Basic australian tax guide for international students ppsx

Studying and Working in Australia, and tax (A basic Tax Guide for International students) Objectives What are my Options? Types of Employment or Business & what’s best for me? Australian Tax How I file my Tax? Tax brackets & PAYG Withholding Employment Search Where I start from? Do I need a Tax File Number? Am I Resident for Tax purposes? How Tax Payable is calculated? Assessable Income General Deductions Specific Deductions Tax Offsets Medicare Levy Medicare Levy Surcharge Work out your Individual Situation (exercise) ADVISED TO BE DONE AS WE GO ALONG THE PRESENTATION What are my Options? Employment Business There are many business structures prevalent in Australia Full time (38 hours/ wk and over) Part time Guaranteed hours of work every wk Up to 38 hours as per contract Casual work (No minimal guaranteed hours/ wk.) Sole Trader* Partnership Domestic students No restrictions International students Company Trust Subject to visa conditions (usually 40 hr/ fortnight) Check conditions on www.vevo.gov.au Where Do I Start From? Intention to have employment or business? Domestic Students International Students YES Apply for Tax File Number (TFN) www.ato.gov.au Sole Trader needs Australian Business Number (ABN) - www.ato.gov.au Resident for Tax purposes? (Note: This is different from Permanent Residency) YES All income having a source in or out of Australia is assessable unless it is exempt From July 2006, NO Tax is payable on most foreign income if Tax Payer satisfies the requirements of being a temporary resident • you hold a temporary visa granted under the Migration Act 1958 • you are not an Australian resident within the meaning of the Social Security Act 1991 • your spouse (if applicable) is not an Australian resident within the meaning of the Social Security Act 1991 NO Income only having a source in Australia is assessable unless it is exempt (No Tax threshold; 32.5% on income < $80,000) Rates Act Schedule Part II Business may need additional registrations e.g.: Goods & Services Tax (GST) PAYG Withholding Fringe Benefit Tax (FBT) DETERMINING RESIDENCY Are you migrating & settling in Australia? Resident for Tax Purposes YES YES NO Are you Australian returning to live in Australia? NO Have you stayed or intend to stay over months? YES Main purpose of being in Australia? Full time Education YES months or more at a particular place? NO Have you been in Australia (in total) 183 days in the income year? Calculate if you are a Resident https://www.ato.gov.au/calculators-and-tools/are-you-a-resident/are-you-a-resident-tool.aspx?anchor=AreYouAResident#AreYouAResident/questions Finding Employment What you need CV/Resume + Cover Letter (Your savings for post retirement period; may also be available at time of leaving Australia permanently) Where & How to Find a Job Career websites: e.g www.seek.com.au, www.indeed.com.au, www.gumtree.com.au Campus Job Boards Walk-in Networking forum Volunteering/ Internship (not considered as Employment) When you get placed, provide your employer with TFN, ABN (if applicable) and Copy of any other document as may be required (e.g Visa, Passport etc.) Your employer MUST make superannuation contribution for you @ 9.5% of wages/salary Revisiting Objectives… What are my Options? Types of Employment or Business & what’s best for me? Australian Tax How I file my Tax? Tax brackets & PAYG How Tax Withholding Payable is calculated? Employment Search Where I start from? Do I need a Tax File Number? Am I Resident for Tax purposes? Assessable Income General Deductions Specific Deductions Tax Offsets Medicare Levy Medicare Levy Surcharge Work out your Individual Situation (exercise) How are we going? AUSTRALIAN TAX Financial year: July – 30 June Profit Tax to the ATO Income + Super@9.5% Nominated Superannuation Fund Employed? Sole Traders Depending on quantum of activities, Financial Statements may not be required If you are Running a Business, it is important that you record all Income & Expenses And keep copies of all receipts, either physically or electronically How Do I file Tax? Company/ Trusts/ Partnership Registered Tax Agent: 9300 3040 File your own on e-tax www.ato.gov.au (Last date: 31st October) If you are registered for GST, you will have to lodge Business Activity Statements (BAS) every quarter Tax Brackets & PAYG Withholding e.g Mr X gets paid wages $ 1,500 per week – $18,200 Nil $18,201 – $37,000 19c for each $1 over $18,200 $37,001 – $80,000 $3,572 plus 32.5c for each $1 over $37,000 $80,001 – $180,000 $17,547 plus 37c for each $1 over $80,000 $180,001 and over $54,547 plus 45c for each $1 over $180,000 Assuming that the annual pay will be $ 1500 x 52 = $ 78,000 How much should he have as tax? Tax liability (without deductions) $ 3,572 + 32.5% of (78000 – 37000) = $ 16,897 Pay As You Go Withholdings An amount withheld by your employer from your pay to deposit to the ATO on your behalf, so that the Tax burden on you at the end of the year is less At the end of Financial year, when Mr X does his tax, assume he claims $ 5,000 deduction (work-related) Then, his taxable income becomes $73,000, which means tax liability becomes lower than what has been withheld This will result in Tax Refund If this tax liability is to be paid equally over 52 weeks, then PAYGW will be calculated at $ 324.94 p/wk Thus, Mr X’s weekly take home wage = $ (1,500 – 324.94) = $ 1,175.06 P.S These figures are only indicative & for educational understanding How Tax Payable is calculated ? s4-15(1) Taxable Income = Assessable Income - Deductions s4-10 (3) Income Tax = (Taxable Income x Rate) - Offset E.g (Indicative) Taxable Income Calculation of Tax Payable (3572 +32.5% (45000-37000) $45,000 $ 6,172 Less: Tax Offsets (assumed ‘Nil’*) Add: Medicare Levy ($45,000 x 2%) NIL – $18,200 Nil $18,201 – $37,000 19c for each $1 over $18,200 $37,001 – $80,000 $3,572 plus 32.5c for each $1 over $37,000 $80,001 – $180,000 $17,547 plus 37c for each $1 over $80,000 $180,001 and over $54,547 plus 45c for each $1 over $180,000 $ 6,172 $ TOTAL TAX PAYABLE $ 7,072 Less: PAYG Withholding $ xxx 900 Refund/ Payable Tax Offset is covered later in the presentation Medicare Levy has been considered here assuming the Tax Payer has access to Medicare facility It is covered later in the presentation Revisiting Objectives… What are my Options? Types of Employment or Business & what’s best for me? Australian Tax How I file my Tax? Tax brackets & PAYG How Tax Withholding Payable is calculated? Employment Search Where I start from? Do I need a Tax File Number? Am I Resident for Tax purposes? Assessable Income General Deductions Specific Deductions Tax Offsets Medicare Levy Medicare Levy Surcharge Work out your Individual Situation (exercise) How are we getting along? Assessable Income s4-15(1) Taxable Income = Assessable Income - Deductions Ordinary Income Characteristics: Convertibility into money or money’s worth Natural incident of business activities Regular, recurrent and periodic receipts e.g Salary/ Wages, Bank Interest, business profit Statutory Income Non Cash Business Benefits (as if convertible into cash; exempt up to $300) Trading Stock Net Capital Gain Balancing Adjustment Windfall Gain is not assessable income Compensation payments, depending on character of loss will be treated Exempt Income (e.g Bursaries and other educational allowances) Asset must be disposed of or its use restricted General Deductions s4-15(1) Taxable Income = Assessable Income - Deductions General section u/s 8-1 s.8-1 (1) allows deduction for any loss/ outgoing: • Incurred in producing assessable income or • Incurred in carrying on a business producing assessable income s.8-1 (2) denies deduction for any loss/ outgoing: • Of capital or of a capital nature • Of private or domestic nature • Incurred in producing exempt income • Not deductible under a provision of the ITAA Specific Section u/s 8-5 Home office as place of business (proportionate) if being used Home studies in the course of performing work (only direct costs can be claimed) Clothing expenses (Protective/ Non-compulsory corporate/ Compulsory corporate/ Occupation specific uniforms) Self education incurred for or in connection with prescribed course of education – s (36) 82A excludes first $250 (substantiation needed) Expenses incurred in gaining a qualification prior to obtaining work in that area are not deductible and must be related to a current income earning activity E.g - University/ Course/ Convention fees (but not HECS contribution/ HELP) - Subscription to journals, Text books & equipment - Education related travel expenses Typing, Stationery, Photocopy costs Road vehicle to carry load of less than tonne or fewer than passengers General Deductions continued… Substantiation Rules (Evidence) Work expenses to be deducted generally require evidence Substantiation NOT Reqd if Laundry expense < $150 or Total work expenses < $300 If total work expenses > $300, all need substantiation   If total work expenses > $300, where Laundry < $150, only the balance amount needs to be substantiated Car Expenses Engine capacity Rotary engine Cents/ km Not available unless a provision, such as s 8-1 allows a deduction for the expense Applies to Individuals only 1.6 lt or less 0.8 lt or less 65 1.601 lt- 2.6 lt 0.801 lt – 1.3 lt 76 2.601 lt and more 1.301 and more 77 Methods of Calculation s.28-15 allows Tax Payer to choose from among these four methods Cents per Km 12% of Original Value Maximum 5000 kms Substantiation NOT Required Business kms > 5000 Substantiation NOT Required 1/3 of Total Expenses Log Book Amount of each car x Business use %age Business kms > 5000 Substantiation Required Substantiation Required Specific Deductions s4-15(1) Taxable Income = Assessable Income - Deductions General section u/s 8-1 Specific Section u/s 8-5 Div 25 *Primarily Business related Please seek professional advice • Tax Related expenses • Professional/ Trade/ Business Membership • Repairs (Non-capital nature) of Plant/ premises to produce assessable income * • Borrowing Expenses/ Cost of Discharge/ Loss to Business by theft * • Cost to contest/ be elected for Membership to Parliament (Federal, State or Territory) or Local Government * Div 30: Donation : For managing Tax Affairs/ ATO disputes etc Value of gift > $2; Must be made to a DGR registered organization s.290-60: Contribution to eligible Super fund for employees Tax Losses (97) Division 36 (from previous year) Tax Offsets s4-15(1) Taxable Income = Assessable Income - Deductions s4-10 (3) Income Tax = (Taxable Income x Rate) - Offset Low Income Rebate s 159N – Maximum Rebate of $445 (Calculated by ATO, depending on your taxable income) Dependent Rebate s.159J – Not available to those receiving certain family benefits or spouse born on or after 1st July 1952; generally applicable only in case of invalid relative/ parent or parent-in-law Zone Rebate s79A – Available to tax payer who has been physically present in a specified zone > 183 days Medical Expenses Rebate s159P – Available for unreimbursed medical expenses (UME) Applied @ 20% of UME above threshold of $2,162 (2014/15) Subject to ‘means test’ i.e $88,000 for singles, $176,000 for couples Private Heath Insurance Offset : Subject to ‘means test’ based on Income levels and age brackets Other Offsets may include Senior & Pensioners Tax Offset Revisiting How Tax Payable is calculated ? s4-15(1) Taxable Income = Assessable Income - Deductions s4-10 (3) Income Tax = (Taxable Income x Rate) - Offset Ordinary Income + Statutory Income = xxx Less: General Deductions + Specific Deduction = xxx Taxable Income Multiply by: Relevant rate Less: Tax Offsets = xxx – $18,200 Nil $18,201 – $37,000 19c for each $1 over $18,200 $37,001 – $80,000 $3,572 plus 32.5c for each $1 over $37,000 $80,001 – $180,000 $17,547 plus 37c for each $1 over $80,000 $180,001 and over $54,547 plus 45c for each $1 over $180,000 = xxx xxx Add: Medicare Levy ? = xxx TOTAL TAX PAYABLE Medicare Levy Normally calculated @ 2% of Taxable Income, subject to reduction for low income earners: However, No Medicare Levy is applicable if Tax Payer is under the Threshold • • Threshold for Singles : $ 20,542 Threshold for Families : $ 34,367 plus $ 3,156 for each dependent child Medicare Levy Exemption is also available if: • You were a blind person • You received sickness allowance from Centrelink • You were entitled to free medical treatment extended by Government • You were Foreign resident/ Norfolk Island resident • You were Temporary Resident without dependents/ with dependents all of who were in exemption category To claim this exemption, Tax Payer has to Medicare Exemption Certificate, which can applied for at Centrelink Medicare Levy Surcharge MLS is designed to reduce the demand on the public Medicare system Tax Payer is required to pay MLS if he/ she is above the threshold and does not have adequate Private Health Cover • • Threshold for Singles : $ 90,000 Threshold for Families : $ 180,000 However, Medicare Levy Surcharge is not applicable: • • Family income > $ 180,000 but own income =/< $ 20,896 If you are Exempt from Medicare Levy Adequate Private Health : Singles: Cover must have an excess of $500 or less Couples or families must have an excess of $1,000 or less Objectives Achieved? What are my Options? Types of Employment or Business & what’s best for me? Australian Tax How I file my Tax? Tax brackets & PAYG Withholding Employment Search Where I start from? Do I need a Tax File Number? Am I Resident for Tax purposes? How Tax Payable is calculated? Assessable Income General Deductions Specific Deductions Tax Offsets Medicare Levy Medicare Levy Surcharge Work out your Individual Situation (exercise) Hope you liked doing this! Thank you Fortuna Accountants & Business Advisors P: 9300 3040 E: melvyn@fortunaadvisors.com.au W: www.fortunaadvisors.com.au [...]... for me? Australian Tax How do I file my Tax? Tax brackets & PAYG Withholding Employment Search Where do I start from? Do I need a Tax File Number? Am I Resident for Tax purposes? How Tax Payable is calculated? Assessable Income General Deductions Specific Deductions Tax Offsets Medicare Levy Medicare Levy Surcharge Work out your Individual Situation (exercise) Hope you liked doing this! Thank you Fortuna... What are my Options? Types of Employment or Business & what’s best for me? Australian Tax How do I file my Tax? Tax brackets & PAYG How Tax Withholding Payable is calculated? Employment Search Where do I start from? Do I need a Tax File Number? Am I Resident for Tax purposes? Assessable Income General Deductions Specific Deductions Tax Offsets Medicare Levy Medicare Levy Surcharge Work out your Individual... $180,001 and over $54,547 plus 45c for each $1 over $180,000 = xxx xxx Add: Medicare Levy ? = xxx TOTAL TAX PAYABLE Medicare Levy Normally calculated @ 2% of Taxable Income, subject to reduction for low income earners: However, No Medicare Levy is applicable if Tax Payer is under the Threshold • • Threshold for Singles : $ 20,542 Threshold for Families : $ 34,367 plus $ 3,156 for each dependent child Medicare... * • Cost to contest/ be elected for Membership to Parliament (Federal, State or Territory) or Local Government * Div 30: Donation : For managing Tax Affairs/ ATO disputes etc Value of gift > $2; Must be made to a DGR registered organization s.290-60: Contribution to eligible Super fund for employees Tax Losses (97) Division 36 (from previous year) Tax Offsets s4-15(1) Taxable Income = Assessable Income... Deductions s4-10 (3) Income Tax = (Taxable Income x Rate) - Offset Ordinary Income + Statutory Income = xxx Less: General Deductions + Specific Deduction = xxx Taxable Income Multiply by: Relevant rate Less: Tax Offsets = xxx 0 – $18,200 Nil $18,201 – $37,000 19c for each $1 over $18,200 $37,001 – $80,000 $3,572 plus 32.5c for each $1 over $37,000 $80,001 – $180,000 $17,547 plus 37c for each $1 over $80,000... s159P – Available for unreimbursed medical expenses (UME) Applied @ 20% of UME above threshold of $2,162 (2014/15) Subject to ‘means test’ i.e $88,000 for singles, $176,000 for couples Private Heath Insurance Offset : Subject to ‘means test’ based on Income levels and age brackets Other Offsets may include Senior & Pensioners Tax Offset Revisiting How Tax Payable is calculated ? s4-15(1) Taxable Income... extended by Government • You were Foreign resident/ Norfolk Island resident • You were Temporary Resident without dependents/ with dependents all of who were in exemption category To claim this exemption, Tax Payer has to Medicare Exemption Certificate, which can applied for at Centrelink Medicare Levy Surcharge MLS is designed to reduce the demand on the public Medicare system Tax Payer is required to pay... (3) Income Tax = (Taxable Income x Rate) - Offset Low Income Rebate s 159N – Maximum Rebate of $445 (Calculated by ATO, depending on your taxable income) Dependent Rebate s.159J – Not available to those receiving certain family benefits or spouse born on or after 1st July 1952; generally applicable only in case of invalid relative/ parent or parent-in-law Zone Rebate s79A – Available to tax payer who... Section u/s 8-5 Home office as place of business (proportionate) if being used Home studies in the course of performing work (only direct costs can be claimed) Clothing expenses (Protective/ Non-compulsory corporate/ Compulsory corporate/ Occupation specific uniforms) Self education incurred for or in connection with prescribed course of education – s (36) 82A excludes first $250 (substantiation needed)... must be disposed of or its use restricted General Deductions s4-15(1) Taxable Income = Assessable Income - Deductions General section u/s 8-1 s.8-1 (1) allows deduction for any loss/ outgoing: • Incurred in producing assessable income or • Incurred in carrying on a business producing assessable income s.8-1 (2) denies deduction for any loss/ outgoing: • Of capital or of a capital nature • Of private ... what’s best for me? Australian Tax How I file my Tax? Tax brackets & PAYG Withholding Employment Search Where I start from? Do I need a Tax File Number? Am I Resident for Tax purposes? How Tax Payable... for me? Australian Tax How I file my Tax? Tax brackets & PAYG How Tax Withholding Payable is calculated? Employment Search Where I start from? Do I need a Tax File Number? Am I Resident for Tax. .. what’s best for me? Australian Tax How I file my Tax? Tax brackets & PAYG Withholding Employment Search Where I start from? Do I need a Tax File Number? Am I Resident for Tax purposes? How Tax Payable