Basic Tax Guide
The information offered on this web site is very basic and provides only a general explanation of some of the main terms you will encounter. Anyone with tax questions should 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
Do I have to Lodge a Tax Return?
As a rule, you must lodge a tax return if your taxable income in the last financial year (1 July to 30 June) was over $6,000. If your taxable income was less than $6,000, and you paid tax during the year, you will need to lodge a tax return in order to receive a refund. If you did not have any tax instalments deducted from your income during this period, you may not need to lodge a return. Some students who received Youth Allowance, Austudy payment, Newstart Allowance or a pension and had no other income may not have to lodge a return even if their income from all sources is over $6,000.
What does "Taxable Income" Mean?
Taxable income is the amount of income on which you will have to pay tax. It is not necessarily the same as the amount you earned in the financial year. Taxable income is assessable income (the amount you earned before tax was taken out) less any allowable deductions.
top of pageHow do I Calculate my Taxable Income?
To calculate your assessable income for the financial year add up your income from:
- employment
- ABSTUDY, AUSTUDY, Youth Allowance or any other Centrelink payments
- other income (eg. bank interest, dividends, etc.).
Don't try to guess how much you earned! The amount is shown on a Group Certificate or Statement of Benefit or Allowance from the organisation that paid you. These documents also show how much tax you have paid. You must have them.
If you have changed addresses and your current or past employers or Centrelink do not have your new address, inform them now to prevent any delays. If you have any problem getting these documents contact your employer. If you can't track a previous employer down, contact the Tax Office to find out what to do next. Bank interest will be shown on your passbook or on a bank statement. If you don't know how much interest you earned or you have lost your records, your bank can give you these details.
NB. An allowance from your parents is not counted as part of your assessable income unless you receive it from a family trust or as a salaried employee working for your parent(s).
Example:
| INCOME SOURCE | AMOUNT ($) |
|---|---|
Youth Allowance |
3,800 |
Part-time Job |
2,750 |
Bank Interest |
15 |
TOTAL TAXABLE INCOME |
6,565 |
What are "tax deductions"?
Tax deductions reduce your taxable income and, therefore, reduce the amount of tax you have to pay. Deductions are allowed for expenses incurred in earning your income. Deductions for education expenses can be claimed if your study is linked to your employment income.
Contact the Australian Taxation Office for details.
How do Tax Deductions affect my Taxable Income?
In the above example we saw that the student's assessable income was $6,565. This, however, is not necessarily the amount on which that student will have to pay tax. To obtain the taxable income, you have to add up the value of legitimate deductions. All deductions are subtracted from the "Assessable Income" to give the "Taxable Income".
What is the "tax free threshold"?
The tax free threshold is the amount below which you do not have to pay tax. In 2006 this amount is $6,000. If your taxable income was less than $6,000 you did not have to pay any tax, and any tax which has been deducted from your income should be refunded in full. You will only have to pay tax if your income exceeds the tax free threshold. If you are a resident for less than a full financial year the tax free threshold is reduced.
What are "tax offsets"?
A tax offset is a reduction in the amount of tax you have to pay. Tax 0ffsets can only reduce the amount of tax you pay to zero. If your offsets are greater than the amount of tax that you are due, you will not receive a refund of the excess amount.
Is the Tax System the Same for International Students?
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 if you are studying a course in Australia of greater duration than six months, you are treated as a resident for taxation purposes. You will need a tax file number in order to lodge your Return. Tax file number applications are available from the International Office or Australian Taxation Office.
Keeping Records
It is advisable that at the start of each financial year (ie, in early July) you buy a manila envelope folder (one with sealed sides so things can't fall out of it). Write the relevant financial year on it (eg. 2006/2007). From then on, keep everything in it that may even remotely be relevant to your tax for that year. For example, use it to file:
- Centrelink letters,
- Group certificates,
- 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),
- Taxpack,
- Accountants letters and so on.
This way, you will always be able to locate your records anytime they are required.