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Edited version of private advice

Authorisation Number: 1051811759684

Date of advice: 9 March 2021

Ruling

Subject: Working holiday maker tax rates

Question

Are you taxed in accordance with the Working Holiday Maker (WHM) tax rates?

Answer

No.

This ruling applies for the following periods:

Year ending 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You are a Country Z citizen.

You arrived in Australia for a short stay and worked for a period under a contract.

You received a visa on your arrival. It was not a Working Holiday Maker visa

While in Australia, you worked in order to help fund your holiday in Australia.

You remained in Australia for another week before returning to Country Z.

You were in Australia for less than 183 days.

Relevant legislative provisions

Income Tax Assessment Act 1936 Subsection 6-5

Income Tax Rates Amendment (Working Holiday Maker Reform) Act 2016

Reasons for decision

Section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that where you are a resident of Australia for taxation purposes, your assessable income includes income gained from all sources, whether in or out of Australia. However, where you are a foreign resident, your assessable income includes only income derived from an Australian source.

The Income Tax Rates Amendment (Working Holiday Maker Reform) Act 2016 came into effect from 1 January 2017, the Act defines a working holiday maker as an individual who holds a Subclass 417 (Working Holiday) visa, a subclass 462 (Work and Holiday) visa or certain related bridging visas which are issued by the Department of Immigration and Border Protection.

The visas allow adults who meet the relevant criteria, including holding a valid passport from eligible partner countries, to work in Australia while having an extended holiday. Work in Australia must not be the main purpose of the visa holder's visit.

The current partner countries are listed below:

•         Belgium

•         Canada

•         Republic of Cyprus

•         Denmark

•         Estonia

•         Finland

•         France

•         Germany

•         Hong Kong Special Administrative Region of the People's Republic of China (including British National Overseas passport holders)

•         Republic of Ireland

•         Italy

•         Japan

•         Republic of Korea

•         Malta

•         Netherlands

•         Norway

•         Sweden

•         Taiwan (other than an official or diplomatic passport)

•         The United Kingdom of Great Britain and Northern Ireland

Most people who come to Australia for a working holiday or to visit are foreign residents for tax purposes.

Foreign residents do not benefit from any tax-free threshold and thus are subject to taxation from the first dollar of earnings with the tax rate being determined by the visa held.

In your case, you are a foreign resident who entered Australia on an alternative visa and therefore not subject to the same tax rates, obligations or entitlements as those provided by the Working Holiday Maker visas. Consequently, the normal foreign resident tax rate applies to your Australian sourced income.

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