If you’re starting a job in Australia for the first time, it’s important you get a Tax File Number to avoid being overtaxed, and to make sure you don’t miss out on any superannuation during the course of your employment.
What is a Tax File Number?
A Tax File Number is a nine digit number that providers use to identify your tax status, like national insurance in the UK or social security in the US. If you're a foreign resident (working in, but not originally from Australia) you'll be taxed at 32.5% of your earnings for the first six months of your stay in Australia. If you stay for longer than six months you start to be recognized as a resident for tax purposes and can be reimbursed. More info here.
Why do I need one?
While a Tax File Number isn't compulsory, you'd be a bit mad not to get one – having a TFN prevents you from recieiving emergency tax, as well as giving you access to a number of government benefits. It makes lodging and tracking your tax return easier, makes it easier to change jobs, and entitles you to superannuation. (although if you do find yourself paying any emergency tax during the course of your stay in Australia, we can help you claim it back).
At Taxback.com, we can help sort you out with a Tax File Number quickly and easily even before you get to Australia, so you have one less thing to worry about when you get there. It only takes a minute to send an application, so get in touch with us here.
Every single time you start a new job you're going to want to file a new TFL document. This is a pre-requisite whether you're an Australian resident or a foreign resident.
The same applies if you've opted for a working holiday visa, which entitles you to travel and work short-term in various locations around the country. A working holiday visa is valid for up to a year, but you'll be taxed as a non-resident for the entire duration of your stay.
You are excluded from foreign residency tax if you're an overseas student, in which instance you'll be taxed as an Australian resident if you choose to work alongside your studies. Also, if you stay in Australia for more than six months and have a consistent contract or place of employment, you'll be treated as a resident for tax purposes and will be eligible for some form of rebate in the next tax year.
Another thing that's extremely important for foreigners travelling to Australia for work is to register for a Tax File Number. If you don't supply your employer with this within the first 30 days of your employment, you could be subject to emergency tax ON TOP OF the 32.5% you're already paying as a foreign resident – which means around 45% of your earnings would be withheld as tax!
You can fill out a short questionnaire on the ATO website to determine your residency status.
Bare in mind you are exempt from the 2% Medicare levy if you are not taxed as an Australian resident.
The average tax refund Down Under is AU$2600
What can I get back?
It's important to bear in mind that you're only eligible for a full rebate under certain conditions. If you're staying in Australia for less than six months or 183 days, you will not reach the point where you qualify as resident for tax purposes and will therefore be unable to claim back on the tax you incurred as a foreign resident. The same goes for a working holiday visa.
If you aren't eligible for a rebate due to the length of your stay or nature of your visa, never fear! You should still be eligible to claim back for any superannuation withholding that occurred with your salary. Super tax is a percentage of your salary put aside for the purposes of a retirement fund, and obviously if you're not staying in Australia until retirement you are entitled to retrieve that money.
You are eligible to apply for remuneration on your super as soon as your visa expires and you leave Australia.
Super is equal to about 9.5% of your earnings, and is collected as part of your income tax every month. The average reimbursement for super tax with taxback.com is around AU$1908, so even if you can't claim back the tax you paid as a foreign resident you can still walk away with a tidy sum!
Submitting Tax Returns
You're obliged to file a return to the Australian Taxation Office if you've paid tax of any kind during your stay, even on a working holiday visa or as a foreign resident. The Australian financial year runs from the 1st July to the 31st June, and because it's necessary to submit a return for every year you were paying tax, you may have to submit more than once depending on when you arrived and how long you stayed.
If you're a foreign resident you may be eligible to submit a tax return early if you're leaving Australia permanently, are ceasing to be an Australian resident for tax purposes or no longer receive an Australian-sourced income (i.e you've left your job and aren't due to receive any outstanding salary).
If you don't submit the appropriate returns by 31st October of the following tax year, you could face a penalty fare AND miss out on any refunds you could be eligible for. It may seem like a hassle, especially if you're no longer living in Australia, but we can help to make the process as streamlined as possible. Remember, it's completely free to get a tax refund estimation with us, and the average reimbursement we can get you from the ATO is between $2,600 and AU$1908.