Working Holidays Makers – Changes to tax arrangements
Currently, a working holiday maker can be treated as a resident for tax purposes if they satisfy the tax residency rules, typically that they are in Australia for more than six months.
This means they are able to access resident tax treatment, including the tax free threshold, the low income tax offset (LITO) and the lower tax rate of 19% for income above the tax free threshold up to $37,000.
However, under changes to the residency rules from 1 July 2016 most people who are in Australia on a working holiday will be treated as non-residents for tax purposes regardless of how long they are here. This means the second marginal tax rate (currently 32.5%) will apply on every dollar of income up to $80,000.
If this applies to you, you should ensure that you tick the “non-resident” box when you complete your Tax File Number Declaration form when commencing a new job.
If you are already working you may need to complete a new TFN Declaration Form or speak to your employer to ensure you are being taxed at the correct rate. If your employer does not withhold the correct amount of tax, you may need to pay tax at the end of the financial year when you complete your tax return.
Employees on Temporary Skilled Work visas such as 457 visas will not be affected by these changes.