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Re: Residency for tax purposes status and Medicare Levy

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Good evening,
I would like to enquire regarding my residency status for tax purposes. I am a foreign resident (foreign passport) under student visa and have studied here in Australia for more than 1 year (meaning I should have reside in Australia for more than 6 months) and my course is 3 years long in total. I also live in 1 place for more than 1 year. I did the residency test on the ATO website and it showed that I am an Australian resident for tax purposes. I even called ATO since I was worried if I did a mistake, and they assured that I am regarded as stated above. I also did more research, even from the ATO website. I started a casual work on beginning of July 2020 (so 2020-2021 Financial Year) and I had to submit a Tax Declaration Form before I can start working. I chose Australian Resident for tax purposes since the residency test result said so and also from ATO's assurance. So, I am aware that Australian resident for tax purposes are eligible for a tax threshold on income of around $18,000 annually. However, I am confused about the Medicare Levy or Medicare Surcharges. I have an Overseas Student Health Cover since I am an international student. Am I eligible for Medicare levy and surcharge exemption? As stated above, I am also a foreign resident (Home Affairs POV) but an Australian resident for tax purposes. I have seen a couple of post regarding the need to submit a form to a certain department to get the exemption every year. May I know more about this? Also, when should I actually submit the form? Should I submit it before lodging a tax return or after? Please let me know to clear all the confusion, your reply will be highly appreciated. Thank you.
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Hi @Putu_Shiong ,

 

Welcome, you're on the right track. Yes, you're definitely an Australian resident for tax purposes. As you're likely on a temporary visa to study/ work, you're probably a Temporary Resident.

https://www.ato.gov.au/Individuals/International-tax-for-individuals/Coming-to-Australia/Studying-in...

 

Usually, Temporary residents aren't entitled to Medicare (unless covered by a Reciprical Health Care Agreement), so they can apply to be exempt from paying the levies (see Category 3 in link below).

https://www.ato.gov.au/individuals/medicare-levy/medicare-levy-exemption/category-3--not-entitled-to...

 

To apply, fill in the 'Medicare Entitlement Statement' form and send it to Servicesaustralia (who run Medicare). They will tell you how much exemption to claim - wait to receive this before loding your tax return.

https://www.servicesaustralia.gov.au/individuals/services/medicare/medicare-entitlement-statement

 

Note: this is pretty simplified - the rules can change based on where you're from, your family & income levels, so read carefully or get some advice for your particular situation.

 

Hope this helps!

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Hi @Putu_Shiong ,

 

Welcome, you're on the right track. Yes, you're definitely an Australian resident for tax purposes. As you're likely on a temporary visa to study/ work, you're probably a Temporary Resident.

https://www.ato.gov.au/Individuals/International-tax-for-individuals/Coming-to-Australia/Studying-in...

 

Usually, Temporary residents aren't entitled to Medicare (unless covered by a Reciprical Health Care Agreement), so they can apply to be exempt from paying the levies (see Category 3 in link below).

https://www.ato.gov.au/individuals/medicare-levy/medicare-levy-exemption/category-3--not-entitled-to...

 

To apply, fill in the 'Medicare Entitlement Statement' form and send it to Servicesaustralia (who run Medicare). They will tell you how much exemption to claim - wait to receive this before loding your tax return.

https://www.servicesaustralia.gov.au/individuals/services/medicare/medicare-entitlement-statement

 

Note: this is pretty simplified - the rules can change based on where you're from, your family & income levels, so read carefully or get some advice for your particular situation.

 

Hope this helps!

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Hi, thank you so much for the help. I really appreciate your response. I have one more question though. So, I've been working on a casual job for almost 2 months. So, as an Australian resident for tax purposes, I claimed the tax free threshold to the employer (payer) as this is my first and only job for now. I realised that my employer did not withhold any tax from my wages per fortnight (I noticed it from the fortnight payment slip/record, no deductions were made) given to me with the calculations in it during pay day. Is this solely because of the tax free threshold that I am entitled to? Since the first $18200 that you earn per financial year is not taxed as per ATO's website. Also, I actually read some articles saying that If you're paid fortnightly, as an Australian resident for tax purposes, you might be liable for taxes if you earn more than $700. Does that still apply on this financial year? I did not get any information on the ATO website. Looking forward to your reply, thank you.
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Hi @Putu_Shiong,

 

I’d like to offer my apologies for the late reply but I’m hoping I can assist you!

 

What your needing is our TAX TABLES information pages. The Regular Payments for:

I considered you mentioned you are currently working as a CASUAL and it is your ONLY EMPLOYER. In this case, your employer should be using the Tax table for daily and casual workers.
(use this table where a payee is engaged on a daily or casual basis, but not paid daily.)
For an example: View the PDF to see you will only start being taxed per dollar after your daily earnings reaches $74

 

I hope that covered it Smiley Happy

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Hi , thanks for the reply. One last question. I am considered to be paid fortnightly or every 2 weeks on the same day each time (I am paid fortnightly by the payer, even if I am engaging in a casual employment and not part-time (this is what is stated on the TFN Declaration Form as recommended by the payer, also I am not paid everytime I finish work at the day or at random times, so it's not a daily payment). Should I use the fortnightly table in this case? Since the payer has not withheld any tax from my salary, which is quite a concern for me. Looking forward to your reply, thank you.
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Hi @Putu_Shiong,

 

How much is the net income, gross income & tax withheld amounts on your fortnightly payslip?

 

It sounds like your employer is paying you based on the fortnightly tax table, which you would only start being taxed if your net income was to reach $714.

 

For example: if you were paid a fortnightly net wage/income of $712, your employer may decide not to withhold tax as it would total a small amount above the threshold (and they may consider you having a holiday within the year) - $712 x 26 (fortnights in a year) = $18,512 of net income per year, as that does hit the $18,200 tax free threshold you may need to pay approx. $300 in tax when you lodge your tax return.

If you do not want a debt/pay that tax when you lodge a return, and prefer to have it wittheld from your pay, you can ask your employer to withhold tax from you.

 

At question 7 on your TFN declaration 'On what basis are you paid', the Casual employment box has definitely been checked?

 

As you have mentioned you checked your TFN declaration with your employer and it stated you’re employed as a casual, then your employer should be using the daily and casual workers tax table.

 

To use the daily and casual workers, you don't need to be paid daily, just employed on a casual basis. On the daily and casual workers page it states use this table where a payee is engaged on a daily or casual basis, but not paid daily.

 

If your employer is not sure which tax table to use to pay your wages, they should check those links as well.

 

Let us know if there’s anything else Smiley Happy

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Hi, thank you again for the reply. I still don't understand the daily and casual tax table. So, can you give me an example for it? Since I've been paid fortnightly by my employer, should I compare it based on the daily amount that I received? For example, I work twice a week, on one day I receive around $45 and my payer decided to pay my wages fortnightly, so I receive around 180 per fortnight. I also requested to have a tax free threshold from this employer since it's my only job and I am considered as an Australian resident for tax purposes. So, is this table applied to Australian resident for tax purposes and are liable for higher taxes since it is a casual employment? I called ATO yesterday and I spoke to the higher department. He told me that no matter which kind of work I am engaged in, the tax free threshold still applies, which is why my payer most likely don't withhold taxes from me.

However, since my payer did not withhold tax, should I be paying tax for the wages I received? Am I liable to taxes even if the tax free threshold is applied? Is this the payer's responsibility to withhold tax from me?
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Hi @Putu_Shiong,

 

Can you please answer the following questions?

  1. On your fortnightly payslip, how much is the:
    1. net income amount
    2. gross income amount
    3. tax withheld amount
  2. At question 7 on your TFN declaration 'On what basis are you paid', which box has been checked: Part-time or Casual employment (if you do not know the answer 100% please ask your employer to check)?

Once I have those answers I can provide you with your specific example.

 

However, with you saying your fortnightly pay totalled only $180, then that has not reached the $712 fortnightly tax table threshold and therefore there is no need for you or your employer to withhold tax on the $180.

 

The payer is responsible for withholding tax yes, but if they calculate that you won’t hit $18,200 for the entire year, they can decide not to withhold tax as they know you won’t need to pay any in the first place.

 

Yes, all those tax tables I linked you are for Australian citizens and residents for taxation purposes.

 

The gentleman that you spoke to yesterday from the ATO is also correct by stating no matter what employment basis your employed on, the tax-free threshold stays the same.

 

Looking forward to your reply.

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Good afternoon,
thank you so much for the assistance. I really appreciate it. So, my gross income per fortnight is usually around $200. There are no deductions made from the gross payment based on the payslip so it stays at $200 (I work around 2 days (5-6 hours) per week and the rate is $18.50 per hour) . I do request for the tax threshold since I am regarded as an Australian resident for tax purposes. No taxes were withheld since no deductions were made to my gross income per fortnight. On the TFN Declaration Form, my employer told me to choose casual employment, not part-time. I've received my wages fortnightly. So, am I liable to pay taxes when I have to lodge my tax return? Should I worry about the withholding tax not being done? Also, I am aware that my employer uses a tax assistant to work out all the taxes. Looking forward to your reply, thank you.
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Your very welcome @Putu_Shiong, happy to help Smiley Happy I know the tax tables are very confusing the first few times reading them.

 

Ok so, you get paid approx. $200 a fortnight on a casual basis.

 

I still think your employer is still using the Fortnightly tax table because:

  • If you were paid anywhere between $0 and $712 for the entire fortnight, the employer does NOT withhold tax and it'll be highly unlikely you'll need to pay tax as your total yearly income wont reach the $18,200 threshold.
  • If you were paid exactly $714 for the entire fortnight, the employer would withhold $1 of tax from you.
  • If you were paid exactly $1,104 for the entire fortnight, the employer would withhold $98 of tax from you.

Yes, you are liable to pay tax but that's ONLY if your income goes above $18,200 and the employer did not withhold tax.

Your employer is not withholding tax because they must already believe you will not reach the $18,200 therefore there is no point in them doing so.

 

Furthermore, you said your employer had you tick the 'Casual' employment basis box; therefore, they should be using the daily and casual workers tax table. As you also mentioned your employer has their own tax assistant, they should check with them or us to ensure they are using the correct table for your employment circumstances.

 

If the employer is advised they are meant to use the daily and casual workers tax table and start doing so, then this is how you will be taxed:

  • For this example, I’m going to say you work 6hour days, 2 days a week.
  • $18.50 x 6 hours a day = $111 earnings per day
  • Going by the table, you will be taxed $10 from the $111 each day you work.

If you are still confused, I would suggest going to speak with your employer or a tax assistant yourself so they can show you in person how this all works. I know it can get very confusing just by reading.

 

All the best!