Income Tax Rates Amendment (Working Holiday Maker Reform) Act (No. 2) 2016

(92 of 2016)

An Act to amend the Income Tax Rates Act 1986, and for related purposes

[Assented to 2 December 2016]

The Parliament of Australia enacts:

1   Short title

This Act is the Income Tax Rates Amendment (Working Holiday Maker Reform) Act (No. 2) 2016.

2   Commencement

 

(1) Each provision of this Act specified in column 1 of the table commences, or is taken to have commenced, in accordance with column 2 of the table. Any other statement in column 2 has effect according to its terms.

Note: This table relates only to the provisions of this Act as originally enacted. It will not be amended to deal with any later amendments of this Act.

      

(2) Any information in column 3 of the table is not part of this Act. Information may be inserted in this column, or information in it may be edited, in any published version of this Act.

3   Schedules

Legislation that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.

Schedule 1   Amendments

Part 1   Amendments

Income Tax Rates Act 1986

1   Subsection 3(1)

Insert:

working holiday maker has the meaning given by subsection 3A(1).

working holiday taxable income has the meaning given by subsections 3A(2) and (3).

2   After section 3

Insert:

3A Working holiday makers and working holiday taxable income

(1) An individual is a working holiday maker at a particular time if the individual holds at that time:

(a) a Subclass 417 (Working Holiday) visa; or

(b) a Subclass 462 (Work and Holiday) visa; or

(c) a bridging visa permitting the individual to work in Australia if:

(i) the bridging visa was granted under the Migration Act 1958 in relation to an application for a visa of a kind described in paragraph (a) or (b); and

(ii) the Minister administering that Act is still to make a decision in relation to the application; and

(iii) the most recent visa, other than a bridging visa, granted under that Act to the individual was a visa of a kind described in paragraph (a) or (b).

(2) An individual's working holiday taxable income for a year of income is the individual's assessable income for the year of income derived:

(a) from sources in Australia; and

(b) while the individual is a working holiday maker;

less so much of any amount the individual can deduct for the year of income as relates to that assessable income.

(3) However, the individual's working holiday taxable income does not include any superannuation remainder, or employment termination remainder, of the individual's taxable income for the year of income.

3   Clause 1 of Part I of Schedule 7

Omit "and 3", substitute ", 3 and 4".

4   At the end of Part I of Schedule 7

Add:

4. If the resident taxpayer is a working holiday maker at any time during the year of income:

(a) count the taxpayer's working holiday taxable income for the year of income as the first parts (starting from $0) of the taxpayer's ordinary taxable income for the purposes of the table in clause 1; and

(b) do not apply the rates in that table to that working holiday taxable income; and

(c) do not count that working holiday taxable income when working out the taxpayer's taxable income for the purposes of clause 2 or 3.

Note: The rates for the taxpayer's working holiday taxable income for the year of income are set out in Part III.

5   Clause 1 of Part II of Schedule 7

Omit "and 3", substitute ", 3 and 4".

6   At the end of Part II of Schedule 7

Add:

4. If the non-resident taxpayer is a working holiday maker at any time during the year of income:

(a) count the taxpayer's working holiday taxable income for the year of income as the first parts (starting from $0) of the taxpayer's ordinary taxable income for the purposes of the table in clause 1; and

(b) do not apply the rates in that table to that working holiday taxable income; and

(c) do not count that working holiday taxable income when working out the taxpayer's taxable income for the purposes of clause 2 or 3.

Note: The rates for the taxpayer's working holiday taxable income for the year of income are set out in Part III.

Example: Rosie earns a $60,000 salary while a working holiday maker from 1 July 2017 to 31 March 2018. She also earns $29,000 while holding a different class of visa from 1 April 2018 to 30 June 2018.

The $60,000 salary is Rosie's working holiday taxable income and is the first part of her ordinary taxable income. Under Part III, she pays tax at the rate of 15% on $37,000 of that salary, and tax at the rate of 32.5% on the remaining $23,000 of that salary.

The $29,000 income makes up the remaining parts of Rosie's ordinary taxable income. Under clause 1 of this Part, she pays tax at the rate of 32.5% on $27,000 of that income, and tax at the rate of 37% on the remaining $2,000 of that income.

7   At the end of Schedule 7

Add:

Part III - Working holiday makers

1. The rates of tax on a taxpayer's working holiday taxable income for a year of income are as set out in the following table.

Part 2   Application of amendments

8   Application of amendments

The amendments made by this Schedule apply in relation to:

(a) assessable income derived on or after 1 January 2017; and

(b) so much of any amounts that can be deducted as relate to such assessable income.