Avoid taxation headache with our practical guide to doing your taxes, written by La Trobe’s Professor of Practice – Taxation, Mr Mark Morris.
Who needs to lodge a tax return?
If you were born in Australia and continue to live here, you will be regarded as an ‘Australian resident for income tax purposes’ and may need to lodge your tax return.
International students may also need to lodge a tax return, if they are living in Australia for a period of time that reflects a degree of continuity, routine or habit that is consistent with ‘residing in Australia’.
It’s essential you lodge a return if you legally need to. If you’re unsure, contact the Australian Taxation Office (ATO) or a registered tax agent.
How much do you need to earn to start paying tax?
If your total taxable income is $18,200 or less, you do not have to pay any income tax for the financial year ending 30 June 2016.
If you worked part-time and tax was deducted by your employer from your income via Pay As You Go (PAYG) but your total taxable income was $18,200 or less, you will be able to obtain a tax refund assuming that was the only assessable income you derived for the year.
For international students treated as Australian residents for tax purposes, it’s particularly important to remember you will be taxed on all your assessable income regardless of where it’s sourced, such as interest income earned in a bank account held overseas.
How do I lodge a return for the 2015-16 financial year?
To lodge your return, you will need your tax file number, payment summary (collected from your employer), bank interest statements, dividend slips, and work-related invoices and receipts.
If your tax affairs are relatively straightforward, you can lodge your return yourself through the ATO’s myGov. Alternatively, you might prefer to lodge your tax return through a registered tax agent to ensure it’s prepared correctly and all of your benefits are claimed.
What types of income need to be declared?
Some of the more common types of assessable income include:
- Salary and wages (whether as a full-time, part-time or casual employee);
- Allowances and bonuses (where received during the 2015-16 income year);
- Tips and gratuities (such as those received working in hospitality jobs);
- Fees received as an independent contractor under a contract for service;
- Any business income derived during the year (not being income derived from carrying on a hobby);
- Australian government payments and allowances, including Newstart Allowance, Youth Allowance, Austudy and certain other educational and training allowances;
- Interest income;
- Dividend income (including the amount of any franking credit tax offset for any franking credit attached to a dividend paid by an Australian resident company);
- Any distributions received as a beneficiary from a family trust or as a partner in a partnership; and
- Capital gains arising from the disposal of certain CGT assets (which is a highly complex area requiring specialist advice from a registered tax agent).
The total amount of assessable income may be reduced by certain work-related deductions, self-education expenses and personal deductions.
What type of work-related deductions can you claim?
Some of the more common types of deductions you may be able to claim include:
- Work-related subscription and union fees;
- Protective clothing and certain work uniforms (including compulsory work uniforms required by your employer);
- Home office expenses (where you are required to work at home after hours and have a separate room allocated in your home for that purpose);
- Employment-related phone and internet costs;
- Travel expenses between worksites (but excluding travel between home and work).
You may also be entitled to claim a deduction for the costs of tools of trade, briefcases, and calculators (costing less than $300) to the extent to which you use the item for work-related purposes. Generally, you will only be able to claim work-related expenses costing $300 or more if you have retained relevant invoices and receipts.
When are self-education costs allowable?
Importantly, self-education expenses are only deductible when the course you’re studying will maintain or improve your skills in your current occupation. They can also be deducted if your study is likely to enhance your chances of promotion, or increase your earning capacity in your existing occupation.
If you’re studying to change careers or to start your career, however, you won’t be able to claim costs. You can find out more in Taxation Ruling TR98/9.
Eligible self-education costs include course fees, textbooks, stationery, travel costs and the depreciation of items such as laptops, tablets and printers. However, it is necessary to add back $250 of any self-education expenses as being non-allowable.
Finally, all Higher Education Loan Program (HELP) repayments are non-deductible.
What other personal deductions may be allowable?
Donations of $2 or more to a deductible gift recipient (e.g. a charity like the Red Cross) will be allowable, provided you have kept copies of receipts for any gifts made.
You can also claim a deduction for any fee paid to a registered tax agent during the year ended 30 June 2016 for the cost of managing your tax affairs. Any amount paid to a registered tax agent to assist you in in preparing your 2016 income tax return, however, will only be deductible in the year ended 30 June 2017.
What tax offsets can you claim?
The calculation of this offset can be complex. It may reduce tax payable on the amount of government benefits, and on assessable income received from other sources.
Where a student is running a business, the individual may be entitled to the small business income tax offset. This offset is 5% of the income tax payable on the portion of an individual’s taxable income that is ‘total net small business income’.
The individual is only able to claim one small business tax offset for an income year, irrespective of the number of sources of that small business income. The maximum offset amount is capped at $1,000 per financial year. Again, the application of this offset is quite complex, so seeking specialist advice is recommended if you intend to claim this offset.
Where to find more help?
For more information, you can visit the ATO’s website.
You can also contact an accountant with taxation expertise. Make sure the accountant is a registered tax agent who is legally authorised to provide such services.
Disclaimer: La Trobe University has used reasonable care and skill in compiling the content of this general commentary. However, it should not be relied upon as advice in any circumstances, and no warranty is provided by either the University or the author concerning the accuracy and completeness of these materials. Accordingly, they disclaim all and any liability to any person in respect of reliance on any of the matters raised in these materials, and professional advice should be sought from an appropriately qualified registered tax agent where required.
This is an edited version of the article Is it Student Refund Time? published on the La Trobe Business School blog.