Life as a recent graduate is both exciting and terrifying. Not only have you finished your formal education forever, you now have to enter the real world and deal with its many adult situations.
One of the many confusing hurdles you’ll face is, of course, dealing with income tax. Luckily, H&R Block’s Director of Tax Communications, Mark Chapman, has put together some great tips to help you tackle your taxes.
- If you’re a low income earner – starting your career as an intern for instance – you may not have to pay income tax at all. You can earn up to $18,200 in taxable income each year without paying any tax.
- Remember, you can deduct any costs which you incur as part of your job from your taxable income. That includes costs associated with using your car for work (not including the drive from home to work!), traveling for work (such as accommodation and meals if you have to work away from home), and the cost of compulsory uniforms.
- You can also claim the costs associated with certain work-related study which you undertake, provided it leads to a formal qualification and improves the knowledge and skills you require for your current job. Taking a course which will enable you to find a job in the first place – or to find a different job – isn’t tax deductible. As well as course fees, you can also claim incidental costs linked to the study, like textbooks, cost of a computer (if you buy one for the course), travel, etc.
- If you’re just starting out after graduating, you may not need to worry about repaying your student loan straight away. You can earn up to $54,869 before you need to repay HELP and other types of student loans. If you earn more than that, you need to repay a minimum of 4% of your loan balance. That repayment percentage increases the more you earn. This table sets out the repayment rates for the current tax year (they are revised each year):
|Repayment income (RI*)||Repayment rate|
|$54,869 – $61,119||4.0%|
|$61,120 – $67,368||4.5%|
|$67,369 – $70,909||5.0%|
|$70,910 – $76,222||5.5%|
|$76,223 – $82,550||6.0%|
|$82,551 – $86,894||6.5%|
|$86,895 – $95,626||7.0%|
|$95,627 – $101,899||7.5%|
|$101,900 and above||8.0%|
- When you start a new job, make sure you tick the box on your tax declaration form advising your employer that you have a HECS-HELP debt. Your employer will withhold additional tax from each pay to cover your estimated HECS-HELP debt liability based on your annual income.
- Some people take two jobs, each of which pays less than the minimum repayment threshold, in order to avoid or defer making loan repayments. That won’t work! If you are working more than one job, each employer will of course only withhold additional tax to cover your HECS-HELP debt based on the income they pay you. However, if your combined income from multiple employers is over the minimum repayment threshold, you will still be liable to make a repayment towards your HECS-HELP debt when you lodge your tax return.
- Don’t think you can avoid repaying your HELP loan by going overseas! Under new rules being introduced by the ATO, you are required to make loan repayments wherever you are in the world. So, if you get a job overseas, you need to tell the ATO where you are moving to, so they can keep in touch!
- If you’re a graduate, chances are you already have a Tax File Number. If you don’t, you can apply online here and verify your identity at a local Post Office.
- Working in the sharing economy is a very popular way to earn extra income but income you earn through organisations like Uber or Airtasker is still taxable. Those companies don’t employ you so – for tax purposes – you’ll be regarded as being in business on your own account. That opens up opportunities – extra tax deductions and concessions for instance – but also imposes obligations. You’ll need to apply for an ABN for instance and if you drive for Uber, you’ll need to register and account for Goods and Services Tax (GST).