Tax Return:: Student Visa/PR/Citizen: How to Calculate Your Tax Refund/Payable

Hello, this is your tax and super specialist, P&C Tax Professionals.

Continuing on from our previous blog posts, today we will go through some of the examples on how the tax refund or payable amount is calculated for a Student Visa holder, Permanent Resident or an Australian Citizen. So, let’s go through a couple of examples to help us consolidate our understanding.

To get the full list of the individual income tax rates for residents, please refer to our previous blog post titled “2022FY Individual Income Tax Rates”: https://en.pnctax.com.au/single-post/tax-return-2022fy-individual-income-tax-rates

For the updated new Low and Middle Income Tax Offset rates which will apply to your 2021-2022FY tax return, you can check the full details on one of our previous blog posts on “LMITO rates”: https://en.pnctax.com.au/single-post/tax-return-updated-2021-2022fy-low-and-middle-income-tax-offset-lmito

<Example 1: Student Visa / Taxable Income = $0 ~ $45,000>

Max’s year to date gross income from his employers for the 2022 financial year is $22,500 (tax withheld from this income = $2,475). During the 2022FY, he also had an interest income of $350 from his Australian bank account. Max has work-related deductions totalling $420 for the 2022FY. With the information we have, his estimated tax refund amount can be calculated as follows:

Taxable Income = $22,500 (gross income) + $350 (bank interest income)

Taxable Income = $22,850 - $420 (work-related deductions)

Taxable Income = $22,430

Tax Payable on Taxable Income = ($22,430 - $18,200) x 19% = $803.70

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Less Offsets:

Low Income Offset = $700

Low and Middle Income Offset = $675

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Plus Medicare Levy:

Medicare Levy = $0

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Less Credits:

Tax withheld – salary & wage type income = $2,475

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Estimated Tax Refund = $803.70 (Tax Payable on Taxable Income) - $700 (Low Income Offset) - $675 (Low and Middle Income Offset)

* The tax offsets will reduce the tax payable on taxable income to $0 but it cannot help you to increase your tax refund amount. Therefore, even if Max has tax offsets that adds up to $1,375, once his tax payable on taxable income reduces to $0, he can no longer use the offsets to increase his tax refund.

Estimated Tax Refund = $0 (Tax Payable on Taxable Income) + $0 (Medicare Levy) – $2,475 (Tax withheld)

Estimated Tax Refund = $2,475

<Example 2: Permanent Resident / Taxable Income = $45,001 ~ $120,000>

Beth’s year to date gross income from her employers for the 2022 financial year is $78,000 (tax withheld from this income = $14,040). During the 2022FY, she also had an interest income of $310 from her Australian bank account. Beth has work-related deductions totalling $515 for the 2022FY. With the information we have, her estimated tax payable amount can be calculated as follows:

Taxable Income = $78,000 (gross income) + $310 (bank interest income) - $515 (work-related deductions)

Taxable Income = $77,795

Tax Payable on Taxable Income = $5,092 + [($77,795 - $45,000) x 32.5%] = $15,750.37

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Less Offsets:

Low Income Offset = $0

Low and Middle Income Offset = $1,500

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Plus Medicare Levy:

Medicare Levy = $77,795 x 2% = $1,555.90

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Less Credits:

Tax withheld – salary & wage type income = $14,040

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Estimated Tax Payable = $15,750.37 (Tax Payable on Taxable Income) - $0 (Low Income Offset) - $1,500 (Low and Middle Income Offset) + $1,555.90 (Medicare Levy) – $14,040 (Tax withheld)

Estimated Tax Payable = $1,766.27

<Example 3: Australian Citizen / Taxable Income = $120,001 ~ $180,000>

Billy’s year to date gross income from his employers for the 2022 financial year is $127,000 (tax withheld from this income = $22,860). During the 2022FY, he also had an interest income of $650 from his Australian bank account and a capital gain from the disposal of his Australian shares of $2,000. Billy has work-related deductions totalling $820 for the 2022FY. With the information we have, his estimated tax payable amount can be calculated as follows:

Taxable Income = $127,000 (gross income) + $650 (bank interest income) + $2,000 (capital gain from shares) - $820 (work-related deductions)

Taxable Income = $128,830

Tax Payable on Taxable Income = $29,467 + [($128,830 - $120,000) x 37%] = $32,734.10

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Less Offsets:

Low Income Offset = $0

Low and Middle Income Offset = $0

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Plus Medicare Levy:

Medicare Levy = $128,830 x 2% = $2,576.60

Medicare Levy surcharge = $128,830 x 1.25% = $1,610.37

Total Medicare Levy = $2,576.60 + $1,610.37 = $4,186.97

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Less Credits:

Tax withheld – salary & wage type income = $22,860

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Estimated Tax Payable = $32,734.10 (Tax Payable on Taxable Income) - $0 (Low Income Offset) - $0 (Low and Middle Income Offset) + $4,186.97 (Medicare Levy) – $22,860 (Tax withheld)

Estimated Tax Payable = $14,061.07

This brings us to an end but if you would like to apply for your tax return through P&C Tax Professionals or have any related questions, please feel free to contact us through our official Facebook Page (P&C Tax Professionals – Australia) or send them to our email address at pnctax@naver.com.

Thank you and bye for now!