backpacker tax

Working Holiday Makers Taxes & the so called Backpacker Tax… Holiday makers on a 417 visa have often never been involved in tax returns so we’ll explain how tax residency & Working Holiday Marker income works.

Tax Residency vs Immigration Residency

Tax residency is different to your immigration status, confusingly. You’re able to be both a non-resident for immigration & a resident for tax. The rules are broader for tax because the ATO wants you to pay tax on your worldwide income (a characteristic of being an Australian tax resident). To work out your tax residency, it’s not a hard and fast rule – it’s all based on intent. This is separate to immigration residency which is a legal process involving visas and citizenship – very different to tax.

Working Holiday Maker Income

The 417 visa gives you special tax rates at 15% on anything under $45,000 and “normal tax rates” on income after $45,000. This is where the residency part comes in. If you’re a tax resident after that working holiday maker cut off applies, your tax is different to a non-resident for tax.

Residents of Australia for tax get tax offsets (LAMITO) but must pay the Medicare Levy & Medicare Levy Surcharge.

Non-residents of Australia for tax do not receive the offsets, but also do not pay Medicare Levy or the surcharge.

As a firm that completes a larger amount of WHM tax returns than normal, we have come across an error in almost all working holiday maker pay summaries that we see where the tax payer has income over $37,000. As mentioned before the 15% rate only applies to income below $45,000 – if you’re earning $75,000 (it’s very common that we see nurses on WHM visas), then you’ve been taxed incorrectly on all income from $45,000 to $75,000 and you will have a tax bill at the end of the year (of approximately 17.5% of the amount of $45,000). If you know this is happening to you, please contact us as soon as possible on (03) 8568 3606 and we can organize training with your payroll so this doesn’t happen.

Please be aware that a bridging visa takes on the attributes of your previous visa & therefore may give way to a longer period of WHM tax rates. This can be a problem if your payroll doesn’t understand WHM tax rates.

Tax Residency

To work out residency, the following questions are what we use to judge intent to make Australia your home;

  • Are you intending to stay in Australia?
  • Have you been in the same place since you moved to Australia, or at least stayed in roughly the same location/area/shire?
  • Do you have a “main” employer, where your employment is secure and they intend to keep you as an employee for as long as possible?
  • As a rough idea, the main question is are living and working arrangements are consistent with making Australia your home?

Income Tax Returns for Working Holiday Makers

At Bookkept tax returns are completed by accoutants experienced in residency & WHM taxes. As WHM tax returns involve complex questions regarding residency & working holiday maker legislation, the fee for these returns are $198, payable upfront. Please book on our website, call (03) 8568 3606 or email [email protected] with your details to get started.

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