Navigating taxes as a student can be daunting, but understanding the basics can significantly ease the process. Here are six crucial tax facts every student should be aware of to stay financially savvy and compliant.
1. Obtain a Tax File Number (TFN)
A Tax File Number (TFN) is crucial for any student in Australia. Without a TFN, your employer will deduct tax from your pay at the highest rate, and you won’t be able to apply for government benefits like HELP or HECS. Applying for a TFN is straightforward and can be done through the Australian Taxation Office (ATO) official website.
2. Determine Your Residency Status for Tax Purposes
Your residency status significantly impacts your tax obligations. Even if you’re not a permanent resident of Australia, you might be considered a resident for tax purposes if you’ve been living in Australia for more than six months. This status allows you to claim the tax-free threshold, reducing the amount of tax you need to pay. More details about determining your residency status can be found on the ATO website.
3. Understand Tax Obligations for Short-term Studies
If you’re studying in Australia for less than six months, you may be classified as a non-resident for tax purposes. Non-residents are taxed at a higher rate and are not eligible for the tax-free threshold. It’s important to keep this in mind when planning your finances. Learn more about non-resident tax rates here.
4. Know What the Goods and Services Tax (GST) Covers
The Goods and Services Tax (GST) is a 10% tax on most goods and services in Australia. However, some items, such as fresh food, education, and certain medical services, are GST-free. Understanding GST can help you budget more effectively and avoid unnecessary expenses. For more information on GST-free items, visit the ATO’s GST guide.
5. Lodge Your Tax Return Annually
As a resident for tax purposes, you are required to lodge an income tax return annually. This process involves reporting your income and claiming any deductions to determine if you are owed a refund or if you need to pay additional tax. Even if you think you didn’t earn enough to pay tax, lodging a return can help you claim back any tax withheld. The ATO provides a step-by-step guide on how to lodge your tax return.
6. Lodge a Final Tax Return Before Leaving Australia
If you’re an international student planning to leave Australia, make sure to lodge a final tax return. This allows you to claim any tax refunds you might be eligible for. The ATO provides specific guidance on what to do before you leave the country, which can be found here.
Keep Accurate Records
Maintaining accurate records of your income, expenses, and any other relevant financial information is vital. This includes keeping receipts for any deductions you plan to claim. Good record-keeping can simplify the tax return process and help you avoid any issues with the ATO.
