If you earn less than $18,200 per annum, you can receive the full amount of interest earnings on savings account.
23 March 2016: Your immigration status in Australia may have no impact on whether or not you are obligated to pay taxes, as the Australian Taxation Office (ATO) has a special category defined as a resident for tax purposes.
A savings account for non-taxpayers is exclusive to those individuals who reside in Australia but do not earn more than $18,200 per annum. This is important as it will mean that there are no withholding taxes on your interest earnings to worry about when it comes to tax time.
What is a savings account for non-taxpayers?
When you are looking over the eligibility requirements for certain Australian savings accounts, you may notice the phrase “resident for tax purposes” listed as a criteria for residency status. This specific term is used because the ATO defines residency differently than the way immigration does. For example, if you're a tourist who is only staying in Australia for a short time, you are not considered a resident or even a temporary resident. Yet if you earn an income during your visit from an Australian source, you could be considered a resident for tax purposes in the eyes of the ATO.
A savings account for non-taxpayers is structured to ensure that those individuals who are not obligated to pay an income tax in Australia will not be subject to any withholding tax on their interest earnings.
How does a savings account for non-taxpayers work?
Whether or not you pay taxes in Australia is dependent on your annual income more than it is based on your residency status. A non-taxpayer will earn a yearly salary that is under $18,200 for the 2015-16 financial year.
In order to ensure that you don’t have to pay taxes if you fall into this category, the bank where you keep your savings will need to know your tax status ahead of time.
For example, Rachel is only earning $15,000 yearly, and is trying to get ahead financially by saving a small amount of money each month in her NAB savings account. Normally, an Australian is taxed on any interest earnings from this type of account at a rate that is based on the account holders tax file number (TFN).
Rachel provided NAB with her TFN when first applying for the account so that there will be no withholding tax on her earnings. Had she not, she would have had to wait until after lodging her return for that money to be refunded to her.
Individuals who do not give the bank their TFN or exemption code will have their interest earnings taxed at the highest marginal rate in accordance with Australian tax laws.
How do I know if I am a resident or non-resident for tax purposes?
Weight is given to whether or not you are a resident of Australia by the tax office because income is taxed at different rates for non-residents – non-residents don't have a tax free threshold. If it is determined that you are not a resident of Australia even though you have earned an income from an Australian based source, then you are taxed only on the income that you earned from that source.
Residents on the other hand must pay taxes on all income earned during the tax year, even if earned from a source based abroad. Tests which ascertain the amount of time you have spent living and working in Australia in comparison to other countries are typically given in order to determine if you are a resident. Once you have completed those tests you will know whether you should lodge your taxes as a resident or not.
What are the advantages and disadvantages of being a non-resident?
Although a non-resident of Australia will not have to declare their worldwide income when lodging a tax return, they will be taxed at a higher rate than a resident will be. Residents of Australia have the advantage of being exempt from taxation if they fall within a certain low income earning bracket, while there is no such bracket for a non-resident.
If you are a non-resident it will make no difference what your income is, you are going to be taxed on every cent that you earned while in Australia.
Can I ever avoid paying income tax?
Tax avoidance is illegal can be penalised with fines. The only way to not pay income tax in Australia is to earn less than $18,200 per annum. If you are a non-resident of Australia you will always have to pay income tax on the earnings made in Australia, no matter how much or little they are.
Help and support
Do I have to pay tax on the money that is in my savings account for a non taxpayer?
You are not taxed on the money deposited into your account, but rather on any interest earned. If you are not obligated to pay Australian taxes then you will avoid any withholding tax by providing your TFN or exemption code.
Are all non-residents also non-taxpayers?
No, you might be a non-resident of Australia but still obligated to pay income tax if you held a job during your time here.
I am a non-taxpayer but withholding tax was deducted from my interest earnings, can I get that money back?
If you did not provide your TFN to your bank than it is possible that withholding tax was taken from your interest earnings. You can get that money back in the form of a refund once you lodge your tax forms with the Australian Tax Office.
DISCLAIMER: Many of the comments in this article are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information applicability to their own particular circumstances.