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  • Working holiday makers

    If you work in Australia, tax will be withheld from your pay and you need to lodge a tax return each year.

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

    From 1 January 2017 – as a working holiday maker – the first $37,000 of your income is taxed at 15% and the balance is taxed at ordinary rates. Any income you earned prior to 1 January 2017 will be taxed based on your residency (most working holiday makers are foreign residents for tax purposes).

    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 serviceExternal Link.

    When you lodge a tax return, we will work out how much tax you should have paid. If you paid too much, we will give you a refund. If you have not paid enough, we will send you a bill.

    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%.

    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).

    See also:

    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 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%

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

    End of example

    Started work before 1 January 2017?

    If you were working for an employer before 1 January 2017, you would have given them a TFN declaration when you started. There is no need to give them a new TFN declaration. However, you should tell them about your visa subclass so they tax you correctly and you don't end up with a debt.

    Finishing work – payment summary

    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 tax return.

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

    Your employer will also report the details from the payment summary to us.

    If you worked for the same employer before and after 1 January 2017, your employer will give you two payment summaries. Income earned before 1 January 2017 is taxed at ordinary rates. Income earned from 1 January 2017 is taxed at 15%.

    When you lodge your tax return it is important that your income is included correctly to ensure that you aren't over-taxed.

    Lodging a tax return

    The Australian income year ends on 30 June each year. You are required to lodge a tax return to make sure you have paid the right amount of tax.

    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.

    We automatically apply the correct tax rates and thresholds based on the information you include in your tax return. Make sure that any income you earn as a working holiday maker from 1 January 2017 is correctly shown on the tax return.

    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 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 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 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 $900 tax withheld.

    On 1 July 2017 Louie lodges a tax return indicating he is a non-resident. On his tax return, he shows his $6,000 working holiday maker income, tax withheld of $900 and $500 deductions related to his employment.

    After the tax return is processed, Louie receives a Notice of Assessment showing his taxable income of $5,500 and tax on taxable income of $825.

    As Louie paid $900 in tax, he receives a refund of $75, which is paid directly into his Australian bank account.

    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 between 1 January 2017 and 30 June 2017.

    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 2017 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:

    ($37,000 − $18,200) × 19% = $18,800 × 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 tax-free threshold and the Medicare levy

    Most working holiday makers are foreign resident taxpayers. Foreign resident taxpayers are not eligible for the tax-free threshold and do not pay the Medicare levy.

    However, if you are on a working holiday visa, but are an Australian resident, you will be eligible for the tax-free threshold in a modified way. The calculation of the tax-free threshold will be affected by any working holiday maker income you earn. The calculation is done in two steps with any working holiday maker income being dealt with first, which effectively reduces your tax-free threshold.

    As an Australian resident, you will also have to pay the Medicare levy unless you qualify for an exemption. For more information about the Medicare levy and exemptions see, 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 2016–17 income year. Ian has no dependants.

    Ian is entitled to the tax-free threshold of $18,200. He is also liable to pay the Medicare levy as Australia has a reciprocal health agreement with the UK - this means he does not qualify for an exemption.

    Ian earned a total of $30,000 in the 2016–17 income year.

    • $25,000 for the period 1 July 2016 to 31 December 2016 (ordinary income)
    • $5,000 for the period 1 January 2017 to 30 June 2017 (working holiday maker income)

    Ian will be taxed at 15% on the $5,000 earned as a working holiday maker. The first $5,000 of the tax free threshold is then used by the working holiday maker income leaving $13,200 of the tax free threshold. The tax free threshold applies to the $13,200 of ordinary income and this is taxed at 0%. The remaining $11,800 of the ordinary income is taxed at 19%.

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

    Working holiday maker income is taxed first

    • $5,000 × 15% = $750

    Tax free threshold is reduced by the working holiday maker income

    • $18,200 − $5,000 = $13,200

    Ordinary income is taxed at resident tax rates.

    • $13,200 × 0% = $0 (using up the remaining tax free threshold)
    • $11,800 × 19% = $2,242

    Total tax on taxable income

    • $750 + $0 + $2,242 = $2,992

    Medicare levy on taxable income

    • $30,000 × 2% = $600
    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: 29 Nov 2017QC 50742