Taxes and superannuation 101 for working holiday makers in Australia

Chapter 2 of 5

Income tax in Australia – The working holiday makers status

The 2016 “backpacker tax” change

As of January 2017, working holiday makers are no longer considered residents for tax purposes, which means they can no longer claim the tax-free threshold (the first $18,200 of yearly income). All income (less than AU$45,000/year) is taxed at the minimum rate of 15%.

Now, the working holiday makers tax rate is different than the tax rate for Australian residents. The working holiday maker tax rate is 15% until you earn $45,000. Australian resident taxpayers get the first $18,200 tax-free (known as the tax-free threshold), and then pay 19% until they earn $45,000.

Tax rates and residency status

Income range and tax rate for non-residents, working holiday makers working for an employer who didn’t register as an “employer of working holiday makers”

• $0-$120,000: 32.5%
• $120,001 to $180,000: $39,000 + tax rate of 37% for income above $90,000
• $180,001 and up: $61,200 + tax rate of 45% for income above $180,000

Income range and tax rate when working for an employer registered as an “employer of working holiday makers”

• $0 to $45,000: 15%
• $45,001 to $120,000: $6,750 + tax rate of 32.5% for income above $45,000
• $120,001 to $180,000: $31,125 + tax rate of 37% for income above $120,000
• $180,001: $53,325 + tax rate of 45% for income above $180,000

How do I get the working holiday maker tax rate status in Australia?

To get the correct working holiday makers tax rate—15% for the first $45,000 earned—your employer must be registered with the ATO as an “employer of working holiday makers.” If not, your tax rate will be 32.5%.

It makes a huge difference:

• Your employer is registered as an employer of working holiday makers with the ATO. If your gross wage is $1,000, your net wage will be $810. You won’t get tax back (or a very small tax return) at the end of the fiscal year (read on for more info on deductions).
• If you’re considered a non-resident for tax purposes and your gross wage is $1,000, your net wage will be $675.

Tell your employer to read the Employers of working holiday makers page for more information on how to register with the ATO in order to withhold tax at the working holiday maker tax rate (otherwise, penalties apply for the employer!).

To get the correct tax rate, the Australian government strongly recommends that you disclose your working holiday maker status and that your employer registers as an “employer of working holiday makers.”