a foreign resident

The system for filing taxes and whether or not a student is entitled to file a claim on tax returns can get a bit confusing. In this post, we’ll take you through a common set of questions asked by students. Answering these questions might help you gain a better understanding while you study in Australia.

Is it necessary to lodge a return for international students in Australia?

If international students in Australia have earned an income of more than $18,200 in a year, then they will need to lodge a tax return at the end of the financial year.

In case their income is less than the specified amount in the past financial year and had no tax withheld, then the students may not need to lodge a tax return. However, if the students studying in Australia did earn below this threshold and still paid the tax, then they must lodge a return as it is plausible that they will be eligible for a refund of the tax paid.

What happens when an international student earns less than $18,200 in a year?

Not all international students will earn more than $18,200 per year. It depends on the work they’ve chosen, and their annual income decided from that job, factoring in the number of hours they’ve worked. 

If the circumstances of the students are such that they earned less than $18,200 and had no tax withheld, then they should present non-lodgement advice to the ATO. This notifies the ATO that the student won’t be lodging a tax return and ensures that he or she doesn’t get marked down as having an outstanding return, which might have carried penalties.

When should one lodge a tax return?

International students in Australia can lodge a personal tax return anytime from June 30. The deadline for lodging the return is October 31. However, the deadline is extended,

in some cases when the student has appointed a tax agent prior to this cut-off date.

Should international students pay taxes if they’re working while studying?

International students who are working while pursuing their studies are obligated to pay taxes. They will have to pay tax on the income they earn while in Australia. However, the majority of students are entitled to claim a refund on their taxes paid in that financial year.

Part-time working students have to pay, on average, 15.5% income tax on their earnings. The amount depends on specific circumstances, such as whether or not the student is classified as a resident or non-resident for tax purposes.

Ways to lodge a tax return for international students in Australia?

So, how do you lodge a tax return? Claiming a tax refund can take place in two ways, depending on what is more suitable to a student’s capacity.

Following are the are two ways to lodge a tax return:

  1. Directly lodging a tax return: Students can lodge the tax return directly with the Australian Taxation Office.  
  2. Lodging a tax return through a Registered Accountant: The students can lodge the return with the help of registered tax accountants.  

Seeking the help of an accountant is highly recommendable as they ensure the return is accurate and contains all the deductions the students are entitled to. Additionally, students can claim the cost of the accountant in the following year of the tax return. 

You can find more information about Individual Tax Return.

Should an international student declare Foreign Income?

If the students are living on a student visa, then they will be regarded as temporary residents by the ATO. This implies that they are not required to declare their foreign source income on their Australian tax return and will not be taxed on it. 

The students are required to declare the income that they derive in Australia. In addition to this, they must also declare any income that they earn from employment performed overseas for short periods when they are temporary residents of Australia.  

What about international students who are in Australia for less than six months?

Are students studying in Australia for a duration of less than six months expected to pay taxes? Yes, as they are not exempted from paying taxes. To further explain, students who are enrolled in courses that are less than six months and who want to leave the country upon completion of the course will be considered a non-resident for Australian Tax purposes. However, the students still need to lodge a tax return declaring any income they earned whilst in Australia, but they won’t be entitled to the tax-free threshold.

Therefore, international students in Australia will pay taxes at the higher rates that are applied to non-residents.

How to file a tax return in Australia?

In case the students wish to file the return on their own, they can go through the following steps:

  • Get a confirmation that you need to file an Australian tax return.
  • Determine your residency status, whether you are a permanent or temporary resident of Australia.
  • Know what income you need to declare; if you have a foreign source income, then you are not liable to pay the tax in Australia.
  • Keep the documents and information ready while you file a return. Here is a checklist of documents:
    • Tax File Number (TFN)
    • Passport
    • Payslips: make sure you have the final payslip from each job, as these are the most important documents. In case you are still working, you will receive a PAYG payment summary from the employer after June 30th. This has the details of the amount earned and the amount of tax you paid.
    • Expense receipts
  • Make sure to file the tax before the deadline.

Still have more questions about filing your tax returns as an international student in Australia? Reach out to experts to help you with specific questions related to paying taxes and filing returns. 

Living as an international student in Australia

The best part about studying in a foreign country is that you are left to fend for your own finances. It’s not as challenging or overwhelming as it looks. The more you experience the process that seems complex, the better you are equipped to handle such circumstances in the future, from paying taxes to interacting with government authorities for filing tax returns. As a student, understanding these systems helps you gain a broader perspective of things, something which you may not have achieved or are limited to back in your home country.