backpacker tax

Australian taxman urges backpackers to check their status regarding new tax rules

by Ray Clancy on December 20, 2016

in Jobs in Australia

Backpackers working in Australia are being urged to contact the tax office if they are confused over their current status and how that will change from the start of 2017.

The new tax regime for young people with working holidaymaker visas begins on 01 January and from that date they will pay 15% in income tax from the first dollar that they earn.

hikers-backpackingBut what they have earned this year will be taxed differently and that depends on their status and the Australian Tax Office (ATO) says visa holders are urged to make sure they are paying the right level of tax.

There could also be confusion among employers so again visa holders are being urged to make sure they check with their bosses and the tax office to make sure they are paying the correct amount.

In July 2017 it gets even more complicated with the introduction of the new backpackers’ superannuation tax. It means that a backpacker who is leaving the country and claiming superannuation from July 2017 onwards will be required to pay the Departing Australia Superannuation Payment with the whole amount being taxed at 65%.

The ATO has made a new table available on its website to show backpackers and employers what they should be paying in tax. ‘From 01 January 2017, as a working holiday maker the first $37,000 of your income is taxed at 15%, with the balance taxed at ordinary rates,’ said an AO spokesman.

‘As a working holiday maker your employer also has to pay superannuation for you if you are eligible. When you leave Australia you can apply to have your super paid to you as a Departing Australia Superannuation Payment (DASP). The tax on any DASP made to working holiday makers on or after 01 July 2017 is 65%,’ the spokesman explained.

‘When you lodge an income tax return, we will work out how much tax you should have paid. If you paid too much, we will give you a refund. If you have not paid enough, we will send you a bill,’ the spokesman added.

The ATO has given the following example of how it will work. Belgian Louie arrives in Australia with a 417 working holiday visa and starts work on a mango farm on 10 January 2017 in north Queensland. He gives his employer his visa details and the first $37,000 of his income will be taxed at 15%.

Louie is paid weekly and earns $100 a day. After five days work, Louie receives his first pay of $500, from which $75 tax is withheld and sent to the ATO. Louie finishes working in April after earning a total of $6,000. His employer gives Louie a payment summary showing he earned a total of $6,000 and had $1,140 tax withheld.

Before he leaves Australia, Louie lodges an income tax return showing his $6,000 income, tax withheld of $1,140 and $500 deductions related to his employment. Once processed, Louie receives a Notice of Assessment showing a taxable income of $5,500 and a tax on taxable income of $1,045. As Louie paid $1,140 in tax, he receives a refund of $95 paid directly to his bank account.

With information being shared between the ATO and the DIBP a visa holder who fails to pay the correct tax could be flagged up if they apply for another visa in the future. If you are still in Australia and found to have deliberately avoiding tax then you could be deported.

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