The recent changes in the Australian backpacker tax have caused a lot of confusion, not only amongst working holiday backpackers but also amongst many employers and even some accountants and tax agents.
Below, we’ve listed 6 simple facts that may clear up your questions!
From January 1, the tax rate for working holidaymakers in Australia has been made 15% on earnings up to $37,000.
This has been reduced from the proposed 32.5% that was originally announced in the budget. For anything above $37,000, ordinary marginal rates will apply, which means all earnings from $37,001- $80,000 will be taxed at the standard 32.5% rate.
The fees for working holiday visa applications will also be reduced by $50 to $390.
This change will be in effect from 1 July 2017. The government hopes to encourage more working holidaymakers to apply for visas because they are vital to the tourism and agricultural industries and their numbers have been declining steadily since 2012/13. These changes will be made to the 417 and 462 visas with the hope of improving the supply of working holidaymakers.
The current age of eligibility (18 to 30) will remain in place for the time being.
The Government is considering options for expanding the upper age of eligibility from 30 to 35 years, but nothing has been made final yet.
To promote tax integrity as well as to collect more data, the government will require employers of backpackers to register with the tax office.
Those who fail to register will have to withhold tax at the 32.5% rate – the backpacker would then have to get the extra tax back on lodging their tax return. The names of registered employers will be public, so available to those on working holidays and to other employers. Scott Morrison. MP, said the new registration system would give better data on who is employing backpackers, and “also help us to address what is the other side of the equation – and that is why are Australians not taking up jobs in the first place? What are the things that need to be done to ensure that Australians will take up these jobs?”.
As a working holiday maker, any departing Australia super payment made on or after 1 July 2017 is taxed at 65%.
The government’s rationale behind the withholding tax hike is to partially offset the cost of the reduction from 32.5% to 15%, as well as acting as an incentive to keep the superannuation money in Australian superfunds and the economy. Morrison said, “this is consistent with the objective of superannuation, which is to support Australians in their retirement, not provide additional funds for working holiday makers when they leave.”
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To apply for your refund, register online and the team of tax experts will provide you with a completely free tax refund estimate. If you are happy with it, they will complete your application. The whole process is completely stress-free and you don’t need to deal with the tax authorities and know complicated tax laws. You simply wait until you receive the maximum legal refund straight to your bank account.