Income tax: are non-resident students who are in Australia on short-term vocational experience entitled to a tax-free threshold?

This Determination does not attempt to resolve whether or not a short-term vocational experience student is a non-resident. That fact must be determined before applying this Determination. Taxation Ruling TR 98/17 sets out guidelines on applying the residency tests in subsection 6(1) of the Income Tax Assessment Act 1936 to visitors to Australia. Section 995-1 of the Income Tax Assessment Act 1997 refers to the same tests.

Non-resident students who are in Australia on short-term vocational experience are not entitled to a tax-free threshold. The definition of prescribed non-resident in subsection 3(1) of the Income Tax Rates Act 1986 does not distinguish between non-residents who are students and non-residents who are not students. The rates of tax for all prescribed non-residents are based on the rates set out in Part II of Schedule 7 of the Income Tax Rates Act 1986 . These rates of tax do not allow any tax free threshold.

Some of Australia's international tax agreements have provisions that specifically relate to students, but these provisions only refer to income derived from outside Australia. There are no provisions in Australia's international tax agreements that provide students with a tax-free threshold for income derived within Australia. Note 1: In this Determination the phrase 'short-term vocational experience' refers to overseas students who are not actually studying in Australia, but are present in Australia for periods of 12 months or less on work experience that is related to their overseas course of study. This may also be combined with a holiday in Australia. Note 2: [DELETED] Example Kim, a UK geology student, is in Australia on a vocational exchange scheme. Kim is working in paid employment for four months at a large mine. At the end of this period, Kim spends a further three months holidaying in Australia before going home. As Kim is not residing in Australia in the ordinary sense, and Kim does not intend to take up permanent residence in Australia, Kim is not an Australian resident. Accordingly, Kim will be taxed at non-resident rates from the first dollar of income derived in Australia, i.e. no tax-free threshold applies.