The Backpacker Tax – what has changed and does it apply to me?

There has been much debate and controversy surrounding changes to the way in which Australia taxes backpackers – or ‘Working Holiday Makers’. Many young international tourists choose to obtain a temporary working Visa to enable them to perform short-term work whilst they travel and explore. Changes to these taxes have recently been passed in Parliament.

Who is considered a ‘backpacker’?

A visitor who works whilst travelling is considered to be a ‘Working Holiday Maker’ by the Australian Taxation Office (ATO). You are a working holiday maker if you are an international tourist, aged between 18 and 30, who has applied and gained either of the following two visas:

• 417 (Working Holiday), and
• 462 (Work and Holiday).

If you hold one of these visas, the new ‘Backpacker Tax’ changes will, therefore, apply to you. If you are an employer with staff holding the above visas, you will also need to be aware of your new obligations.

What are the taxation changes?

From 1 January 2017, working holiday makers will be taxed at 15% for the first $37,000 they earn. Any income above $37,000 will be taxed at the standard foreign resident rates.

Currently, working holiday makers are taxed at 32.5%. As the new rates only apply from the 1st of January (mid-financial year), any income earned up until the 1st of January will still be taxed at the current rates.

Changes to super

There have also been changes to the rates of superannuation tax applied to working backpackers. Australian employers are legally required to make super payments on an employee’s behalf. Backpackers who then leave the country may apply to gain access to their super. From 1 July 2017, these Super amounts will be taxed at 65%. Up until that time, super will continue to be taxed at just 38%.

What do I need to do as an employer?

If you employ or are planning to employ, working holiday makers, you must register with the ATO to add “working holiday maker” to your PAYGW registration. This can be done online via the ATO website. New tax tables are also available from the ATO, to make salaries and tax withholding obligations easier to follow.

Contact the ATO or Call Hart Partners if you are unsure of your obligations.

What do I need to do as a working holiday maker?

The first thing you need as a working holiday maker is an Australian Tax File Number (TFN). This can be obtained once you receive your working visa. When you start a new job, you will need to fill out a TFN declaration to enable your employer to tax you correctly.

You will also be required to lodge a tax return in Australia to report all of your income. This will allow the ATO to determine whether you have paid too much or too little over the course of the financial year.

When you finish a job, make sure you get a payment summary from your employer to let you know how much you have earned (so you can report it on your tax return). If you are leaving the country, ensure you complete a tax return and apply to gain access to your super. The ATO can provide advice as to how to go about this. Visit their website for more information. Or you can enlist professional tax advice from a local tax professional.

It is important you understand and comply with all the required legislation, and report your income accurately, to avoid penalty.

Changes to taxation can be a confusing business, so if you are struggling to make sense of the new backpacker taxes, Hart Partnersare on hand to provide the appropriate advice for your circumstances. We invite you to call our friendly team on 03 9600 3220 today.