So many Oz tax changes have come into play over the past six months to our Australian tax refund.
At one stage the ATO was going to take 95% of our superannuation!
We now know what the Australian government plans to do with our Australian tax refund.
We have compiled this list of 6 tips to make sure you maximise your Australian tax refund in 2017 and beyond!
1. Apply for your TFN
If you’re going to work in Australia, then you’ll need a tax file number so your employer can deduct the correct taxes from your income..
This number will also come in useful when you want to apply for your tax back.
You can apply for your TFN here if you don’t already have one.
The tax will be deducted at source by your employer, so you don’t really need to worry about an underpayment of tax.
If you’re self-employed in Australia or maybe doing the odd bit of freelance work, then you’ll need an ABN (Australian Business Number).
Examples of cases where you might need an ABN include childminding, carpentry, fundraising, and personal training.
In the case of an ABN, tax is not taken at source, so you should retain a portion of the income to meet the liability at the end of the tax year.
2. The tax-free threshold
Residents in Australia can avail of something called the tax-free threshold, which means they don’t need to pay tax on yearly income up to $18,200.
Typically when you arrive in Australia however, you’ll be deemed a non-resident for tax purposes and pay 32.5c on each dollar from the first dollar you earn.
However, if you stay over 183 days in Australia, you may become a resident for tax purposes and qualify for the tax-free threshold.
The new so-called backpacker tax has been passed by the Senate recently which means working holiday makers will not be able to avail of this tax free-threshold but instead, must pay 15c on each dollar from the first dollar earned.
This is set to come into effect from January 2017. However, if you don’t qualify as a resident now, then you still have to pay 32.5c until January 1, 2017.
When you file your Australian tax return, you may be able to claim on work-related expenses to reduce your tax liability. These include courses like RSA, RCG, and white cards and equipment you pay for yourself.
To claim an expense for your Australian Tax Refund:
- You should have paid for it yourself and weren’t reimbursed
- It was related to your job
- You must have a record or proof (with some exceptions)
There are some exceptions, however, in most cases, you should keep all receipts for work expenses so you can have proof for the Australian Tax Office. At Taxback.com we can tell you what you need to submit as evidence.
4. The Medicare levy
The Medicare Levy is a healthcare scheme for Australians and partly funded by taxpayers. Some nationalities, including Britons and Italians, can get access to healthcare at little or no cost, but if you don’t qualify for the scheme, then you’re exempt from paying the levy.
However, the levy may get deducted from your wages whether you qualify or not and you can apply for a refund of this.
It’s easier to list the countries that can avail of the scheme: UK, Northern Ireland, Italy, Malta, Sweden, Netherlands, Finland, Norway, Belgium, and Slovenia.
So if you’re from the Republic of Ireland, you should check your payslip to see if it has been deducted from your wages and apply for an exemption certificate if so.
You must earn more than $20,542 in the financial year to be eligible for a Medicare levy exemption and submit a Medicare Entitlement Statement separately to your tax return application.
5. Superannuation for your Australian tax refund
When you work in Australia and earn more than $450 per month, your employer will pay the equivalent of 9.5% of your wages into a super fund on your behalf each month.
Most employers will sign you up to their default fund, however, if you’re going to be travelling around the country with many different employers, it may be worth finding your own super fund so you can keep all the payments in one place. This will make it much easier to claim it back when you leave.
Superannuation is a retirement scheme for Australians, so if you don’t plan on returning to Oz, you should apply for a refund of this when you leave Australia.
You can’t claim all of it back as any refund amount is currently taxed at 38%, but it can still be a hefty amount, with the average super refund at about $3380. You’ll need details of the fund and your TFN to apply for a refund.
Your visa should be expired, and you must be out of the country to apply. You can always contact immigration or get Taxback.com to help cancel your visa if you’ve already left.
Note: New tax arrangements in relation to superannuation will take effect from July 2017, meaning the tax on super refunds will rise to 65%. This is called the Departing Australia Superannuation Payment.
This means that if you have left Australia already, you should apply for your superannuation as soon as possible because it doesn’t matter if you earned it under the new or old rules, you might still lose 65% after July 1, 2017.
The new 65% tax will apply only to applications for superannuation funds where contributions were paid after 1 July 2017.
Basically, the rule is if your contributions stopped up to and including June 2017, the 38% tax will apply, but if your super contributions only finished from July 1, 2017, onwards, then the 65% tax will apply.
For example, Julia’s employer was contributing to her super fund until June 15, 2017. She applies for her refund in August 2017, and her refund is still taxed at the 38% rate. Mark had contributions made to his fund until the end of July 2017, and he applies for his super in August 2017, but his refund is taxed at the 65% rate.
We will also be updating our guide to claiming your super back in the coming days.
There is no time limit on claiming your superannuation.
If you are leaving Australia permanently I suggest you read my guide on what to do before you leave Australia.
6. Beat the rush for your Australian tax refund!
It’s a good idea to file your tax return as early as possible after the end of the tax year to avoid any queues or rush at the Australian Tax Office (ATO).
The Australian financial year runs from July 1 to June 30, and because you must file a tax return every year, you may have to submit more than one if you’re present for longer than one tax year.
If you don’t submit by the deadline of October 31, you could face a penalty and miss out on any refunds.
To file your tax return, you’ll need your TFN, passport ID, and final payslip.
For a free, no-obligation estimate of your Australia tax refund, you should try Taxback.com’s Australian calculator here.