Working holiday

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From 1 January 2017, as a working holiday maker, the first $37,000 of your income is taxed at 15%, with the balance taxed at ordinary rates.

As a working holiday maker your employer also has to pay super for you if you are eligible. When you leave Australia you can apply to have your super paid to you as a Departing Australia Superannuation Payment (DASP). The tax on any DASP made to working holiday makers on or after 1 July 2017 is 65%. AIIM can assist you with this claim.

You are on a working holiday, if you have a visa subclass 417 (Working Holiday) or 462 (Work and Holiday).

When you lodge an income tax return, we will work out how much tax you should have paid. If you paid too much, you will get a refund. If you have not paid enough, you will receive a bill.

Applying for a tax file number

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Your tax file number (TFN) is your personal reference number in the Australian taxation system. You can apply for a TFN online once you have your work visa.

You don’t have to have a TFN, but you pay more tax if you don’t have one.

Starting work after 1 January 2017 – TFN declaration

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When you start work, you give your employer a TFN declaration. This tells the employer everything they need to know to work out how much tax to withhold from your pay.

Your employer will check if you have a visa subclass 417 (Working Holiday) or 462 (Work and Holiday), but you should tell them anyway to ensure they tax you correctly.

Employers of working holiday makers are required to register with the ATO as employers of working holiday makers.

Registered employers of working holiday makers will withhold tax from your pay at 15% on the first $37,000 of income.

If you work for an unregistered employer, they must withhold tax from your pay using foreign resident tax rates. Foreign resident tax rates apply a rate of 32.5% to the first $37,000 of income.

Started work before 1 January 2017 – TFN declaration

If you are already working for an employer before 1 January 2017 you will have given them a TFN declaration when you started. There is no need to give them a new TFN declaration, but you should tell them about your visa subclass anyway to ensure they tax you correctly.

Finishing work – payment summary

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When you finish work, you will receive a payment summary showing how much you earned and how much tax was withheld from your pay. You use the information in the payment summary to complete your income tax return.

Only income earned from 1 January 2017 is eligible for the working holiday maker tax rates. You will receive a separate payment summary for any income from this date.

Lodging a tax return

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The Australian tax system runs from 1 July to 30 June. You are required to lodge a tax return to make sure you have paid the right amount of tax.

If you leave Australia permanently, you can lodge your tax return early.

When you lodge a tax return, we work out how much tax you should have paid based on your actual income for the year. If too much was withheld from your pay, we refund you the difference. If you have not paid enough, we will send you a bill.

We automatically apply the correct tax rates and thresholds based on the information you include in your income tax return.

Example

Louie lives in China and is planning a working holiday in Australia.

In preparation for his trip Louie applies for a TFN, indicating that he is not an Australian resident for tax purposes. He is granted a 417 visa before his arrival in Australia.

On 10 January 2017, Louie starts work with Bob’s mango farm in Far North Queensland. As part of the normal employment process, Louie gives Bob a TFN Declaration and advises him that he is a working holiday maker on a 417 visa.

As Bob is a registered employer with the ATO, the first $37,000 of Louie’s income is taxed at 15%.

Louie is paid weekly and earns $100 a day. After 5 days work, Louie receives his first pay of $500, from which $75 tax is withheld and sent to the ATO.

Louie finishes working for Bob in April after earning a total of $6,000. Bob gives Louie a payment summary showing he earned a total of $6,000 and had $1,140 tax withheld.

Before he leaves Australia, Louie lodges an income tax return showing his $6,000 income, tax withheld of $1,140 and $500 deductions related to his employment.

Tax comparison

The working holiday maker tax rate is different to the tax rate for Australian residents.

The working holiday maker tax rate is 15% until you earn $37,000. You are then taxed at the same rate as Australian residents.

Australian resident taxpayers get the first $18,200 tax free (known as the tax free threshold), and then pay 19% until they earn $37,000.

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

Departing Australia Superannuation Payments (DASP)

Employers are required to make super contributions on behalf of their employees to fund retirement.

If you worked and earned super while visiting Australia on a temporary visa, you can apply to have this money paid to you as a Departing Australia Superannuation Payment (DASP).

As a working holiday maker, any departing Australia super payment made on or after 1 July 2017 is taxed at 65%.

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