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Edited version of your written advice
Authorisation Number: 4140042760480
Date of advice: 27 February 2018
Ruling
Subject: Tax rate on working holiday visa
Question 1
Is your income earned while on a Working Holiday Visa after 1 July 20XX subject to tax at a rate of 15% (under $37,000)?
Answer
Yes
Question 2
As a contractor, is it compulsory to pay your own superannuation contributions?
Answer
No.
This ruling applies for the following period:
Period ending 30 June 20XX
The scheme commences on:
1 July 20XX
Relevant facts and circumstances
You arrived in Australia on a 417 visa during the 20XX/XX financial year.
You worked in several positions as a salary and wage earner.
You lodged an income tax return for the 20XX/XX financial year and declared your income.
You commenced work in a new position with a new employer.
You were told to register for an ABN as you would be working as a contractor.
You registered your ABN as an individual/sole trader.
You invoiced the two different entities for the work you carried out.
Accommodation and board was included.
You have departed Australia and you have no set plans to return.
You have no employment set up in Australia.
You have relatives in Australia that you would initially stay with if you returned.
Relevant legislative provisions
Income Tax Rates Act 1986 Subsection 3A
Reasons for Decision
Residency status of working holiday makers
New legislation that came into effect from 1 January 2017 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 young adults aged 18 to 30 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.
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 the first $37,000 of your taxable income is taxed at the rate applicable to working holiday makers. Above that threshold, the rates are the same as for residents.
Tax rate while on working holiday visa
The legislation set the rate of tax that applies to working holiday makers at 15% for income which does not exceed $37,000 in one financial year.
You were working in Australia while on a 417 visa: your taxation rate is defined and set in the new legislation. Accordingly, any income you derived from your employment in Australia after 31 December 2016 while you were holding a working holiday visa was subject to a tax rate of 15% for any amount under $37,000.
Tax rate after 1 July 2017
Your terms of employment changed. You registered as an individual sole trader and applied for an Australian Business Number. You invoiced two entities and you were not taxed on the income you received.
As a sole trader you use your individual tax file number when lodging your income tax return and declare your income at A4 - label D ‘Working holiday maker net income’ on your tax return. The relevant amount of tax will be calculated and you will receive a notice of assessment including the amount you are to pay to us.
Any income you derived while working as a contractor was subject to the same tax rate of 15%.
As you left Australia permanently before the end of the financial year, you can lodge your income tax return earlier. Visit the ATO website and search for ‘Lodging your tax return early’ or enter the Quick Code 33230.
Sole trader and superannuation
As a sole trader, you don’t have to make superannuation contributions to a super fund for yourself. However, you should consider super as a way of saving for your retirement.