We chatted to Ashley Debenham – tax expert at etax.com.au – about the common mistakes they see students make, and how to avoid them.
Studying part time while working makes for a busy life, one where personal administration can be low on your list of priorities—including taxes. That said, making sure you file them on time is important to make the most of your return and reduce your risk of fines or interest charges. Hear from Ashley Debenham, tax expert at etax.com.au.
How to avoid tax trouble:
Including dodgy deductions
The most common incorrectly claimed items come from students who are studying in one field but working in another, Debenham says. “Students often mistakenly think they can claim self-education expenses like course fees, laptops, or travel.” “However, for a self-education expense to be eligible, the course you are studying must be directly related to your current employment. It can’t be to get you a new job or a promotion,” she says.
Failing to claim what you can
Conversely, many part time students don’t claim the expenses that they can. Debenham says if you’re:
- Improving your academic qualifications for the job you already have during your studies
- Improving your knowledge or skills for your current job
- A trainee and your self-education course is part of the traineeship
- Can show that your course, qualification or degree can lead to an increase in income within your current employment
Then you are eligible to claim a range of expenses related to your study including course fees, stationery and textbooks, student service, union and amenity fees, equipment depreciation and repairs and possibly car expenses. “If you’re working, you may also be able to claim uniforms if they have a company logo, or travel for work-related reasons,” she says.
Being afraid to catch up on skipped tax returns
It can be easier to stick your head in the sand If you’ve skipped a tax return in the past, for fear of fines or interest charges. However, Debenham says it’s best to get caught up—and you may even be surprised with a bonus tax return!
Buying up on ‘instant tax deductions’ at tax time
“For a deduction to be claimable it must be directly connected to your work. If, for example, you wish to claim office supplies, you must need to purchase your own office supplies to do your job,” Debenham says. It’s also important to note items over $300 can’t be claimed in full and must instead be depreciated over the ‘effective life’ of the item, which is usually several years.
Not keeping adequate records
It’s essential to have documentation of anything you plan to claim, so take the time to create a box or file to quickly stash any receipts you may be able to use to claim a deduction come tax time. If you’re planning on claiming travel costs, keep a log in your car and ensure you fill it in thoroughly (and regularly).
Not understanding that Austudy is considered income for tax purposes
If you receive Austudy, it’s a good idea to look at your tax situation at the beginning of the financial year, rather than waiting for tax time, says Debenham. Why? You might be stung with a tax bill. You can contact Centrelink to ensure this doesn’t happen.
Failing to file a return because you’re under the tax-free threshold or haven’t paid tax
While those earning under the tax-free threshold who haven’t paid tax probably don’t need to file a return, Debenham says you do need to notify the Australian Tax Office regardless with a non-lodgement advice. The good news is, much like catching up on late returns, if you have paid tax, you may net yourself a bonus return cheque!
Failing to clarify if you need to pay tax as an international student.
If you are a student studying in Australia and you’re earning income from working, chances are you will need to do a tax return, Debenham says. Depending on how long you’ve been in Australia, you may be regarded as a resident or non-resident for tax purposes, and in each case different tax rates do apply. If you’re unsure, Debenham recommends getting in touch with a skilled tax agent for individual advice.
Not timing your voluntary HECS/ HELP repayments to your best advantage
If you plan to pay off some of your debt in advance, Debenham says the ATO applies a yearly interest indexation on your loan amount on the first of June each year. “If you make a voluntary repayment prior to 1 June—with enough notice that they can process it before 1 June, the amount of interest that is added to your loan will not include the amount you just paid off, saving you money,” she says.
Trying to DIY a complex tax return
It’s a tax agent’s job to ensure you get the best possible refund and to ensure you avoid ATO trouble, says Debenham. “Tax agent fees can be claimed as a deduction on your next tax return and for online services such as Etax, fees are generally less than $100 and can be deducted out of your refund so you’re not out of pocket for anything up front,” says Debenham.
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