At a glance
As a student, lodging a tax return can be confusing and daunting. But don't let the challenges scare you away – lodging a return can be quite beneficial.
If you’ve paid your taxes for the financial year, depending on how much you’ve earned, you might be entitled to a tax refund – and who doesn’t want money from the government?
To help students navigate the uncertain waters of lodging a tax return, here are our annually updated tax tips for students, for the year ending 30 June 2015.
1. Obtain your refund for tax withheld
Where your taxable income for the year ending 30 June 2015 is below the tax-free threshold of A$18,200, you will typically not have to lodge an income tax return for the 2014-15 tax year.
However, the only way you can get back the income tax that has been withheld from your taxable income during the year is to lodge an income tax return.
Tax can be withheld from your salary, and it can also be withheld from any interest income you earned during the year if you have not provided your tax file number (TFN) to your bank.
Similarly, tax may have been withheld from a distribution from a family trust where you have not previously provided your TFN to the trustee. Where you have not provided your TFN, tax is withheld at 49 per cent.
2. Identify all your sources of assessable income
To determine whether you need to lodge a tax return or not, identify all sources of income derived during the year that is assessable for income tax purposes.
Such amounts include:
- income from work as an employee or a contractor, including any tips or gratuities received
- investment income, such as any bank interest or dividends on shares received
- certain government payments received such as Austudy, ABSTUDY living allowance and youth allowance
- some non-government scholarships, grants and awards
- distributions from a family trust or partnership
3. Consider the special rules for those under 18
Certain types of income derived by minors under the age of 18 may be taxed at a higher rate than would apply to that same income if the taxpayer was aged 18 or over. The types of income that may be taxed differently include:
- income received as a beneficiary from a trust
- interest, dividends, rent and royalties
Such income will be taxed at a rate of 68 per cent for income that is greater than A$416 and less than A$1307, and at a rate of 47 per cent on income that exceeds A$1307.
Minors will also not be able to typically claim the low income tax offset to reduce their tax liability on such income.
Ordinary marginal tax rates will apply to other income derived by a minor aged under 18, such as:
- employment or business income
- taxable government payments such as Youth Allowance
- income from a deceased estate
- income from property transferred to a minor as a result of a person’s death or a family breakdown
- net capital gains on a disposal of investments
4. Know your deductions
You are entitled to claim deductions for certain expenses that are directly related to the income you have received. For example, you can claim work-related deductions if you have the necessary receipts or credit card statements.
Typical work-related expenses that are allowable include:
- uniforms and protective clothing
- employment-related telephone, mobile and internet costs
- subscriptions and union fees
- travel expenses between worksites or client locations (not the commute to and from home)
You should consult your CPA Australia registered tax agent to identify all eligible deductions.
5. Claim the right tax offsets
If you receive Austudy, ABSTUDY living allowance, Newstart Allowance, youth allowance or other taxable Commonwealth government education or training payments, you are eligible for the beneficiary offset.
This offset ensures you do not have to pay tax on those payments. You may, however, have to pay tax on other income, such as wages or investment income.
In certain circumstances the low income tax offset will be available to reduce tax payable on such income provided your taxable income exceeds the tax-free threshold for the particular year.
The Australian Taxation Office (ATO) will automatically calculate these offsets when they process your tax return.
You may, however, be eligible for other tax offsets which you must claim through your tax return.
Students should therefore consult their CPA Australia registered tax agent to identify if any other tax offsets available.
6. Identify eligible self-education expenses
If your study is directly related to maintaining or improving your skills in your current occupation, or could increase your income from your current employment, you can claim self-education expenses.
Typical self-education expenses include:
- course fees
- student union fees
- the depreciation of assets such as computers and printers
7. Understand HELP debts
Higher Education Loan Program (HELP) debt repayments are not tax deductible.
If you have a HELP debt, repayments only commence once your salary exceeds A$53,344 (this figure is for year ending June 30 2015 and is indexed annually). The specific amount required to be repaid will depend on a range of factors, including your taxable income.
If you are working and you have filled out a tax file number declaration form, your employer will withhold additional tax from your salary to assist you cover your HELP debt. The ATO will automatically calculate what your HELP repayment is for the year once you lodge your tax return.
If you don’t notify your employer that you have a HELP debt through the TFN declaration, your employer will not withhold the additional tax and you may therefore find yourself facing an unexpectedly hefty tax bill.
If your income varies significantly over a year and you do not expect to exceed the minimum repayment threshold you can ask your employer to stop withholding the additional tax for HELP purposes and that additional tax withheld may be refunded to you after you lodge your tax return.
8. Know if you’re a resident for tax purposes
If you are an Australian resident you will be required to disclose all your income earned for the year, including income derived overseas, and will be entitled to claim eligible tax deductions and offsets.
If you’re an overseas student studying at an Australian education institution for a period of six months or more you will be regarded as an Australian resident for income tax purposes. You will therefore pay the same rate of tax as other resident taxpayers and have access to the tax-free threshold.
You are only entitled to a pro rata tax-free threshold if you are only an Australian resident for part of the year.
Note: The list above is not exhaustive and you should always speak to a CPA-registered tax agent about your specific circumstances.The above commentary is current as at 22 April 2015.