Tax for International Students in Australia

Australian universities are some of the highest quality in the world – the experiences studying in Australia are like no other. We are here to assist with all your Australian tax return complications.

Completing your taxes correctly and strategically may save you thousands during your stay in Australia. As always, understanding your Australian tax residency is crucial. As a student in Australia, you may be considered:

  1. Australian Resident for Tax Purposes
  2. Temporary Resident
  3. Non-Resident for Tax Purposes
  4. Working Holiday Maker

We stress the importance of being proactive with your financial and tax affairs. There are potentially thousands of dollars that can be saved with strategic tax planning. Do not hesitate to contact us for any matter.

Australian Resident for Tax Purposes

As an Australian resident for tax purposes, you must declare all income (and deductions) both in Australia and internationally on your Australian tax return (even if you’ve already paid tax on it overseas). For example, foreign share sales.

You will be considered a resident for tax purposes in Australia if you:

  • reside in Australia (i.e. you intend to live in Australia indefinitely – you are taking active steps to do this, moving to other visas)
  • are domiciled in Australia (i.e. your permanent place of abode is Australia);
  • spend at least 183 days in Australia in an income tax year;

Click here for Australian resident tax rates per the ATO website.

Temporary Resident

If you have a temporary visa (many student visas are temporary), you may be considered a temporary resident for tax purposes. This means you only declare income you derived in Australia, plus any income you earn from employment or services performed overseas while you are a temporary resident of Australia. Other foreign income and capital gains do not have to be declared.

One advantage of being a temporary resident is you get access to the resident tax rates (lower tax brackets, tax free threshold) in addition to the temporary resident foreign income exemption.

You will be considered a temporary resident in Australia if you:

  • If you have a temporary visa, and neither you or your spouse is an Australian resident within the meaning of the Social Security Act 1991

Non-Resident for Tax Purposes

As a foreign resident, you only pay tax on your Australian sourced income (Australian employment income, Australian interest income and Australian dividends). Any income earned abroad does not need to be included in your Australian tax return.

You will be considered a non-resident for tax purposes in Australia if you:

  • Spend less than 183 days in Australia in an income tax year
  • Do not have a temporary visa
  • Have no intention to reside in Australia

Foreign residents tax rates can be found here.

Working Holiday Maker (WHM)

If you are on an Australian Working Holiday Visa (subclass 417) or an Australian Work and Holiday visa (subclass 462) – you may be taxed differently than above. There was a recent case that changed the way WHMs are taxed for citizens of certain countries.

Most WHMs will be taxed:

  • 15% tax from the first dollar up to $45,000 from 2020-21 & onwards
  • 5% on each $1 over $45,000 to $120,000
  • 37% on each $1 over $120,000 to $180,000
  • 45% on each $1 over $180,000

Working Holiday Makers from the below countries may be able to access Australian resident tax rates if they can prove they are an Australian resident for tax purposes:

  • Chile
  • Finland
  • Germany (for 2017–18 and later income years)
  • Israel (for 2020–21 and later income years)
  • Japan
  • Norway
  • Turkey
  • United Kingdom

The ATO is enforcing strict enforcement on this. Their view is that “most people who come to Australia for a working holiday or to visit are foreign residents for tax purposes”. To ensure you can access favourable tax rates you must be:

  • considered an Australian resident for tax purposes (per the notes earlier in this blog) and.
  • from a non-discrimination article (NDA) country

This area requires specialist expertise – so please ensure you contact us.

Superannuation Rate And Your Tax Residency

The superannuation rate obligated to be contributed by your employer is currently 10.0% for the income year ending 30 June 2022. The SG percentage rate is set to increase by 0.5% every year until it reaches 12.0% from 1 July 2025.

Per your tax residency status – your ability to access your superannuation will change.

  • Australian Resident for Tax Purposes
    • Unable to claim any super upon departure
  • Temporary Resident
    • Able to access your super through a departing Australia superannuation payment (DASP). Learn more about DASP for temporary residents here.
    • Your DASP will be taxed at 35%. If you have $10,000 in super – you will receive $6,500 after tax.
  • Non-Resident for Tax Purposes
    • Unable to claim any super upon departure
  • Working Holiday Maker
    • Able to access your super through a departing Australia superannuation payment (DASP). Learn more about DASP for WHMs here.
    • Your DASP will be taxed at 65%. If you have $10,000 in super – you will receive $3,500 after tax.

Be proactive!

It’s critical you seek specialist tax and financial advice on your personal situation. The Australian tax system is overly complicated as you can see above there are many different scenarios and tax residencies. Do not hesitate to contact us for any matter, please book a free initial consultation if you would like to chat.