New to Australia: Your First Australian Tax Return

Mia: Welcome to the podcast, our newsletter made easy. Please note, this podcast features AI-generated voices for your hosts, Mia Taylor... Leo: and Leo Baker, bringing you expert insights from the team at Aevum Accounting. Each week, we're here to help you confidently navigate the ins and outs of Australian tax, whether it's for your individual finances or the complexities of your business. Mia: We'll cut through the jargon to give you strategies for compliance, smart planning, and that ultimate peace of mind. Leo: So, if you're looking to understand your obligations, maximise your financial position, or simply gain clarity on your money matters, you're in the right place. Let's get started with our review of the week! Mia: This one comes from Kate. It was their first tax return in Australia, after moving over from the UK, and she says, we'd never had to do a tax return before, so we had no idea what to expect. She finishes with, would definitely recommend! Leo: Thank you, Kate. If you've moved to Australia in the last year or so, this one's for you, because a few things work differently in the year you arrive. And if you're doing your own return, the deadline is this coming Monday. Mia: Monday? I thought it was always the thirty-first of October. Leo: Normally it is. But the thirty-first falls on a Saturday this year, so people lodging their own return have until Monday the second of November. And if you'd like a registered tax agent to do it, and you haven't used one before, get in touch before Saturday. Mia: Good to know. So where does a new arrival start? Leo: With one question. Are you an Australian resident for tax purposes? Because that answer drives almost everything else on your return. Mia: Isn't that just whatever my visa says? Leo: No. Your visa and your tax residency are two different things. The tax office uses its own tests, not the immigration rules. Mia: So someone on a temporary visa could still be a resident for tax? Leo: Yes, they can. It works the other way too. You can hold a visa and still be a foreign resident for tax. It all comes down to the tests. Mia: Okay, so what are the tests? Leo: There are four, but the main one is called the resides test. If you reside here, in the ordinary sense of living here, you're a resident, and you don't need the other three. Mia: And if you've moved here for good? Leo: Then generally you're an Australian resident for tax purposes. The tax office's own example is a family who migrated here on a permanent visa, and it treats them as resident from the moment they arrived. Mia: What about people who aren't sure how long they'll stay? Leo: Then the tax office looks at the whole picture: how long you've been here, why you came, your work, your family and your home. It says six months is a considerable time, but it's not a hard line. Mia: And international students? Leo: If you're here to study, in a course that lasts six months or more, you may be a resident for tax. Mia: And working holiday makers? Leo: They have their own rates. For this return it's 15% on the first $45,000, and for most of them that's the same whether they're residents or not. Mia: Alright. Let's say I've worked out I'm a resident. What's different about my first year? Leo: The tax-free threshold. A resident normally pays no tax on the first $18,200. But if you became a resident part way through the year, you only get part of it. Mia: How much of it do you get? Leo: $13,464, plus a share of the remaining $4,736 for each month you were a resident. And you count the month you became one. Mia: Can you give me an example? Leo: Say you became a resident in January. That's six months, so you get half of the $4,736, and your threshold is $15,832. Mia: And if you moved here back in October? Leo: If that's when you became a resident, it's nine months, so $17,016. Mia: Is it always the month you landed? Leo: For most people who move here to stay, yes. But if you came as a visitor or on a working holiday and only became a resident later, you count from then. Mia: And above the threshold, it's the normal rates? Leo: Yes, 16% up to $45,000 for this return, then thirty, and so on. And the low income tax offset isn't cut back for a part year. Mia: Now, income. If I've still got money coming in from overseas, does that go on my return? Leo: Once you're a resident, you declare your income from everywhere, Australia and overseas, from the day you became a resident. Mia: And what about money I earned before I came? Leo: Overseas income you earned and were paid before you became a resident isn't taxed here. Mia: So my last pay from my old job back home is fine? Leo: That's the catch. Wages generally count as income when you receive them. So if your last overseas pay only landed after you'd become a resident here, it can be taxable in Australia, even though you did the work before you moved. Mia: Even if tax was already taken out overseas? Leo: Then you may get a foreign income tax offset for the tax you paid there, as long as you declare that income here. And you can claim up to $1,000 without working out the limit. Mia: So does my visa matter for anything? Leo: It does in a few places, like the working holiday rates and Medicare. But the big one is this. If you're on a temporary visa, and your partner, if you have one, isn't an Australian citizen or permanent resident living in Australia, you're usually a temporary resident for tax purposes. Mia: And what does being a temporary resident change? Leo: Quite a lot. Most of your foreign income isn't taxed here, and neither are most overseas capital gains. The main exception is pay for work you do while you're a temporary resident, which can be taxed here even if you do the work overseas. Mia: Does that late pay catch apply to temporary residents too? Leo: Generally not. If you did the work before you became a temporary resident, late pay for it usually isn't taxed here. Mia: And if I've moved here for good and brought investments with me, say shares back home? Leo: Generally, they're treated as if you bought them at their market value on the day you became a resident. So the growth before then isn't taxed here, only the growth after. It's worth keeping a record of what they were worth on that day. Mia: And for temporary residents? Leo: Different again. While you're a temporary resident, most overseas gains aren't taxed here anyway. And if you later stop being a temporary resident and stay, they're generally treated as bought at their market value on the day that changes. Mia: Now Medicare. Do new arrivals pay the Medicare levy? Leo: The levy is 2%, and it's for residents. Foreign residents don't pay it. So in the year you arrive, you can claim a full exemption for the days before you became a resident, as long as you didn't have dependants then, or they were exempt too. Mia: And once I am a resident? Leo: Then it depends on whether you're entitled to Medicare. If you're not, for example you're on a temporary visa and haven't applied for permanent residency, you may be able to claim an exemption for that time. Mia: Is that just a box I tick? Leo: No. You need a Medicare Entitlement Statement from Services Australia first, and the tax office says you have to wait until you have it before you lodge. Mia: How long does that take to arrive? Leo: Up to eight weeks. So if you haven't applied yet, it may not arrive before Monday, which is one more reason to get in touch with a registered tax agent before Saturday. Mia: Anything else that trips people up? Leo: Two things. If your partner isn't eligible for Medicare either, they need a statement too. And if your partner is on Medicare, the exemption generally doesn't work. Mia: Now, I've heard people from the UK are different. Leo: They are. Australia has reciprocal health care agreements with eleven countries. The United Kingdom, Ireland, New Zealand, Italy, Malta, Sweden, Finland, Norway, the Netherlands, Belgium and Slovenia. Mia: So what does that mean for the levy? Leo: If you lived in the UK before you came, you're generally covered by Medicare from the day you arrive until your visa expires. So you can't get that statement for the time you were covered, and if you're a resident for tax, you pay the levy like everyone else. Mia: And the surcharge from our Medicare episode? Leo: Still applies. If you're a resident for tax, single with no dependants, and earning over $101,000 for surcharge purposes, you may pay it for any days without an appropriate level of hospital cover from a registered Australian health insurer, unless you're exempt from the levy. Mia: Even if my visa made me buy health insurance? Leo: If you're covered by Medicare, yes. Overseas visitor and overseas student health cover don't count for the surcharge. But if you've got the levy exemption for that time, the surcharge doesn't apply. Mia: Let's finish with the practical things. Tax file number first. Leo: If you're in Australia on a visa with work rights, you can apply for a tax file number online, and it should arrive within twenty-eight days. Mia: And if I've already started a job without one? Leo: You've got twenty-eight days to get one and give it to your employer. If you don't, they have to take tax from your pay at the highest rate. Mia: And my bank account? Leo: Give your bank your tax file number too, or tax comes out of your interest at the top rate. Mia: And to lodge it myself? Leo: You'll need a myGov account linked to the tax office, and then you can do it online. Mia: So let's recap. Your visa isn't your tax residency, and if you've moved here to stay, you're generally a resident from when you arrived. Leo: In the year you become a resident, your tax-free threshold is smaller, and you declare income from everywhere from that day. Temporary residents mostly leave their foreign income out. Mia: If you're not entitled to Medicare, the levy exemption needs a statement from Services Australia. And if you came from the UK, you're usually covered by Medicare, so you pay the levy. Leo: And get your tax file number to your employer and your bank. Doing your own return? You've got until Monday. Mia: If you're not a client yet and you'd like the team to look after your first Australian return, head to aevumaccounting.com.au and get in touch before Saturday. Leo: Or head to aevumaccounting.com.au. And if you're already a client and any of this sounds like you, just let the team know when you start your return. Mia: Before we go, a quick but important reminder. The information shared today is for general informational purposes only, and does not constitute specific tax or financial advice. Leo: Everyone's situation is unique, and tax laws are complex. For personalised advice tailored to your situation, we always recommend consulting with a qualified professional. Mia: Until next time, stay savvy, stay proactive... Leo: And welcome to Australia, tax file number and all!