• Are you an Australian resident for tax purposes if you come for a working holiday or visit?

    Most people who come to Australia for a working holiday or visit are not Australian residents. This includes people on 417 or 462 visas (backpackers).

    This is because most backpackers, consistent with their visa requirements, do not intend to stay in Australia, but only intend to have a holiday while working some of the time.

    From 1 January 2017, the first dollar of income earned by backpackers in Australia is taxed at the working holiday maker tax rate of 15% up to $37,000 in an income year. This is regardless of residency status.

    Working out residency for tax purposes

    Working out residency for tax purposes involves looking at your purpose for being in Australia, your way of life in Australia and whether you have a home in another country.

    To be an Australian resident you must meet one of the following:

    1. Demonstrate your living and working arrangements are consistent with making Australia your home.

    This usually means you have developed routines and habits in your lifestyle in Australia similar to how you lived prior to coming to Australia. You are not in Australia simply as a visitor or a tourist, but are living and working here with a settled way of life. See factors to consider for further information on the types of things we look at.

    1. Live in Australia for more than six months in an Australian income tax year, and
      • do not have a place in another country where you usually live
      • intend to take up residence in Australia.
       

    For example, if you travel around Australia for a seven month working holiday and have a place in another country you call home to which you intend to return, you would not be an Australian resident.

    Most people, who hold working and holiday visas, consistent with their visa requirements, do not intend to stay in Australia, but only intend to have a holiday in Australia and work some of the time before returning home once they have finished travelling. For most people, their behaviour while in Australia is consistent with this purpose and is not consistent with being a resident. You will not be an Australian resident just because you rent a house or apartment and stay in one place for an extended period of time. See examples 1 and 2.

    You may be an Australian resident if your purpose for being in Australia changes and your behaviour shows this. For example, you may decide to live in one location and work for 12 months, developing routines associated with your work and social arrangements, or you may apply for a permanent visa. If this occurs you will become a resident of Australia for tax purposes at the time your behaviour changes. See examples 3 to 5.

    If you intend to migrate to Australia, or live and work in Australia for one employer, you may be an Australian resident from the time you arrive in Australia. See example 6.

    Examples – backpackers not residents of Australia

    Example 1 – typical single backpacker

    Roberto lives in Italy with his parents and comes to Australia on a 417 working holiday visa for 12 months. Roberto intends to work while on holiday in Australia. While Roberto travels to Australia, his possessions remain at his parents’ home in Italy. He also prepays his subscription to a soccer club in Italy to retain his membership for the next 12 months. He intends to return to his parents’ place when he returns from his holiday.

    For the first four months in Australia, Roberto works in his uncle’s café in Docklands and stays with him in North Carlton rent free. On his days off Roberto spends his time seeing the tourist spots in Victoria. Roberto then travels around Australia for the next two months.

    For the next three months, Roberto works in Regional Victoria and stays in shared accommodation. For the following three months, Roberto returns to live and work with his uncle and seeks an extension of his 12 month visa in order to continue his holiday around Australia and buys a car for this purpose.

    He stays in Sydney for approximately two months and works as a waiter. During this time, he stays with friends in share accommodation. For the next two months, he travels by car around New South Wales and Queensland and stays in various hostels.

    He then sells his car and leaves Australia to travel to Fiji and New Zealand for a month. He returns to Melbourne to stay with his uncle for several weeks and then departs Australia to return to his parents’ home in Italy.

    Decision: non-resident

    While Roberto stayed in Australia for 17 months, his behaviour showed he was a visitor. His main purpose was to have a holiday in Australia and fund that through casual and intermittent work. While he was in Australia, he did not treat any place as if it were his ‘home’, or as distinct from any other place where someone might stay while on holiday.

    His return home to Italy where he lived before his visit, keeping possessions at his parents’ home and prepaying his soccer membership also show his home is outside of Australia.

    End of example

     

    Example 2 – typical backpacker travelling to Australia with friends

    Erin, a social worker, and her boyfriend, Sean, who has just completed his law degree, come to Australia from the Republic of Ireland on a 417 working holiday visa for 12 months. Erin and Sean met in Dublin while they were studying at University College Dublin.

    Sean comes from Limerick, while Erin is Dublin born. Sean, while studying, stayed on campus and regularly returned to his home in Limerick during the breaks. Erin lived at her parents’ home in Dublin while attending university. While Erin and Sean travel to Australia their possessions remain at their respective parents’ homes in Ireland.

    Erin and Sean are enjoying a gap year before they commence work in Ireland, and they intend to travel and work around Australia. They arrive in Brisbane to stay at a hostel and join a group of backpackers that work around Queensland. During this time, they work in several remote areas to pick fruit, staying in connected share accommodation.

    They decide to stay longer and qualify for the 12 month extension on their visa. For the next 12 months, they decide to spend more time in Sydney, Brisbane and Cairns to extend their Australian adventure.

    For the first six months, they stay in Sydney, renting an apartment for six months and working casually in a bar. During this time, they enjoy the beach lifestyle in Sydney and take trips up and down the coast with the aim of seeing as many of the NSW beaches as possible.

    For the next six months, they stay in hostels in Brisbane and Cairns as well as camp in local National Forests. During this time, they work casually in bars for a few weeks at a time to fund their travels.

    Erin and Sean return to their parents’ homes in Ireland.

    Decision: non-resident

    Erin and Sean in the first year are traveling and working in Australia. In the second year, they take out a six month lease and work for the same employer for six months (both factors which some people consider is all that is required to be an Australian resident). However, residency for tax purposes also depends on other factors and their behaviour during this time is still consistent with being a tourist.

    End of example

    Examples – resident of Australia from change of behaviour

    Example 3 – backpacker who decides to extend stay

    Yangsook lives in the Republic of Korea and comes to Australia on a 417 working holiday visa for 12 months. Yangsook intends to work while on holiday in Australia.

    While Yangsook travels to Australia her possessions remain at her father’s home in the Republic of Korea. Before her visit to Australia, she enrols at Korea University and defers her start by 12 months.

    For the first three months, Yangsook stays in 14 different hostels as she travels around New South Wales and Queensland.

    For the next six months in Australia, she works in far north Queensland fruit picking on several different farms and lives in the shared accommodation provided by the farms. During this time she has a few dates with John, the son of a farmer and they agree to keep in contact after she continues on with her travels.

    She leaves Queensland to spend 14 days in Fiji and returns to Sydney to stay with a friend in shared accommodation, but soon returns to John’s place.

    Yangsook and John fall in love and want to keep seeing each other. Yangsook applies to extend her visa for another 12 months and live with John’s family. Yangsook obtains work as a waitress in a local café. On her days off she does chores around the farm and spends time with John.

    Decision:

    • non-resident for first year

    During this time Yangsook's behaviour is consistent with that of a visitor.

    • resident for the second year

    Yangsook is a resident from the time she extends her visa as she has changed her behaviour to develop strong family ties in Australia, as well as habits and routines consistent with making Australia her home. The income she earns in Australia is taxed at the working holiday maker tax rate. As a resident, she also has to declare any income she earns outside Australia in her income tax return. This is taxed at resident tax rates.

    End of example

     

    Example 4 – backpacker who gets sponsored to stay

    Bjorn, a computer programmer from Sweden, comes to Australia on a 12 month 417 working holiday visa. Upon arrival Bjorn finds shared accommodation for a period of two months (61 days). During that 61 day period, Bjorn works as a barista at a local café.

    Bjorn decides to travel to Perth to explore the city and spends 19 days there. Bjorn then arranges a 21 day holiday to Fiji and returns to Australia. On his return, Bjorn finds shared accommodation and recommences working in a different café for two months (61 days). Bjorn then goes on a 30 day holiday in New Zealand.

    After that holiday, Bjorn returns to Australia, goes back to the shared accommodation and gets a job as a computer programmer, still intending to return to Sweden.

    He enjoys Australia and the new job. His employer is short-staffed and desperate to keep Bjorn, so he asks Bjorn if he will stay if he gets approval to sponsor him under the Employer Nomination Scheme. His employer gets approval and Bjorn is advised his visa is approved and he signs a contract for 12 months.

    Decision:

    • non-resident during his stay on holiday
    • resident from when he commits to stay under the Employer Nomination Scheme
    End of example

     

    Example 5 – New Zealander who decides to stay indefinitely

    Matt arrives in Australia from New Zealand on a special category visa that allows him to remain indefinitely in Australia and to work in Australia. Matt is unsure whether he will settle in Australia permanently. Matt maintains his home and other assets in New Zealand.

    Once Matt arrives in Australia, he decides he will holiday around Australia to determine where he may live and takes up various short-term work opportunities.

    Matt rents shared accommodation while exploring Australia and permanent work opportunities. Matt finds permanent employment in Brisbane.

    As a result, Matt sells his home and other physical assets in New Zealand, and transfers his financial assets to Australia. He rents a house in Brisbane and has his furniture and personal items shipped across from New Zealand.

    Decision:

    • non-resident during his stay on holiday
    • resident from when his intention and behaviours changed to live in Australia

    Matt is a non-resident until he made his decision to relocate to Australia. At that time he became a resident, as that is when his intention changed. From this time he intended to live in Australia and his behaviour (selling his home and setting up a home in Brisbane) is consistent with residing in Australia.

    End of example

    Examples – resident of Australia from date of arrival

    Example 6 – person who wants to migrate to Australia

    Martina always wanted to migrate to Australia. She has no assets other than her bank account and suitcase. Migrating was easier said than done, so she entered Australia on a 12 month 462 work and holiday visa, hoping that would provide an opportunity to speed things up.

    Martina obtains a fixed contract of employment for six months in Melbourne, opens an Australian bank account by transferring the balance of her overseas account to it, joins the local soccer team as the goal keeper and enrols in the local community college to improve her English skills. Martina would like to live in Melbourne, but cannot afford to lease a flat, so she settles for a room in a shared house.

    Martina takes steps to determine if she is able to stay after her visa expires, but has to return home and apply to migrate through normal channels, which she does immediately upon her return. She has established some referees during her stay.

    Decision: resident

    Martina is a resident from when she first arrived. Her behaviour from when she arrived was consistent with being a resident.

    End of example

    Factors to consider

    There are two main factors we use to work out if you are an Australian resident if you are here for a working holiday, or visiting and working during your stay:

    • your purpose for being in Australia
    • how you actually live – do you have a settled way of life and developed routine and habit in Australia similar to how you lived before coming to Australia? This is different to being in Australia on a holiday or visit and working as you need.

    We also look at other factors when determining your purpose for being in Australia and where you actually live. No one factor will determine whether you are an Australian resident. It will depend on all the factors:

    • Your living arrangements – have you purchased or leased a place to live in Australia? This is different from leasing a place while you are on holiday and working as you need.
    • Your connections in the Australian community – have you joined a local club or group to be part of the local community, such as a sports team where you are expected to be regularly involved? This is different to joining a local club or group to meet locals and other travellers or to access cheap meals, gym facilities etc.
    • Where your valuable assets are located – do you have a bank account, investment, car, personal or household assets in Australia? This is different from having an Australian bank account to receive your wages, owning a car to get around Australia or acquiring some cheap furniture to furnish temporary accommodation.
    • Whether you have strong family ties in Australia – do you have a close relationship with a person who lives in Australia and are you in Australia to support or live with them? This is different from visiting family in Australia or traveling around Australia with your girlfriend or boyfriend on holiday.
      Last modified: 20 Dec 2016QC 50774