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.
What Is the Backpacker Tax?
The “backpacker tax” refers to the special tax rates that apply to working holiday makers (subclass 417 and 462 visa holders) on Australian-sourced income, which differ from the tax rates and thresholds that apply to Australian residents. Understanding which rate applies to you – and whether you may actually qualify as an Australian resident for tax purposes despite holding a working holiday visa – can make a significant difference to how much tax you pay and whether you’re due a refund.
Working Holiday Maker Tax Rates
Working holiday makers are generally taxed at a flat rate from their first dollar of Australian income, without access to the tax-free threshold that applies to residents. This applies specifically to income earned while on a 417 or 462 visa, and your employer should be applying the correct working holiday maker withholding rate – using the wrong rate is a common problem we see, especially with employers unfamiliar with these rules.
Lodging Your Tax Return as a Backpacker
Even on a working holiday visa, you’re generally required to lodge an Australian tax return if you’ve earned income here, and many backpackers are owed a refund once excess tax withheld during the year is reconciled. We check your payment summaries, superannuation position, and any deductions you’re entitled to – such as work-related expenses if you were working in a trade or hospitality role – before lodging.
Superannuation and Working Holiday Makers
If you had superannuation paid on your behalf while working in Australia, you may be able to claim a Departing Australia Superannuation Payment (DASP) once you leave the country and your visa expires, though this is taxed at a higher rate than standard superannuation withdrawals. We can advise on the process and timing for claiming this once you’re ready to depart.
Multiple Employers and Farm Work
Many working holiday makers work multiple jobs throughout the year, including seasonal farm work that may qualify for a second-year or third-year visa extension. Each employer should be withholding tax correctly, and we make sure income from all your employers during the year is correctly reported together in your return.
Frequently Asked Questions
Am I taxed differently as a backpacker on a working holiday visa?
Yes – working holiday makers are generally taxed at specific rates on Australian income from their first dollar earned, different from the rates and thresholds that apply to Australian residents.
Do I still need to lodge a tax return if I’m only in Australia for a few months?
Yes – if you’ve earned income in Australia, you’re generally required to lodge a tax return covering that income, regardless of how long you were in the country.
Can I get a tax refund as a backpacker?
Often yes – many working holiday makers are owed a refund once the tax withheld during the year is reconciled against what was actually owed, particularly if you worked for only part of the financial year.
Can I claim my superannuation back when I leave Australia?
Yes, generally through the Departing Australia Superannuation Payment (DASP) process once your visa has expired and you’ve left the country, though it’s taxed at a specific DASP rate.
What if I worked for several different employers during my working holiday?
All income from every employer during the financial year needs to be included in your tax return – we help you pull this together correctly, including any farm work used toward a visa extension.
How much does it cost to have my backpacker tax return prepared?
Fees depend on the complexity of your situation – a simple return with one employer costs less than one involving multiple employers, farm work, or a DASP claim. We agree the fee upfront.
Related Tax Return Services
If you’re not on a working holiday visa but still want a straightforward tax return, or you’re after our broader Melbourne tax accountant service, we can help with that too. We also assist other groups with tailored returns, including teachers.
Whether you’re looking for the cost of a backpacker tax return, a backpacker tax checklist of documents needed, or simply how to lodge a backpacker tax return correctly on a working holiday visa, our registered tax agents can guide you through it.