Australian Tax for Overseas Migrants Moving to Australia

Coming to Australia – Taxation issues for Non Residents

Thanks for visiting Australia – and chipping in

Resident or not? |  Being a non-resident | Tax file numbers |  Double tax agreements|  Medicare |  Superannuation

If you are lucky enough to enjoy a visit to Australia and earn some money while you’re here, good for you. The only thing is, being on vacation Down Under doesn’t automatically translate into a tax holiday as well. And, for the new arrival, the Australian tax system may seem a little bewildering. However, by using the links provided below, you should be able to ensure you’re ticking all the correct tax boxes.

If you’ve arrived from overseas and want to work here, you need to check that you have the right permissions to do so – one way is to check what type of visa you have. Another way is to contact the Department of Immigration and Citizenship (DIAC) which will also tell you what type of visa you need to get for working. DIAC is open 8.30am to 4.30pm Monday to Friday on 13 18 81.

Travellers who make some income while in Australia will be expected to pay some tax on their earnings – but it’s important to clear up one tax-related distinction at the outset. Are you a ‘resident’ or not? It may seem a strange way to phrase the concept of being a bona-fide tax-paying Australian. But the term is hard-wired into the Tax Office’s lingo, so we’re stuck with it for now.

Resident or not?

It’s an important question to settle (and the long answer to whether you are a resident or non-resident for tax purposes can be found here.)

But in a nutshell, travellers who come solely to work and overseas students are ‘residents’ (for tax purposes). Residents need to pay tax on any income they earn, from anywhere in the world. Residents don’t pay any tax on the first $6,000 of their income, and then 15% up to $37,000 and so on (see first pair of tables below).

People on holiday here and those who combine the holiday with some paid work will be ‘non-residents’ in the eyes of the taxman. These people start paying tax on the first dollar earned (see second pair of tables below).

Here are the tax rates applied to residents for tax purposes, and to non-residents:

Being a non-resident

So, what are the differences if you’re regarded as a non-resident? For starters, you will be taxed only on income you earn in Australia. But a non-resident is taxed from the word go, and at a flat rate of 29% (in other words, there is no tax-free threshold of $6,000 – see table above).

Tax file numbers

If you have the right visas and permissions to work, the next administration task is to obtain a tax file number (TFN).  Find out what a TFN is and how to get one. How you apply for a TFN will depend on your residential status. You’ll need this for everything to do with Australian tax. It is important to have a TFN for another significant reason; if you don’t, tax will be deducted from your wages at the top tax rate (45% for 2010-11 financial year).

Non-residents can’t claim to have tax reduced by way of schemes called ‘tax offsets’ (and there are various such support schemes available to residents, for dependants and so on). Deductions available to Australian residents have a wide range over most expenses ‘incurred in earning income’ that are unavailable to non-residents. For example, a traveller (non-resident) can’t claim living expenses while in Australia as a living away from home allowance or deduction. Generally, you can claim only up to $300 in work-related expenses before receipts will be required.

Australia has ‘double taxation agreements’ with several countries, so that certain categories of workers pay tax on their own country’s terms, such as self-employed professionals, teachers and those working for foreign companies that have a physical workplace in Australia.

Medicare

Still, there are some advantages in your non-resident status. You will be exempt from the 1.5% Medicare levy, which residents have to pay to cover basic medical costs. Tax is only paid on Australian income, and in a lot of cases the 10% goods and services tax (GST) can be refunded on items valued at more than $300 taken out of the country (the refund is collected at departure). Also interest on bank accounts is only taxed at 10%, not 29% (but you’ll need that tax file number).

The end of the Australian financial year is June 30, and tax returns should be lodged from then and before October 31. If not enough tax has been taken out while you were working in Australia, more will be asked for. But if too much was put aside, you’ll get a refund. But make sure a proper address is given with your tax return as it can take six weeks to process.

If you are leaving the country before the end of the financial year it is possible to lodge your tax return early, but you will need to collect a group certificate (or ‘payment summary’) from every employer and details of other income made in Australia. Find out more about early lodging, here.

It may be easier however to lodge your return online using e-tax, which you can do from anywhere, even if you have left the country.

If you get rental income from an Australian property, you need to include that in your income tax return. But remember, if the only income you receive from Australia is in the form of interest from bank accounts, unfranked dividends or royalties, you don’t need to lodge an income tax return. Find out more about investing in Australia here.

Superannuation

When you start working your employer will contribute to a ‘super’ (superannuation) fund on your behalf. This ensures money is put aside for your retirement. Find out more about superannuation, here. Income tax will be taken out of your regular pay in a system called pay-as-you-go (PAYG) withholding. Find out what income tax is, why it exists and how it affects you.

NOTE: Because your TFN is your special identity code, and plays a key role in living in Australia, it’s important to protect it. Unfortunately, the theft of identities is a growing area of criminal activity, and one of the main ways do so is through stealing people’s TFNs, which can allow access to your funds. Find out more about identity theft, and scams, here.