Your tax rate will depend on whether the Government determines if you are an Australian Resident for Tax Purposes or a Non-Australian Resident for Tax Purposes. Residents have significant tax advantages over non-residents and can save several thousand dollars per year.
If you have an Australian Student Visa, the duration of your visa will become a key tool used to determine if you’re an Australian Resident for Tax Purposes or a Non-Australian Resident for Tax Purposes.
The ATO uses what’s called a “residency test” to determine how to classify you. Depending on how the ATO categorises you, you’ll be taxed in two different ways:
- Australian Resident for Tax Purposes: you will be considered an Australian Resident if:
- You hold a Student Visa that lasts for more than six months and you stay in Australia for more than six months; OR
- Your course is shorter than six months but you spend more than 183 days in Australia (with a visa or visas that allows you to work) during the financial year (1st July – 30th June)
- Non-Australian Resident for Tax Purposes: you will be a Non-Australian Resident for Tax Purposes if:
- You are on a Student Visa and your course is shorter than six months; OR
- You don’t spend more than 183 days in Australia with a visa that allows you to work
If you are on a Work and Holiday or Working Holiday Visa, you will be taxed as a Working Holiday Maker.
Tax implications for each classification:
If you are an Australian Resident for Tax Purposes you won’t pay tax ($0) on the first $18,200 you earn as salary, wages and subcontractor’s income. After this, your tax will start at 19% but will increase as your income rises (if you don’t exceed the minimum amount and you had some tax withheld, you will be able to claim it back on your tax return).
The table below from the Australian Tax office shows tax rates for 2018-2019.
If you are a Non-Australian Resident for Tax Purposes, you will have to pay 32.5% from the first dollar earned in Australia. For instance, if your income within the financial year was $18,200, it means you would have to pay $5,915 to the Australian Taxation Office (ATO) at the end of the financial year.
Source: https://www.ato.gov.au/Rates/Individual-income-tax-rates/
The table below from the Australian Tax office shows tax rates for 2018-2019.
So, as you can see, having a Student Visa and studying for more than six months can save you thousands of dollars… it’s well worth considering one our longer courses to minimise your tax.
If you are a Work and Holiday Maker and you earned $18,200 within the financial year, you will have to pay 15% in taxes. This means paying $2,730 to the ATO.
Before deciding which type of visa you want to apply for and the length you wish to stay in Australia, take the time to think about it because it is an important decision.
