From 1 January 2017, the Australian taxation treatment of working holiday visas changed.
Historically the Australian Taxation Office (ATO) treated Working Holiday Makers as foreign residents of Australia for tax purposes as their behaviour in Australia is usually not consistent with being a resident within the ordinary meaning of that term.
From 1 January 2017, a Working Holiday Maker’s residency status is no longer relevant as, from that date, all individuals who satisfy the definition of a Working Holiday Maker will pay tax at the same rates on their “working holiday taxable income”, whether a resident or a foreign resident for Australian tax purposes.
A Working Holiday Maker is an individual who is in Australia under one of the following visa subclass:
- 417 (Working Holiday); or
- 462 (Work and Holiday).
Working Holiday Makers are taxed at different rates to other Australian taxpayers. Please see the table below for the various tax rates applicable as at 1 July 2017.
Whilst you may think that this visa only applies to backpackers touring around Australia, it is often used by Australian employers when they are looking at bringing an employee under the age of 30 to work in Australia on a short term basis.
Working holiday visas are attractive in that the fees and turnaround times are significantly lower as compared to a 457 visa.
If a person is a working holiday maker for part of an income year only and holds a different (non-working holiday) visa for the balance of that income year, the working holiday maker rates of income tax apply only to income derived during the period in which the person qualifies as a working holiday maker.
Australian income tax rates
The following table summarises the Australian individual income tax rates that apply from 1 July 2017:
|
Taxable income |
Resident |
Working Holiday Maker |
Foreign resident |
|
0 – $18,200 |
Nil |
15c for each $1 |
32.5c for each $1 |
|
$18,201 – $37,000 |
19c for each $1 over $18,200 |
15c for each $1 |
32.5c for each $1 |
|
$37,001 – $87,000 |
$3,572 plus 32.5c for each $1 over $37,000 |
$5,550 plus 32.5c for each $1 over $37,000 |
32.5c for each $1 |
|
$87,001 – $180,000 |
$19,822 plus 37c for each $1 over $87,000 |
$21,800 plus 37c for each $1 over $87,000 |
$28,275 plus 37c for each $1 over $87,000 |
|
$180,001 and over |
$54,232 plus 45c for each $1 over $180,000 |
$56,210 plus 45c for each $1 over $180,000 |
$62,685 plus 45c for each $1 over $180,000 |
The above rates do not include the Medicare levy of 2%.
Foreign residents are not required to pay the Medicare levy.
Working holiday makers and temporary residents may be subject to the Medicare levy if they come from a location with whom Australia shares a Reciprocal Health Agreement.
Departing Australia Superannuation Payments (DASP)
From 1 July 2017, a tax rate of 65% applies to Departing Australia Superannuation Payments (DASPs) made to former temporary residents who were Working Holiday Makers (WHM).
Now for the kicker, the 65% tax rate will come in effect if the following apply:
- you ever held a subclass 417 or a subclass 462 visa, or associated bridging visa
- your DASP includes super contributions made while you held the above visas
- the DASP is paid to you on or after 1 July 2017.
The following table summarises the DASP rates post 1 July 2017:
|
Payment component |
DASP ordinary tax rate |
DASP Working holiday makers (WHM) tax rate |
|
Tax free component |
Nil |
Nil |
|
Taxable component – taxed element
Applies to taxed elements whether taken as DASP lump sum or rollover. |
35% |
65% |
|
Taxable component – untaxed element
Applies to DASP lump sums. Also to roll-over amounts up to the untaxed roll-over plan cap amount.
Any part of a rollover that exceeds the untaxed roll-over plan cap amount is subject to tax under the Superannuation (Excess Untaxed Roll-over Amounts Tax) Act 2007 (47%) rather than at DASP tax rates. |
45% |
65% |
Questions
Please do not hesitate to contact Michael van Schaik if you have any questions