Work in Australia: what about your taxes?
This is already September, It's over tax time! Have you lodged your Tax Return? This is about time to understand how taxes work in Australia!
In Australia, when you are working, taxes are automatically deducted from your salary. If you are on a Working Holiday Visa or a Student Visa, as your income won't be too high, you can receive a major part of your taxes back. Indeed, it is called Tax Return in Australia, meaning Tax declaration. It can be a good deal for you if you do it correctly because you can leave Australia or enter the next financial year with big Dollars in your pockets!
In average, if you have worked for one year on a WHV, you can receive up to $2600 back. Naturally, if you are on a student Visa, as you can't work full time, the amount will be less important.
How does Tax Return work in Australia?
It is important for you to know if you are considered as a resident for tax purposes (that is being taxed as an Australian resident or citizen), because your Tax Return amount will depend on this.
Here are the conditions:
- If you are not an Australia citizen or resident, you will need to work 6 months or more in Australia, in the same city or State to receive the resident for tax purposes status.
- If you work one year without break but in many different states, you won't be considered as resident and you will be taxed at a higher rate.
Tax rates are the following for the resident status:
- If you earn less than $20,000/year, you won't be taxed and you will get all your money back;
- If you are between $20,000 and $37,000/year, you will be taxed at a 19% rate;
- If you are part of the higher income panel, you will be taxed at 33%.
However these tax rates may change from July 2016: whatever your income is, even if it's less than $20,000/year, you will be taxed at a 32.5% rate. We will keep you updated as soon as these changes will take effect.
Another piece of information to be aware of: the financial year in Australia starts on 01/07 and finishes on 30/06 of each year. If you arrive in January and leave in December, you will need to make 2 tax return applications: one from January to end of June, and one from July until December.
If you wish to obtain the resident status, you will need to calculate your timing (more than 6 months before the 30th June). :-)
Applying for a tax return in Australia: what are the steps?
To apply for a tax return, you will need to respect some conditions:
- Have a TFN - Tax File Number (your social security number)
- Being employed and declared (obviously) and having received from your employer(s) your PAYG Summary which summarizes the income amount you received and the deducted taxes. Without these PAYG Summaries, you won't be able to apply for your Tax Return.
You have different ways to apply for your Tax Return:
- Online directly on the ATO - Australian Tax Office Website, this is the E-Tax Return, it's free and you can apply here: But it could be relatively complicated, especially if your English level is not fluent: if you tick the wrong information, ATO will come back to you to ask for the undeclared taxes. We have often been witness of this situation with our students who were asked to pay between $500 and $2,000 instead of being refunded.
- Through a Tax Agent (accountant): you need to select them carefully, because as you are not automatically considered as resident, it is better to use agencies specialised in Working Holiday or international students status. They understand quickly what's wrong and they can rectify your information; they can even contact your former employers if some documents are missing. The big advantage is that they can refund you on your Australian or you home bank account. We can recommend you a Tax Agency if you need it. Link for contact Form
- You can apply for your tax return anytime during the year as long as you have a proof that you will leave Australia and won't come back (flying tickets are enough): in this case, you can receive your taxes and Superannuation at the same time
- The deadline for your Tax Return application in Australia is on the 31st October each year, except if you use a Tax Agent.
- You will receive an answer from ATO within a month if you apply online and if you use a Tax Agent it might be even faster. The delay might vary depending on the period you lodged your tax Return.
Other questions on Tax Return? Click here