Taxation in Australia – A Quick Guide for Migrants

As a migrant to Australia, you now know (or getting familiar) about the ‘G’day mate’ attitude, bouncing kangaroos, and beautiful white sandy beaches that dot our coastline. But what about taxation in Australia?

As you become a permanent Australian resident, understanding how the tax system works is something you should learn as early as possible.

Q: How does taxation in Australia work?

A: In a nutshell, tax in Australia is no different to tax elsewhere – it’s money collected from the residents to the government. It pays for roads, hospitals, schools and many other important community services.

Q: What tax are we talking about?

A: There are many kinds of taxes, but the big one (and the one that matters most as a newly arrived migrant) is income tax and it is basically a chunk of what you earn that is paid to the Australian Taxation Office (https://www.ato.gov.au/). There’s also a 10% goods and services tax (GST) (https://www.ato.gov.au/Business/GST/) that essentially adds to the cost of things like groceries.

Q: How is the income tax calculated?

A: Depending on what you earn, the amount of tax you pay will differ. It applies both to salaries and business or investment income, and for a normal individual, the percentage goes up depending on how much you earn up to about 45%. Individual Tax Rates

Tax Rates - Migrant Ninja

Q: Anything else that I should know about?

A: Yes, as well as your income tax, you’ll pay a Medicare levy of 2% or even an additional 2% surcharge on that, depending on your income and level of private health cover. The levy and surcharge helps pay for government health care.

Q: Do I pay tax on all my income?

A: No. Australian residents don’t start paying tax at all until they’ve earned a dollar more than $18,200 (See table above) and follow this LINK for more information. But for this to apply, you’ll need a tax file number (TFN) and must sign a declaration before you start work. Foreign residents do not benefit from the threshold.

Q: What is a Tax File Number?

A: A tax file number (TFN) is a unique nine-digit number we issue to individuals and organisations to help us administer tax. This number is aimed to increase the efficiency in administering tax and other Australian Government systems such as Income Support payments. A tax file number (TFN) also identifies you for tax and super purposes. You can apply for a TFN in various ways depending on your circumstances. Tax File Number

Q: What’s the difference between an Australian and a foreign resident of Australia?

A: If you’re living in Australia, or you’ve been here for half of the year or more, you’ll be regarded as an Australian resident. This can also apply to international students as well, but generally, if you don’t regard Australia as your usual residence, you’ll be called a foreign resident.

Not sure which applies to you? Check out this LINK

Q: What are my obligations?

A: In Australia, the government makes you completely responsible for providing the information required so that your tax can be correctly collected – and penalties apply if you don’t comply (https://www.ato.gov.au/general/interest-and-penalties/penalties/). Annual tax returns are filled out after the financial year ends on June 30, and you will get a refund if you are entitled to one.

Q: How to lodge your tax return?

You can choose to prepare and lodge your own return (Online or in person) or use a registered tax agent.

Due dates for lodging tax returns Most registered tax agents have a special lodgment program and can lodge returns for their clients after the usual 31 October deadline. The due date will also depend on your personal situation. Contact your tax agent for advice. If you’re using a tax agent for the first time, or using a different tax agent, you need to contact them before 31 October to take advantage of their lodgment program due dates.

Q: What about if I run a business?

A: To run a business as a sole trader, you’ll need to get an Australian Business Number (ABN) to go with your TFN – but it’s free to apply for at the Australian Business Register. You will then need to follow the rules for employing staff through the PAYG system, and GST registered businesses must fill out and lodge BAS statements each quarter or month.

It may all seem a little daunting, but the ATO can help either at a shopfront location, on the phone, or even through live online chat – no matter what major language you feel most comfortable speaking! ATO Help in Different Languages

Q: How do I Lodge online with myTax?

The easiest and fastest way to lodge your tax return is online using myTax. To lodge online you’ll need a myGov account linked to the ATO.

As a first time lodger, there are a few steps you need to follow:

Step 1 – Have your tax file number (TFN) handy.

Step 2 – Create a myGov account.

Step 3 – Phone ATO on 13 28 61 and enter your TFN and date of birth when requested. Select 1 at the prompt to get your unique linking code to verify your account from an operator. Each unique code will expire after 24 hours.

Step 4 – Sign in to myGov, go to the Services page and link to the ATO. Select I have a linking code and follow the instructions as prompted.

Step 5 – You’re now ready to use ATO online services and start your tax return using myTax.

Additional Resources

ATO HELP

Read my earlier post on using myGov for filing your tax returns

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MIGRANT NINJA TIP – A simple tax calculator is available to help you calculate the tax on your taxable income.

The Income tax estimator gives you an estimate of the amount of your tax refund or debt, and takes into account:

  • the Medicare levy
  • higher education loan scheme repayments
  • tax offsets
  • tax credits
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