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 hacks for students for the year ending 30 June 2018.
Obtain your refund
If a person’s taxable income for the year ended 30 June 2018 is below the tax-free threshold of $18,200, they may not need to lodge an income tax return.
However, if you have had tax withheld from your income during the year and are under the threshold you must lodge a tax return to have these withholding amounts refunded to you.
Typical examples of situations where tax may have been withheld are pay as you go (PAYG) withholding amounts from your salary, withholding from bank interest income during the year where you have not provided your tax file number (TFN) to your bank, or distributions from a family trust where you have not previously provided your TFN to the trustee.
Identify all your sources of assessable income
To determine whether or not you need to lodge a tax return, 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 Youth Allowance, ABSTUDY, living allowance and Austudy
- 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 your deductions
You are entitled to claim tax deductions for certain expenses that are directly related to the income you have received. For example, you can claim work-related deductions if:
- you spent the money yourself
- the expense must be directly related to earning your income
- it must not have been reimbursed
- you must have the relevant records to prove it.
Typical work-related expenses
that are may be 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.
Monthly tax update 2019 - Webinars: offering the most current and comprehensive overview of the month’s tax changes and how they affect you, your organisation and your clients.
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
- 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$55,874 (this figure is for year ending 30 June 2018). 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 to 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 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 are required to make repayments based on their worldwide income.
Are you 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 concessional rate of income 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.
14 small business tax tips for 2018