Tax Rate on Subclass 500 Student Visa for International Students

As an international student in Australia, taxes might not be the first thing on your mind. But did you know that being a Subclass 500 visa holder and staying for more than 6 months could make you a tax resident under Australian tax laws? Don’t worry, you’re not alone. Knowing the basics about your tax obligations will help you avoid surprises. Whether you’re earning part-time while studying or just figuring out how the system works, we’ll guide you through tax rates, filing, superannuation, and more.

Please Note: This article serves as a general guide with information accurate as of the publication date. For tailored advice, consult a registered tax agent or The Department of Home Affairs.

Understanding Tax Residency for Subclass 500 Visa Holders

You might be asking, “Am I considered a tax resident in Australia?” Let’s break it down:

Residency Criteria

Your tax residency depends on several tests under Australian law:

1. Domicile Test:
   Determines if Australia is your permanent home, considering whether you have moved to Australia with the intention to stay indefinitely. Evidence might include leasing a house or long-term employment.
2. 183-Day Test:
   If you’re physically present in Australia for more than half the financial year (183 days) and intend to stay, you may meet this condition. However, this test alone doesn’t automatically make you a tax resident if your behavior shows an intent to return to your home country.
3. Behavioral Test:
   Examines your social and economic ties, living arrangements, and behaviors indicating your intent to remain in Australia. Examples include:
   • Proof of long-term rental agreements or leases.
   • Employment contracts or consistent payroll records.
   • Bank statements showing regular transactions in Australia.
   • Membership in local organizations or maintaining utility accounts.

International students staying for more than 6 months under a Subclass 500 visa often meet these criteria and follow the same tax rules as Australian citizens. However, non-residents do not qualify for the $18,200 tax-free threshold and are taxed at 32.5% from the first dollar earned.

Annual Income and Tax Rates

If you earn AUD 18,200 or more each year as a tax resident, you’ll pay tax on the money you earn above that amount.

Here’s a Simple Tax Breakdown for Residents:

• $0 – $18,200: No tax (this is your tax-free amount!)
• $18,201 – $45,000: 19% tax on the money you earn over $18,200
• $45,001 – $120,000: $5,092 plus 32.5% tax on the money you earn over $45,000
• $120,001 – $180,000: $29,467 plus 37% tax on the money you earn over $120,000
• $180,001 and above: $51,667 plus 45% tax on the money you earn over $180,000

Essential Steps for Filing Taxes

1. Determine If You Need to File a Tax Return
   If you earn more than $18,200 a year as a tax resident, you need to file a tax return. If you earned less than $18,200 but had tax withheld, you can claim this tax back by filing a return.
2. Apply for a Tax File Number (TFN)
   A Tax File Number (TFN) is required for tax purposes. Apply online through the ATO website as soon as you start working.
3. Apply for a Medicare Levy Exemption Certificate
   International students are typically exempt from the 2% Medicare Levy, but you must apply for a Medicare Levy Exemption Certificate through Services Australia to secure this exemption. Without this certificate, the levy may be deducted automatically, and you would need to request a refund after filing your tax return.
4. File Your Tax Return Through MyGov
   MyGov is the primary platform for lodging tax returns. It offers key benefits, such as:
   • Pre-filling income and tax data from employers and banks, saving time.
   • ATO account linking for streamlined lodgment, tracking past returns, and monitoring refunds.
5. Refunds for Overpaid Tax
   If your income is below the $18,200 threshold but tax was withheld, you are eligible for a refund by filing a tax return. Refunds are processed after filing and deposited directly into your nominated bank account. Ensure you have all necessary documentation, including payslips and income statements (accessible through MyGov), to file accurately.

Superannuation Contributions for Subclass 500 Visa Holders

When you work in Australia, your employer is required to contribute to a superannuation fund, a retirement savings account. Here’s what you need to know:

Contribution Rate

Your employer must contribute 11.5% of your earnings to your superannuation fund as of July 1, 2024. For example, if you earn $1,000 in a week, your employer will contribute $115 to your super fund.

Choosing a Superannuation Fund

As an employee, you can choose your own superannuation fund or use your employer’s default fund. It’s important to:

• Compare fees and returns across funds.
• Use tools like the ATO’s YourSuper comparison tool to evaluate options.
• Check if the fund offers features like online access, lower fees, or good long-term returns to maximize your savings.

Accessing Your Superannuation Fund

While you can’t access this money while you’re still studying in Australia, you can claim it back through the Departing Australia Superannuation Payment (DASP) if you leave the country. The tax rates for withdrawing superannuation depend on the type of contributions:

• 38% tax for taxable components (e.g., employer contributions).
• 65% tax for untaxed components (less common).

Deadlines and Methods for Lodging Tax Returns

Here’s what you need to know about filing your tax return:

• The deadline to file your tax return is October 31.
• You can start filing your return as early as July 1.
• You can lodge your tax return online through the MyGov platform or with the help of a registered tax agent.

Late Filing Penalties

If you miss the deadline, the ATO may impose penalties:

• $222 per late period, up to a maximum of $1,110, depending on the length of the delay.

Important Points to Consider for Subclass 500 Visa Holders

1. Australian Income Only: You are only required to report income earned in Australia, such as part-time jobs, internships, or any other paid work in Australia. Overseas income is generally not taxable.
2. Medicare Levy Exemption: Ensure you apply for a Medicare Levy Exemption Certificate to avoid paying the 2% levy unnecessarily.
3. Tax-Free Threshold for Residents Only: Non-residents are taxed at 32.5% from the first dollar earned, as they don’t qualify for the $18,200 threshold.
4. Keep Good Records: Keep track of your payslips, income statements, and other documents showing income and tax withheld. These are critical when filing your tax return.
5. Consult an Expert: Tax rules can be tricky, so consulting with a tax agent can ensure compliance and maximize your refund.

Final Thoughts

As a Subclass 500 visa holder, it’s important to understand your tax responsibilities in Australia to avoid surprises. By following the simple steps in this guide—like determining your residency status, applying for a Tax File Number, keeping track of your documents, and filing on time—you’ll stay on top of your tax obligations.

Don’t forget about superannuation. Although you can’t access it immediately, it’s a significant saving for the future, and many international students overlook it.

If you need help, contact Knowbal for expert assistance with tax filing and guidance on navigating Australian tax laws. We’re here to make tax season stress-free!