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, foreign residents’ tax rates applied to all non-residents who work in Australia. 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 1 January 2017, registered employers can withhold 15% tax on the first $37,000 of income. However, the employer must register with the ATO to use this rate. An unregistered employer will withhold tax at the foreign tax rate of 32.5% on the first $37,000 of income.
A non-resident backpacker working before 1 January 2017 will pay 32.5% tax on their income. They cannot claim the tax-free threshold. However, if you qualify as an Australian resident, you can claim the tax-free threshold for wages earned before 1 January 2017. After this date, the new working holiday makers’ income tax rules apply to you. You cannot claim the threshold, regardless of your residency status.
We understand that these tax issues are quite complicated, especially with the constant changes to tax rules. I 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.