How are Working Holiday Makers Taxed?

Welcome to the "lucky country"! Australia is a great place to travel and there are lots of opportunities to work whilst you're here. But you need to know that a working holiday isn't automatically a tax holiday and, for new arrivals, the Australian tax system can be a minefield.
The bottom line is that travellers who earn income while in Australia are expected to pay tax on their earnings.
 

If you are in the following working holiday maker visa subclass you will be affected by the working holidaymaker tax rules:

• 417 (working holiday)
• 462 (work and holiday)

 

From 1 January 2017, as a working holiday maker, you will generally not be entitled to the tax free threshold and will be subject to special tax rates, irrespective of whether you are a resident of Australia for tax purposes or not. You will be taxed at 15% on the first $45,000 you earn. If you earn more than this, you will be taxed at the ordinary marginal tax rates on your earnings above $45,000.

This special rate of tax will not apply to you if you are a resident of Australia tax purposes and you are from a country that has a doubletax agreement with Australia containing a non-discrimination article (Chile, Finland, Germany, Israel, Japan, Norway, Turkey or the United Kingdom).
 

You should be paid superannuation (super) by any employer you work for whilst in Australia. You can then apply for a refund of that super once you leave Australia, which is called a Departing Australia Superannuation Payment and is taxed at 65% (from 1 July 2017).
 

When you get a job in Australia, you should advise your employer that you are on either a 417 or 462 visa type so that they know to deduct tax at the special 15% rate.

Although your working holiday maker status means you'll be taxed at special rates, you'll also usually be regarded as non-resident for tax purposes.

If you are classified as a non-resident for tax purposes in Australia, you will be taxed only on income you earn in Australia. You also can't claim living expenses while in Australia as a 'living away from home' allowance or deduction against your taxable income.

In better news, you will be exempt from the 2% Medicare levy, which residents have to pay to cover basic medical costs. Tax is only paid on Australian income and interest on bank accounts is only taxed at 10%.
 

The Australian financial year ends on June 30, and tax returns should be lodged after that date. If your employer has not taken enough tax out whilst you were working in Australia, you'll have to pay any amount still owing. But if your employer has paid too much tax on your behalf, then you'll get a refund. If you on a WHM Visa and your employer has taxed you correctly you don't need to lodge a tax return or a non-lodgment advice if both of the following apply:

To employ a working holiday maker in Australia on a visa subclass 417 or 462, you must:

• Register with the ATO as an employer of working holiday makers to withhold tax at the working holiday maker tax rate, before making your first payment to them
• Check your worker's visa status using the ATO's Visa Entitlement Verification Online  service.

Penalties may apply if you fail to register – and you should not employ, or pay someone for work, if they don't have permission to work in Australia.
 

If you are a working holiday maker leaving the country before the end of the financial year, it is possible to lodge your tax return early but you will need to collect a "payment summary" or "income statement" from every employer and provide details of other income you've earned in Australia. You may be able to obtain the details of your income statements from the ATO, providing your employer(s) have paid all your income, including annual leave entitlements, and have uploaded this information to the ATO.

H&R Block can take the pain out of the process by preparing and lodging your tax return for you. Our friendly tax agents are very experienced and can also advise you exactly which deductions you're entitled to and which you aren't.