Starting a working holiday in Australia means understanding a few key details, including your visa options. There are two main visas under the Working Holiday Maker (WHM) program: the subclass 417 Working Holiday visa and the subclass 462 Work and Holiday visa. The 417 visa is for passport holders from specific countries, while the 462 visa, often known as the ‘Backpacker Visa,’ is available to a different set of nationalities. Both allow you to work and travel across Australia, with slight differences in eligibility and requirements.
Visa Subclass 417
Under the Visa Subclass 417, working holidaymakers are given a temporary visa. This visa entitles you to go on a holiday while working part-time (or even full-time) in Australia. You can fulfill your plans and stay in the country up to a whole year. Aside from this benefit, you can also do the following:
- Work in Australia up to six months per employer
- Depart and come back to the country in an unlimited number of times as long as the visa is valid
- Study in the country up to four months
Visa Subclass 462
As for Visa Subclass 462, it is a visa for work and holidaymakers similar to 417. It also provides the same benefits. However, the difference is that you can get another Work and Holiday visa again. It is applicable for those who have worked in Northern Australia for three months in the following industries:
- Forestry
- Fishing
- Hospitality
- Agriculture
To know the current status of your visa, you can check it with Visa Entitlement Verification Online.
Tax Rates as a Working Holidaymaker in Australia
Working holidaymakers in Australia should know that tax will be withheld from their pay, and they must lodge a tax return each year. Holders of subclass 462 (Work and Holiday) and subclass 417 (Working Holiday) visas are typically classified as non-residents for tax purposes, regardless of how long they stay in Australia.
Before 2017, backpackers could claim tax residency and qualify for the tax-free threshold if they stayed in one area for six months. However, in January 2017, working holidaymakers were reclassified as foreign residents for tax purposes, meaning they are no longer eligible for the tax-free threshold available to Australian residents.
Employers hiring working holidaymakers must register with the Australian Taxation Office (ATO) to apply the correct tax rates. This ensures that working holidaymakers meet their tax obligations while working and travelling across Australia.
| Working Holiday Tax Brackets | Working Holiday Tax Rates |
|---|---|
| $0 – $45,000 | 15c for each $1 |
| $45,001 – $135,000 | $6,750 plus 30c for each $1 over $45,000 |
| $135,001 – $190,000 | $33,750 plus 37c for each $1 over $135,000 |
| $190,001 and over | $54,100 plus 45c for each $1 over $190,000 |
Your Residency Status and Taxes
A huge factor in how you will be taxed in the country is whether or not you are a resident. Working holidaymakers are not considered residents for tax purposes. There are a few differences when you are a resident or a non-resident. Let us take a look:
- Non-residents working in Australia on a working holiday visa will pay 15% tax on their income up to $45,000.
- Meanwhile, residents will not pay on their first $18,200.
- Once residents reach $18,200 to $45,000, they will be required to pay 19% of that income.
It’s important for non-residents to ensure they are employed by a registered employer. Registered employers will withhold tax at the reduced rate of 15% on income up to $45,000. Some employers do not accept working holidaymakers, so be sure to verify this before starting work.
If you work for a non-registered employer, be aware that the tax rate is significantly higher. Non-residents working with non-registered employers are taxed at 32.5% on the same amount of income. This high rate makes it essential to seek out registered employers to keep your tax rate lower.
From a tax perspective, becoming an Australian resident isn’t as simple as living in the same area for six months. The Australian Taxation Office (ATO) uses various tests, like the 183-day test and domicile test, to assess residency. This means that even if you’ve lived in the same city or region for an extended period, you’ll need to prove other connections to establish yourself as a resident for tax purposes.
Declaring yourself a resident for tax purposes can be complex but may offer certain benefits. For instance, residents qualify for a tax-free threshold, meaning the first $18,200 of your income isn’t taxed. If you earn less than this amount, you may be eligible for a full tax refund, though this depends on your specific situation and any tax withheld during the year.
What Else Do You Need to Know?
You may be wondering if you need to worry about the Medicare levy while working in Australia. Generally, Australian residents pay a 2% Medicare levy on their taxable income to support the public healthcare system. If you’re from a country like Italy, the Netherlands, New Zealand, or Norway, Australia’s reciprocal health care agreements (RHCA) mean you may qualify for certain Medicare benefits.
However, as a foreign resident for tax purposes, you are typically exempt from the Medicare levy itself. Your tax residency status is what mainly determines if you need to pay this levy—not just your nationality or RHCA eligibility.
If Medicare levy amounts have been withheld from your pay, you’ll need to obtain a Medicare Entitlement Statement from Services Australia to confirm you’re not eligible for Medicare benefits. This statement is required to claim a refund on the levy in your tax return. Discovering that you’ve paid the levy when you qualify for an exemption can be frustrating, so this document helps streamline your refund process. You can get started on your tax return online to check your eligibility and claim any entitlements.
Apart from Medicare, you may also want to know about your Tax File Number (TFN). This unique reference number, issued by the Australian Taxation Office (ATO), is essential for managing your tax and superannuation. Your TFN stays with you for life, even if you change your name, job, or move, so it’s important to keep it secure.
While a TFN isn’t strictly mandatory, not having one means that your employer will be required to withhold tax at the highest rate, currently 47%. Without a TFN, you may also face difficulties accessing government benefits, lodging your tax return online, and applying for an Australian Business Number (ABN) if needed.
You can apply for a TFN online if you’re in Australia, have a valid passport, and a registered Australian address, where your TFN will be delivered. Eligible applicants include Australian citizens, permanent migrants, and temporary visitors. After applying, expect to receive your TFN within 28 days.
How to Claim Your Tax Back from a Working Holiday
Working holidaymakers in Australia should need to lodge a tax return, which is a requirement for both residents and non-residents. Tax returns are based on the financial year from the first of July to the 30th of June the following year. If you lodge your tax return, you should send it before the 31st of October.
Tax returns should be filed if you earn an Australian income, which denotes the following:
- Earnings from employment
- Income for renting out a space or apartment
- Australian pensions
- Annuities
- Capital gains
The income year in Australia ends on 30 June. You should lodge your tax return to ensure you have paid the correct amount of tax. The Australian Tax Office (ATO) calculates your tax based on your income for the year. If you have overpaid, you will receive a refund; if you underpaid, you will need to settle the difference.
Non-residents may find it challenging to complete their tax returns. Assistance can be beneficial, especially since you can ignore income from which withholding taxes have been deducted, such as bank interest. It’s also helpful to lodge your tax return early if you plan to leave Australia before 30 June.
Working Holidays & Superannuation
As a working holidaymaker in Australia, your employer is required to contribute to your superannuation, a retirement fund. Employers currently contribute 11.5% of your earnings to your super fund. Note that this rate is increasing annually and will reach 12% by July 2025.
When you leave Australia, you can reclaim your superannuation through the Departing Australia Superannuation Payment (DASP) scheme. Keep in mind, however, that the DASP is taxed at 65% for holders of subclass 417 or 462 visas.
For your tax return, employers will withhold tax based on your income and residency status. At the end of the year, you’ll need to present your final payslips, Payment Summary, and Tax File Number (TFN). Your residency status will significantly impact your tax refund amount.
The team at TaxReturn.com.au can help you claim back tax from your working holiday. Contact them today to start your tax return.
