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Important: Backpacker Tax Changes for Working Holiday Makers

With the new backpacker tax rules that took effect this year, there could be some confusion on what income tax rates now apply to working holiday makers.

To clarify, you are classified as a working holiday maker if you entered the country with a visa subclass 417 (Working Holiday) or 462 (Work and Holiday). On 1 December 2016, the Senate passed the Income Tax Rates Amendment (Working Holiday Maker Reform) Bill, securing lower backpacker tax rates after 18 months of uncertainty.

We summarise the important points on the new backpacker tax changes from information from the Australian Taxation Office (ATO) and the Department of Immigration and Border Protection (DIBP) below.

I’m on a 417 or 462 Working Holiday visa. What’s my income tax rate this 2017?

From 1 January 2017, working holiday makers are taxed at 15% on their first $37,000 of income. Simple enough, but it’s a little more complicated for income earned before this date.

Currently, the common law rate for non-residents who work in Australia is 32.5% income tax from their first dollar earned. Non-resident backpackers whose employers or clients are already withholding this amount will still pay that amount for income earned last year.

Though it’s unlikely for a backpacker to qualify as a resident, those who do qualify as a resident under the old rules will still be able to claim the tax free threshold of $18,200 and then pay 19% until $37,000 for income earned before 1 January 2017.

Australian residents, foreign residents and working holiday makers all pay the same tax rates on income over $37,000.

What if I say I’m a resident even if I’m not?

First of all, that would be wrong, and you could face financial and legal consequences.

The ATO says that those who lie on their tax return can be charged interest on any shortfall, and may be subject to other penalties. So, if you don’t pay the correct tax amounts, you’ll owe even more money.

The DIBP also notes that, even though the ATO will decide how to penalise those who lie on their tax returns, they could also face visa consequences in addition. That is, if you’re suspected of fraud or other criminal activity, the department could cancel your visa, kick you out of the country and refuse future visa applications. You may also be prevented from returning to Australia for a period of time.

Are there also changes that affect my superannuation?

Working holiday makers leaving the country can apply to have any super they earned paid to them as a Departing Australia Superannuation Payment (DASP). Any DASP made on or after 1 July 2017 will be taxed at 65%.

This new rate will apply whether you earned super under the old or new backpacker tax rules.

The current rate of 38% is still in effect if you leave Australia and are paid your DASP before 1 July 2017.

I hire backpackers. Do I need to do anything?

Businesses that hire working holiday makers are required to register with the ATO. You may do this online here. Registration has been extended to 31 January 2017.

Registered businesses can now use the new backpacker tax rules and withhold 15% of the first $37,000 of a working holiday maker’s income.

Unregistered businesses, on the other hand, must withhold tax at 32.5% for the first $37,000 of a working holiday maker’s income, if the worker provides a TFN, or at 47%, if no TFN was provided. Working holiday makers who qualify for residency also cannot claim the tax-free threshold. Furthermore, penalties will apply to those who fail to register.

Below is the new tax table for working holiday makers. You may find more information on calculating your workers’ taxes using this table here.

Taxable income Tax rate Value
$0–$37,000 15% on each $1 up to $37,000 0.15
$37,001–$87,000 32.5% on each $1 over $37,000 to $87,000 0.325
$87,001–$180,000 37% on each $1 over $87,000 to $180,000 0.37
$180,001 and over 47%* on each $1 over $180,000 0.47

* Includes the Temporary Budget Repair Levy of 2%

It’s recommended that you seek advice from tax experts to be fully ready for these new changes, such as CeTax. CeTax specialises in helping contractors and businesses that use contractors manage their taxes and other statutory obligations. Contact a CeTax tax accounting specialist through the hotline 1300 031 282 or via email at ready@cetax.com.au.

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15 responses to “Important: Backpacker Tax Changes for Working Holiday Makers”

  1. fastpokeap.com says:

    ABC Rural digs through the details of the new backpacker tax changes, to find out what they mean for farmers and working holiday makers.

  2. Maria says:

    the accountant at the bar i work at says its too much of a hassle for her to register and im the only one working there on the working holiday visa. Theres not much i can do. I already tried talking to her twice. She doesnt care that the salary i get after the 32.5% will make my life even harder. (I need to put money aside for my partner visa)
    Can I at least get the money back on my tax returns ?

  3. Will says:

    I’m a backpacker who’s worked 6 months and was expecting all my tax back in the next few weeks will I still get any tax back?

    • David Marriner says:

      @Will, that will depend on what you file in your income tax return. If you wish, we can refer you to our partner company, CeTax, so they can look at your particular circumstances and help you maximise your return.

  4. Greg karlson says:

    Be careful, even if you leave the country before your visa expiry date it won’t matter because your visa may still well be active. I left the country last month early with hopes on getting more super back – unfortunately my visa is still active and will be so for another 4 weeks – meaning that I cannot apply through DASP for my super. (Immigration officers assured that all will be fine and that it’s all automatically done nowadays – sure.)

    I have had to apply for a temporary visa cancellation but that has 4-week turnover time – of course I will not meet the cut off date and will get hit with 65% tax (On top of tax already paid after transferring to my private super of course)

    Well done Australia – no way better to make a backpacker feel they had a good time than squeezing them dry on the way out.

  5. topci.org says:

    Instead, the NFF is proposing a tax of 19 per cent for overseas workers, saying it would be fairer for backpackers and the industries that rely on them for labour.

  6. Robyn Dola says:

    So as per the ato website WHV holders who have earnt $18,200 or more between Jan-Jun 2017 will get essentially NO TAX FREE THRESHOLD on any income received Jul-Dec 2016.
    Say you earnt $18,200 in Jul-Dec 2016 and $18,200 in Jan-Jun 2017: this means you pay 15% on WHV income which also in turn erodes the tax free threshold on earlier income resulting in paying 19% tax on $18,200 PLUS 15% tax on $18,200.
    This can’t be right surely??????

    • Emma says:

      Correct. This is what they told me today after being on the phone for an hour. Us poor souls who were in Australia between 1st Jul 16 and 31st Dec are the mugs who have to pay 32.5%!!! Fuming

  7. G says:

    Robyn, I have the same problem as you loding my taxes. It’s like we couldn’t get any refund from july december 2016. Instead of having 0% tax it seems they expect us to have been taxed at 30% something …

  8. Lena says:

    Sorry to leave a question as well 🙂 I arrived before July2016 and earned less than 18200 from July-Dec 2016, but earned over 18200 in 2017. Do I still pay 19% on my income from July – Dec2016 or can I claim that back meaning claim the tax free treshold ?

  9. Abel says:

    in my case, I put all the number good but then I realize that I do not change the part when ask When did you earn this income, after 1 January 2017, I left all (3 answers, 3 employers) with a NO meaning that I earned the income before that date. Now the facts are that I was recommended to put that I’m a resident for taxes purposes and I hold a visa WH 462. One week later I received an email that said (We are waiting to receive information from your employer about how much income you were paid in the last financial year and the amount of tax deducted. Your employer needs to give us this information by 14 August).
    Well, I’ve got confused with some of the new rules and people’s comments. Anyone knows whats happening in these case?

  10. Amy says:

    I’m trying to find one everywhere what happens to my tax when i have two jobs at once but everything is coming back blank?!
    Is it still 15% or is it different?

    Thanks

    Amy

  11. Bel says:

    I have a question, inn 2017 I fell in the new scale of 15%. Now I got informed that as a backpackers and with all the new rules and all, that you don’t get any tax back from that 15%. Is this true?

  12. Homepage says:

    … [Trackback]

    […] Find More Informations here: certica.com.au/backpacker-tax-changes-working-holiday-makers/ […]

  13. Stephen Cleary says:

    Im applying early for 2018 and they are saying since I stayed under 181 days i will be taxed the full 32% even though I obviously didnt meet any threshhold. Does any body know abouy this

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