Basic Tax Guide
The information offered on this web site is very basic guide. For further information visit the Australian Taxation Office website.
The tax advice given below addresses the following:
- Do I have to lodge a tax return?
- What does "taxable income" mean?
- How do I calculate my taxable income?
- What are "tax deductions"?
- How do tax deductions affect my taxable income?
- What is the "tax free threshold"?
- What are "rebates"?
- Is the tax system the same for international students?
- Keeping records
As a rule, residents must lodge a tax return if taxable income in the last financial year (1 July to 30 June) exceeds the $18,200 'tax free threshold'. If taxable income is less than $18,200, and tax was paid tax during the year, a tax return must be lodged to receive a refund. If no tax instalments were deducted during this period, it may not be necessary to lodge a return. Some students who received a Centrelink benefit and had no other income may not have to lodge a return even if their income from all sources is over $18,200.
Please note the tax free threshold increased to $18,200 from $6000 in mid-2012. The $6000 tax-free threshold applies to the 2011/12 financial year and earlier.
Taxable income is income from which tax may be deducted. It is not necessarily the same as the amount earned in the financial year. Taxable income is assessable income (the amount earned before tax was taken out) less any allowable deductions.
Taxable income can come from (but is not limited to):
- ABSTUDY, AUSTUDY, Youth Allowance or any other Centrelink payments
- other income (eg. bank interest, dividends from shares and trusts, etc.).
The amount is shown on a Payment Summary or Statement of Benefit or Allowance from the income provider. These documents also show how much tax has been withheld.
It is a legal requirement to keep payment summaries and other proof of income and tax. If a previous employer cannot be found, contact the Tax Office to find out what to do next. Bank interest will be shown via a bank statement.
NB. An allowance from parents is not counted as part of assessable income unless it is received from a family trust or as a part of an employment arrangement.
|Income Source||Amount ($)|
Total Taxable Income
Tax deductions reduce the assessable taxable income and, therefore, reduce the amount of tax to pay. Deductions are allowed for expenses incurred in earning income, such as the cost of laundering uniforms, union fees or transport costs. Deductions for some education expenses can also be claimed. Tax deductions can also be claimed for some non-work related expenses, such as donations to approved charities.
Tax is not payable by residents who earned less than the threshold amount during the financial year, and any tax paid may be refunded. The threshold changes for people who are a resident for less than a full financial year.
A tax offset is a reduction in the amount of tax to pay. Tax offsets can only reduce the amount of tax to zero. If offsets are greater than the amount of tax due, a refund will not include the excess amount.
Any non-resident of Australia who earns $1 or more in the financial year must lodge a tax return. Non-residents are not eligible for the tax-free threshold. However students studying a course in Australia of greater duration than six months are treated as a resident for taxation purposes. A tax file number is required in order to lodge a tax return. Tax file number applications are available from the Australian Taxation Office.
Records for tax affairs should be kept for at least five years. It advisable to keep the following documents:
- Centrelink letters,
- Payment summaries,
- Deduction receipts,
- Tax Assessment Notice (sent to you by the Australian Taxation Office after you lodge your tax return),
- A copy of your tax return (always make a copy of your return before you send it to the ATO),
- Medical receipts
- Accountants letters
This way, you will always be able to locate your records any time they are required.