Backpacker tax changes : working holiday makers pay less tax from 1 January 2017

From the 1st January 2017 onwards, ATO implies new rules for backpacker tax. All Working holiday makers with a visa subclass 417 or 462 will only need to pay 15 cents for each dollar from the first dollar they earn up to $37,000. Previously, all non-residents who work in Australia are subjected to foreign residents’ tax rates. Non-residents will have to pay 32.5% of their income for the first $87,000 of their wages.

If you are a backpacker and plan to start working after 1st January 2017,registered employers are able to withhold tax of 15% on the first $37,000 income as long as the employers are registered with ATO. However, for an unregistered employer they will withhold tax using the foreign tax rate at 32.5% for the first $37,000 of income.

A non – resident backpacker working before 1st January 2017 will be taxed 32.5% from their income without being able to claim the tax free threshold. However, if you do qualify as an Australian resident, the tax free threshold for the wages earned before 1 January 2017 can be claimed. After this date, you will be subjected to the new working holiday makers’ income tax previously mentioned above without claiming the threshold regardless of your residency status.

It is understandable that these tax issues are quite complicated especially with the constant changes of tax rules. If you are unsure with the income tax return issues, it will be wise to consult a professional and qualified taxation team to avoid any tax penalties. Our team at A One Accountants are well trained to help you claim deductions as much as you can and maximize your tax refund.

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