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How your Student Visa length can affect your tax return

If you have worked, are currently working or will eventually work in Australia you need to read this article as it could save you thousands of dollars in taxes.

So, grab a coffee, find a notebook and read this critical information about tax returns in Australia for international students.

1. LENGTH MATTERS

Your tax rate will depend on whether the Government determines if you are an Australian Resident for Tax Purposes or a Non-Australian Resident for Tax Purposes. Residents have significant tax advantages over non-residents and can save several thousand dollars per year.

If you have an Australian Student Visa, the duration of your visa will become a  key tool used to determine if you’re an Australian Resident for Tax Purposes or a Non-Australian Resident for Tax Purposes.

The ATO uses what’s called a “residency test” to determine how to classify you. Depending on how the ATO categorises you, you’ll be taxed in two different ways:

  • Australian Resident for Tax Purposes: you will be considered an Australian Resident if:
    • You hold a Student Visa that lasts for more than six months and you stay in Australia for more than six months; OR
    • Your course is shorter than six months but you spend more than 183 days in Australia (with a visa or visas that allows you to work) during the financial year (1st July – 30th June)

  • Non-Australian Resident for Tax Purposes: you will be a Non-Australian Resident for Tax Purposes if:
    • You are on a Student Visa and your course is shorter than six months; OR
    • You don’t spend more than 183 days in Australia with a visa that allows you to work

If you are on a Work and Holiday or Working Holiday Visa, you will be taxed as a Working Holiday Maker.

Tax implications for each classification:

If you are an Australian Resident for Tax Purposes you won’t pay tax ($0) on the first $18,200 you earn as salary, wages and subcontractor’s income. After this, your tax will start at 19% but will increase as your income rises (if you don’t exceed the minimum amount and you had some tax withheld, you will be able to claim it back on your tax return).

The table below from the Australian Tax office shows tax rates for 2018-2019.

If you are a Non-Australian Resident for Tax Purposes, you will have to pay 32.5% from the first dollar earned in Australia. For instance, if your income within the financial year was $18,200, it means you would have to pay $5,915 to the Australian Taxation Office (ATO) at the end of the financial year.

Source: https://www.ato.gov.au/Rates/Individual-income-tax-rates/

The table below from the Australian Tax office shows tax rates for 2018-2019.

So, as you can see, having a Student Visa and studying for more than six months can save you thousands of dollars… it’s well worth considering one our longer courses to minimise your tax.

If you are a Work and Holiday Maker and you earned $18,200 within the financial year, you will have to pay 15% in taxes. This means paying $2,730 to the ATO.

Before deciding which type of visa you want to apply for and the length you wish to stay in Australia, take the time to think about it because it is an important decision.

2. YOUR VISA ALSO AFFECTS YOUR SUPERANNUATION

If you have been working as an employee in Australia, you get paid 9.5% of your salary as Superannuation. Superannuation is the system used for retirement in Australia and normally, you can’t access this money until you retire (normally when you are 65 years old). But if you don’t plan to stay here forever, you can claim this money back once you depart for your home country and your visa is not no longer active (expired or cancelled).

The percentage of your Superannuation you will get depends on the type of visa you held:

  • Work and Holiday / Working Holiday Visa: you will get 35% of the total amount that is shown in your superannuation fund balance returned to you.
  • Student Visa: you receive 65% of the total amount that is shown in your superannuation fund balance.

The Working Holiday Visa percentage (35%) applies if you hold or held a Work and Holiday or Working Holiday Visa in Australia. Even if you are not on a Work and Holiday anymore, you will be marked and taxed as Working Holiday Maker for having had one.

Imagine you have $8,000 on your Superannuation Account once you depart Australia. After two years of working here:

  • If you held a Work and Holiday Visa on your first year + a Student Visa on your second year, you will receive 35% of the total amount ($2,800) once you depart Australia.
  • If you have been on a Student Visa during these two years you will get 65% of your Superannuation savings ($5,200) once you leave Australia.

If you have further questions, don’t hesitate to contact us or our partner accountants, TaxBack.com. They will also help you out by answering any of your questions and claiming your taxes and your Superannuation – offering the best advice and doing all the paperwork for you – in the most professional way!

Why choose TaxBack.com?

  • Free Refund Estimation
  • Offices in Sydney, Cairns, Perth, Brisbane, Melbourne & Darwin
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