Tax tips for students

Lodging a tax return can seem daunting for students. Parents who may be helping to navigate these uncertain waters can also find it challenging. To help, CPA Australia has put together eight tax tips for students for the year ending 30 June 2016.

Obtain your refund

Where your taxable income for the year ended 30 June 2016 is below the tax-free threshold of $18,200 you will typically not need to lodge an income tax return.

However, you need to lodge a tax return where you have had tax withheld from your salary or other sources of income such as bank interest during the year (where you have not provided your tax file number, or TFN, to your bank) or distributions from a family trust where you have not previously provided your TFN to the trustee, regardless of the income you have earned.

If you do not lodge a tax return, you will not receive a refund you may be entitled to.

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

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 $416 and less than $1307, and at a rate of 47 per cent on income that exceeds $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

Know the deductions you may be entitled to

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 and they directly relate to the work you do.

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 but not the commute to and from home

You should consult your CPA Australia-registered tax agent to identify all eligible deductions.

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 are available.

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
  • textbooks
  • stationery
  • student union fees
  • the depreciation of assets such as computers, tablets and printers

By contrast if you are embarking on study for the first time or if the study is unrelated to your work then the expenses incurred are not deductible.

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$54,126 (this figure is for year ending 30 June 2016). 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 indicating you have a HELP debt, 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.

People who are overseas with a HELP debt will be required to make repayments from 1 July 2017 based on their world-wide income for the 2016‑17 financial year onwards.

Know if you're a resident for tax purposes

If you’re an international student studying at an Australian education institution in Australia for a period of six months or more you will be regarded as an Australian resident for tax purposes. You will therefore pay the same rate of tax as other resident taxpayers and have access to the tax-free threshold.

Note: The list above is not exhaustive and you should always speak to a CPA Australia-registered tax agent about your specific circumstances.

Read next: Tax tips for employees


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