Since 1975, the reciprocal Working Holiday Maker (WHM) program in Australia has helped to forge closer ties between young people in Australia and other countries. It permits young individuals to take a 12-month vacation during which they can work part-time and attend school. A working holiday may involve full- or part-time employment, volunteer activity, or no employment at all. You may tailor your year abroad because you are free to work as much or as little as you like.
How do tax rules for holiday makers work?
The working holidaymaker tax regulations will apply to you if you fall under one of the following working vacation maker visa subclasses:
- 417 (Working holiday visa)
- 462 (work and holiday visa)
You will normally not qualify for the tax-free threshold as a working holidaymaker and will be subject to special tax rates regardless of whether you are an Australian resident for tax purposes or not. For the 2022 tax year, you must pay 15% tax on your first $45,000 in earnings. You will be required to pay taxes on your excess earnings ($45,000 or more) at the standard marginal tax rates if you earn more than this.
This special rate of tax won’t apply to you if you are a resident of Australia for tax purposes and come from a country with a double tax agreement with Australia that includes a non-discrimination provision (Chile, Finland, Germany, Israel, Japan, Norway, Turkey or the United Kingdom).
Any Australian employer you work for must pay you superannuation (super). Once you have left Australia, you can ask for a return of that super, known as a Departing Australia Superannuation Payment, which is subject to a 65% tax (from 1 July 2017). When you land a job in Australia, let your employer know that you have a 417 or 462 visa type so they can withhold taxes at the discounted 15% rate.
How does a working holiday maker get taxed?
On their tax file number declaration, a person will state that they are a holiday maker. Using the form, employees must indicate whether they are a working holiday maker, an Australian resident, or a foreign resident for tax reasons. When determining how much tax to deduct from payments one makes to employees who possess visa subclasses 417 or 462, he consults the working holiday maker tax table.
The tax rate for working tourists is different from the tax rate for Australian citizens. Until you earn $37,000, the working holiday maker tax rate is 15%. Then, a working holiday maker pays taxes at the same level as Australian citizens. The tax-free level for Australian residents is $18,200 after which they pay 19% of their income up to $37,000.
On income over $37,000, foreign residents and holiday makers pay the same tax rates.
Tax rates for working holiday makers 2021-2022-2023:
|Taxable Income||Tax Payable|
|0 to $45,000||15%|
|$45,001 to $120,000||$6,750 plus 32.5% of income $41,000|
|$120,001 to $180,000||$31,125 plus 37% of income over $120,000|
|$180,000 and over||$53,325 plus 45% of income over $180,000|
Tax file number
You require a tax file number if you intend to work in Australia (TFN). In our tax system, your TFN serves as a personal identification number. As soon as you receive your work visa, you can apply for a TFN online.
Although a TFN is not required, not having one results in higher taxes.
Resident or non-resident?
Although you will be taxed at a higher rate due to your position as a working holiday maker, you will typically be treated as a non-resident for tax purposes.
You will only be taxed on income earned in Australia if you are considered a non-resident for tax purposes in Australia. Additionally, you are not permitted to deduct living expenditures from your taxable income while you are in Australia as a “living away from home” allowance or deduction.
The 2% Medicare levy, which residents must pay to cover essential medical expenditures, will not apply to you, which is better news. Only Australian income is subject to tax, and bank interest is only taxed at a 10% rate.
When to lodge your tax return
Tax returns must be filed after June 30 because that is the conclusion of the Australian financial year. You will be responsible for paying any remaining taxes owing if your employer did not deduct enough of them from your pay while you were employed in Australia. You will receive a refund, though, if your employer overpaid taxes on your behalf.
Are you a working holiday maker’s employer?
If you have a visa subclass 417 or 462 and want to hire a working tourist there, you must:
- Before making your first payment to them, register with the ATO as an employer of working holidaymakers to have tax deducted at the working holidaymaker tax rate.
- Use ATO’s Visa Entitlement Verification Online service to check the status of your employee’s visa.
If you don’t register, you could face penalties. If someone doesn’t have the right to work in Australia, you shouldn’t hire them or pay them.
When the income year is through or you leave your job in Australia, decide if you need to:
- You can look at your income statement
- Lodge your tax return.
- Apply for a superannuation payment before leaving Australia (DASP)
You can get expert help for the process if needed.