When you’re a student, lodging an income tax return may seem a bit daunting. In fact, event parents who're helping to navigate these uncertain waters can find it challenging! To help, CPA Australia has put together tax tips for students for the year ending 30 June 2020.
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Lodge a return
If you're preparing and lodging your own tax return, you have from Wednesday 1 July to Saturday 31 October to lodge. If you lodge online in August or September, most of your information will already be pre-filled in your tax return. This means you'll be less likely to leave something out.
Most registered tax agents have a special lodgment program and can lodge returns for their clients after the usual 31 October deadline. 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.
If you haven't lodged a previous year's tax return, it's important to get up to date as soon as possible to avoid penalties.
Get your refund
If your total taxable income for the year ended 30 June 2020 is below the tax-free threshold of $18,200, you may not need to lodge an income tax return.
However, if you have had tax withheld from your income during the year and are under the threshold, you must lodge a tax return to have these withholding amounts refunded to you.
Typical examples of situations where tax may have been withheld are pay as you go (PAYG) withholding amounts from your salary, withholding from bank interest income during the year where you have not provided your tax file number (TFN) to your bank, or distributions from a family trust where you have not previously provided your TFN to the trustee.
Set up your myGov account
If you haven’t already, you should set up your myGov account. This is a secure way to access government services online with one login and one password. You can then link government services, including the ATO, to your account. If you choose to lodge yourself, you can also access myTax through your myGov account.
Most employers will give you your income statement (formerly known as payment summaries) via myGov. You will also be able to see your superannuation information there as well.
Identify all your sources of assessable income
To determine whether you need to lodge a tax return, identify all sources of income derived during the year that is assessable for income tax purposes.
Such amounts include:
- income subsidised by JobKeeper, including ‘top up’ amounts on your usual salary
- income from work as an employee or a contractor, including any tips or gratuities received
- investment income, such as any bank interest or dividends on shares received
- certain government payments received such as Youth Allowance, ABSTUDY, living allowance and Austudy
- some non-government scholarships, grants and awards
- distributions from a family trust or partnership.
If you get paid cash in hand, you still need to declare the cash as income on your tax return. Check that your pay slip or income statement shows all your earnings and the amount of tax taken out, as well as super payments if you’re entitled.
You can report illegal activity and concerning behaviours to the ATO such as JobKeeper fraud, demanding or paying for work cash in hand to avoid obligations, underpayment of wages, bypassing visa restrictions and visa fraud, identity fraud, tax fraud, not paying correct super to employees or creating false or fraudulent documents or records.
Report income and expenses from the gig, online and cash economy
If you drive people around, do odd jobs, give private tuition, rent out your possessions, run social media accounts or sell products, your income from such activity may be assessable and your expenses deductible. This can include barter and cryptocurrency payments as well.
The ATO is receiving data from a range of websites including AirTasker, Uber, AirBnb and eBay which is matched against tax returns. Make sure you keep records and report correctly.
For some activities such as online selling, you’ll need to first determine whether you are in business. Find more information here or talk to your CPA Australia-registered tax agent.
Gains or losses from cryptocurrencies
The ATO is now matching transaction data obtained from digital currency exchanges, so it is more important than ever to ensure cryptocurrency gains and losses are correctly reported.
If you are currently, or have been, involved in acquiring or disposing of cryptocurrencies, you need to be aware of the income tax consequences. These vary depending on the nature of your circumstances.
A person involved in cryptocurrency transactions needs to keep appropriate records for income tax purposes. If you have dealt with a foreign exchange and/or cryptocurrency, there may also be taxation consequences for your transactions in the foreign country.
If you are involved in cryptocurrencies, you should contact your CPA Australia-registered tax agent for advice.
Check your super
If you’re an employee and are paid more than $450 before tax in a calendar month, or are under 18 and work more than 30 hours per week, your employer should be making contributions into your nominated superannuation fund.
You can check if you’re entitled to super payments and can report your employer if they haven’t paid them.
You might also have a number of small-balance super accounts from working different jobs. Be aware that from 1 July 2019, inactive low-balance accounts will start to be consolidated, exit fees will be removed and insurance will be provided on an opt-in basis for members under 25 or with balances below $6000. To find your lost super check out SuperSeeker on the ATO website at www.ato.gov.au.
Know your deductions
You are entitled to claim tax deductions for certain expenses that are directly related to the income you have received. For example, you can claim work-related deductions if you have the necessary receipts or credit card statements, they directly relate to the work you do and you paid for the expense and were not reimbursed.
Typical work-related expenses that may be allowable include:
- uniforms and protective items
- employment-related mobile phone and internet costs
- subscriptions and union fees
- travel expenses between worksites or client locations but not the commute to and from home.
You can use the myDeductions tool in the ATO app to keep track of your expenses during the year then upload it via myGov to prefill your tax return.
If you use a tax agent, they can access your uploaded data through their practice management software.
You should consult your CPA Australia-registered tax agent to identify all eligible deductions.
The ATO will pre-fill your tax return with the gifts and donations information they have received. Make sure to add in any donations not included where the receipt shows your donation is tax deductible.
If you made one or more donations of $2 or more to bucket collections conducted by an approved organisation for natural disaster victims, you can claim a tax deduction of up to $10 for the total of those contributions without a receipt.
Claim the right tax offsets
If you receive Austudy, ABSTUDY living allowance, Newstart Allowance, Youth Allowance or other taxable Commonwealth government education or training payments, you are eligible for the beneficiary offset.
This offset ensures you do not have to pay tax on those payments. You may, however, have to pay tax on other income, such as wages or investment income. The ATO provides a beneficiary tax offset calculator to estimate your offset.
In certain circumstances, the low-income tax offset will be available to reduce tax payable on such income, provided your taxable income exceeds the tax-free threshold for the particular year.
The ATO will automatically calculate these offsets when they process your tax return. You may, however, be eligible for other tax offsets which you must claim through your tax return.
Students should therefore consult their CPA Australia-registered tax agent to identify if any other tax offsets are available.
Identify eligible self-education expenses
If your study is directly related to maintaining or improving your skills in your current occupation, or could increase your income from your current employment, you can claim self-education expenses.
Typical self-education expenses include:
- course fees
- student union fees
- the depreciation of assets such as computers, tablets and printers.
By contrast, if you are embarking on study for the first time or if the study is unrelated to your work then the expenses incurred are not deductible.
Understand HELP debts
Higher Education Loan Program (HELP) debt repayments are not tax deductible.
If you have a HELP debt, repayments commence once your salary exceeds $45,881 for 2019–20. The specific amount required to be repaid will depend on a range of factors, including your taxable income.
If you are working and you have filled out a tax file number (TFN) declaration form indicating you have a HELP debt, your employer will withhold additional tax from your salary to assist you to cover your HELP debt. The ATO will automatically calculate what your HELP repayment is for the year once you lodge your tax return.
If you don’t notify your employer that you have a HELP debt through the TFN declaration, your employer will not withhold the additional tax and you may therefore find yourself facing an unexpectedly hefty tax bill.
If your income varies significantly over a year and you do not expect to exceed the threshold, you can ask your employer to stop withholding the additional tax for HELP purposes and that additional tax withheld may be refunded to you after you lodge your tax return.
People who are overseas with a HELP debt are required to make repayments based on their worldwide income.
Are you a resident for tax purposes?
The tests used to work out residency status for your clients for tax purposes are not the same as residency tests used for other purposes such as immigration.
If you’re an international student studying at an Australian education institution in Australia for a period of six months or more, you may be regarded as an Australian resident for tax purposes. You will therefore pay the same concessional rate of income tax as other resident taxpayers and have access to the tax-free threshold. You will also be assessable on your worldwide income, not just the income from within Australia.
There are separate rules for working holiday makers and individuals who are dual residents.
For non-residents temporarily in Australia as a result of COVID-19, the ATO has advised that if individuals who are in Australia temporarily for some weeks or months will not become an Australian resident for tax purposes, as long as they usually live overseas permanently and intend to return there as soon as they are able.
There are a number of rules to determine tax residency so you should always speak to a CPA Australia-registered tax agent about your specific circumstances.
Consider the special rules for those under 18
Certain types of income derived by minors under the age of 18 may be taxed at a higher rate than would apply to that same income if the taxpayer was aged 18 or over. The types of income that may be taxed differently include:
- income received as a beneficiary from a trust
- interest, dividends, rent and royalties.
Such income will be taxed at a rate of 66 per cent plus 2 per cent Medicare Levy for income that is greater than $416 and less than $1307, and at a rate of 45 per cent plus 2 per cent Medicare Levy on income that exceeds $1307.
Minors will also not be able to typically claim the low-income tax offset to reduce their tax liability on such income.
Ordinary marginal tax rates will apply to other income (known as ‘excepted income’) derived by a minor aged under 18, such as:
- employment or business income
- taxable government payments such as Youth Allowance
- income from a deceased estate
- income from property transferred to a minor as a result of a person’s death or a family breakdown, and/or
- net capital gains on a disposal of investments.
You may receive the low-income tax offset or the low and middle-income tax offset. The amount of the offset depends on your income level and how much tax you have paid throughout the year. However, both of these income tax offsets will only reduce tax payable on excepted income.
Find a good tax agent
Student life can be financially challenging and those promises of large refunds can sound attractive. But be careful – the tax rules can be complicated, and those deductions need to be legitimate if you want to avoid paying extra tax, penalties and interest.
You should watch out for agents who offer a very low fixed fee, promise large refunds, spend very little time with you or don’t ask for receipts. A good tax agent will ask you about your employment and any investments, and check that you’ve got the right records to back up your claims.
Finding a good tax agent is a great way to begin to understand your tax obligations and some agents do offer special rates for students, so don’t forget to ask.
The Tax Help program is also available to eligible recipients from July to October in all capital cities and many regional areas across Australia. Tax Help is a network of ATO-trained and accredited community volunteers who provide a free and confidential service to help people complete their tax returns online using myTax.