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  • Working holiday makers

    If you work in Australia, tax will be withheld from your pay and you may need to lodge a tax return each year. The requirement to lodge a tax return will depend on how much income you have earned during the year.

    The Australian income year starts on 1 July and ends on 30 June the following year.

    As a working holiday maker, the first $37,000 of your income is taxed at 15% and the balance is taxed at ordinary rates. You are a working holiday maker if you have a visa subclass:

    • 417 (Working Holiday)
    • 462 (Work and Holiday).

    You can check your visa status using the Visa Entitlement Verification Online systemExternal Link.

    As a working holiday maker, your employer also has to pay superannuation for you if you are an eligible employee. 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%.

    Find out about:

    Australian resident or foreign resident

    Most people who come to Australia for a working holiday or to visit are foreign residents for tax purposes. This includes people on visa subclass 417 (Working Holiday) or 462 (Work and Holiday) (backpackers).

    Taxation of working holiday makers – appeal

    On 26 November 2019 we appealed to the Full Federal Court against the Federal Court's decision in the matter of Addy v Commissioner of TaxationExternal Link. The decision could impact working holiday makers who are a resident of Australia for tax purposes and are from:

    • Chile
    • Finland
    • Germany
    • Japan
    • Norway
    • Turkey
    • United Kingdom.

    What this means for you

    Working holiday maker income tax rates will continue to apply at the 15% rate (regardless of whether you are a resident or not) until the appeals process has ended.

    If the decision of the Federal Court is found to be correct, and you were also a resident of Australia, you may be entitled to a refund of Australian tax paid on your working holiday maker income.

    If you are from one of the countries listed above and seek a refund, you may need to provide records to show your residency status. These can include:

    • records showing the time you spent in each location in Australia
    • records that show your accommodation in Australia (such as credit card, bank statements, rental receipts and rental agreements)
    • employment records
    • travel records
    • visa applications
    • your living arrangements before and after your holiday in Australia.

    Employers must apply the pay as you go (PAYG) withholding tax rate in accordance with your tax file number declaration. If you identify as an Australian resident for tax purposes, and our records show you are a working holiday maker, we will notify your employer (and you) of your status. We will also advise your employer to apply the relevant tax rate.

    Working holiday makers who may be entitled to a refund are encouraged to wait until the appeal has been decided before seeking an amendment or objecting to an assessment.

    If the decision affects you, you won't be disadvantaged. You can lodge an amendment request or an objection at a later time.

    We encourage you to check this website for updates on the appeal decision.

    Next step:

    Applying for a tax file number

    If you plan to work in Australia you need a tax file number (TFN). Your TFN is your personal reference number in our tax system. You can apply for a TFN online once you have your work visa.

    You don't have to have a TFN, but without one you pay more tax.

    See also:

    Starting work – TFN declaration

    When you start work, you give your employer a TFN declaration. This helps the employer 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.

    Your employer is required to register with us as an employer of working holiday makers. Working holiday makers do not register.

    If your employer is registered with us, they will withhold tax from your pay at 15% on the first $37,000 of income.

    Example 1

    Gorge is on a 417 Working Holiday visa and has started work for Paul's Pickles. As Paul is a registered employer of working holiday makers, 15% tax will be withheld from Gorge's pay.

    Gorge's tax withheld is calculated by the following:

    • Gorge's pay × 15% = tax withheld
    • $500 × 15% = $75

    Gorge earned $500 in the first week and had $75 tax withheld.

    End of example

    If your employer is not registered with us as an employer of working holiday makers, they must withhold tax from your pay using foreign resident tax rates. Foreign resident tax rates start at 32.5%.

    Example 2

    Aleks is on a 417 Working Holiday visa and started working for Pamela's Berries. As Pamela is not registered as an employer of working holiday makers, Pamela will withhold tax at the foreign resident tax rates starting at 32.5%

    Alek's tax withheld is calculated by the following:

    • Aleks's pay × 32.5% = tax withheld
    • $500 × 32.5% = $162.50

    Aleks earned $500 in the first week and had $162.50 tax withheld.

    End of example

    Finishing work – income statement

    Through Single Touch Payroll (STP) you will be able to see your year-to-date tax and super information in myGov. It will show the amount you earned, tax withheld and superannuation that has been paid. You will see the information by logging in to myGov and accessing ATO online services.

    Your employer is no longer obligated to give you an end-of-year payment summary but if they do the payment summary will be available in myGov along with your income statement.

    The information on your income statement or payment summary will help you to determine if you need to lodge a tax return, and if so, complete your tax return.

    See also:

    Lodging a tax return

    The Australian income year ends on 30 June each year.

    You do not need to lodge an income tax return or a non-lodgment advice if both of the following apply:

    • all of your income was earned as salary and wages while you were a working holiday maker
    • the total of your taxable income for the income year was less than $37,001.

    You are required to lodge an income tax return if either of the following applies:

    • your taxable income for the year was more than $37,000
    • you carried on a business.

    You will need to lodge an income tax return should you wish to claim any deductions

    If you leave Australia permanently before 30 June, 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 will refund the difference to you. If you have not paid enough, we will send you a bill.

    Example 3

    Louie lives in Belgium 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 2018, 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 tells him that he is a working holiday maker on a 417 visa.

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

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

    Louie's tax withheld is calculated by the following:

    • Louie's daily pay × 15% = tax withheld
    • $100 × 15% = $15

    Louie's total tax withheld is calculated by the following:

    • Days worked × tax withheld per day = total tax withheld
    • 5 days × $15 = $75

    Louie finishes working for Bob in April after earning a total of $6,000. Louie's income statement shows he earned a total of $6,000 and had $900 tax withheld.

    As Louie's total taxable income for the year is below $37,001 Louie is not required to lodge a tax return for the 2018 income year.

    End of example

    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.

    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.

    Our individual income tax rate page shows the most up-to-date rates and thresholds, including those above $37,000. Australian residents, foreign residents and working holiday makers pay the same tax rates on income over $37,000.

    The following examples show how this works, and the key differences between working holiday makers and Australian residents.

    Example 4

    Klaus is a German backpacker on a 417 visa and earned $37,000 in the 2018 income year.

    Klaus will pay 15% of his income in tax.

    • $37,000 × 15% = $5,550

    Klaus:

    • does not pay the Medicare levy (he is not entitled to use the Medicare system)
    • is not entitled to the low income tax offset (as a foreign resident).

    In total, Klaus will pay $5,550 tax.

    End of example

     

    Example 5

    Richelle is an Australian resident. She earned $37,000 in the 2018 income year.

    Richelle gets the first $18,200 of her income tax-free. She will pay 19% tax on the income between $18,200 and $37,000.

    That works out to be:

    (Total income − tax-free threshold) × tax rate = tax withheld

    ($37,000 − $18,200) × 19% = $3,572

    In addition, Richelle also:

    • pays the Medicare levy of 2%  
      • $37,000 × 2% = $740
    • is entitled to a credit for the low income tax offset  
      • $445

    In total, Richelle pays $3,572 + $740 − $445 = $3,867 tax.

    End of example

    The Medicare levy

    Most working holiday makers are foreign resident taxpayers. Foreign resident taxpayers do not pay the Medicare levy.

    If, given your circumstances, you determine that you are an Australian resident for tax purposes then you may be liable to pay the Medicare levy.

    Australia has reciprocal health agreements with the following countries:

    • Belgium
    • Finland
    • Italy
    • Malta
    • Netherlands
    • New Zealand
    • Norway
    • Republic of Ireland
    • Slovenia
    • Sweden
    • United Kingdom.

    If you come from one of these countries and are an Australian resident for tax purposes you will be liable to pay the Medicare levy.

    Example 6

    Ian is a working holiday maker from the UK and his circumstances mean he is an Australian resident for the whole 2017–18 income year. Ian has no dependants.

    He is liable to pay the Medicare levy as Australia has a reciprocal health agreement with the UK.

    Ian earned a total of $40,000 in the 2017–18 income year.

    Ian will be taxed at 15% on the first $37,000 he earned as a working holiday maker. The remaining $3,000 is taxed at 32.5%.

    Ian's tax and Medicare levy would be calculated as follows:

    • $37,000 × 15% = $5,550
    • $ 3,000 × 32.5% = $975

    Total tax on taxable income:

    • $5,550 + $975 = $6,525

    Medicare levy on taxable income:

    • $40,000 × 2% = $800

    In total, the amount of tax Ian pays is $7,325, calculated as:

    • $6,525 + $800 = $7,325
    End of example

    Departing Australia Superannuation Payments (DASP)

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

    If you worked and earned super as a working holiday maker, your super will be taxed at 65% when it is paid to you. This DASP tax rate for working holiday makers is effective from 1 July 2017.

    You can apply for the DASP after you leave Australia if you meet all requirements.

    See also:

    Last modified: 04 Dec 2019QC 50742