People from another country who have decided to go on a holiday in Australia should know about taxes. Lodging your tax return may be one of the last things on your mind. After all, you may have just arrived in Australia, and you look forward to exciting adventures, certainly not paperwork.
Australia does have plenty of opportunities for travellers and holidaymakers, including those looking for a job. There are several places to visit and experience. But, aside from these activities, you should be aware of your responsibilities as a taxpayer, especially if you plan to work.
If you are in Australia for an extended trip, taxation may be different from how things are done in your own country. This guide is all about Australian taxes for non-residents, so you fully understand what you may have to pay in case you are stuck in Australia for a while.
Working in Australia
Many holidaymakers are simply in the country to enjoy the sights. However, you probably want to earn some cash while here. Before you do, it is important that you get a Tax File Number (TFN). This number applies to all citizens, as well as non-citizens who wish to work in Australia.
It is a requirement to get a TFN for yourself. Failing to get a Tax File Number is not an entirely serious offence. However, you should be prepared to get slashed 45% off your income. With such a deduction, it makes sense to apply for a TFN.
For more information about the Tax File Number and how to apply, please read our TFN guide.
Taxes for Travellers and Holidaymakers
Not everyone will be taxed when working in Australia. It will depend on your income during the year. Note that income year in the country begins on the 1st of July. It ends on the 30th of June of the subsequent year.
If you plan to work in the country, you need to have either of the following types of visa:
- Visa 417 (Working Holiday)
Working holidaymakers will receive this temporary visa, which is legal permission to go on a holiday and work either part-time or full-time. With this visa, you can stay in the country for up to a year and work for up to six months. It also allows you to study for up to four months. Visa holders are allowed to leave and re-enter Australia multiple times as long as the visa is valid.
- Visa 462 (Work and Holiday)
This type of visa is similar to 417, except that it permits people to work and stay in Australia for up to a year. You can also apply for another Visa 462 if you have worked for about three months in Northern Australia. The extension is only applicable to those in the specific industries of forestry, fishing, agriculture, and tourism and hospitality.
Employers will have to register with the ATO if they plan to accept working holidaymakers. This way, they can withhold tax at the correct tax rate before making the first payment. One more requirement is to have the visa status checked using the Visa Entitlement Verification Online system.
It is important that you talk to your potential employer about your visa. This way, they can apply the special 15% rate.
The tax system changed from the 1st of January in 2017. Since then, working holidaymakers will have the first $37,000 of their income taxed at 15%. The surplus dollars that you have earned will be taxed at ordinary rates.
Will You Be Considered a Resident?
Even if you stay for a long period in Australia, being a working holidaymaker regards you as a non-resident. Therefore, you will be taxed at a special rate, as mentioned above.
Those who are considered non-residents for tax purposes will only be taxed on the earnings they have received while in the country. Therefore, if you have another job overseas or in your own country, that income will not be taxed by the government.
But since you are not a resident, you cannot claim any expenses that you may have made. Residents can claim a tax refund for their travel and work-related purchases. Additionally, you are not entitled to the “living away from home” allowance, which is customarily deducted against taxable incomes for Australians.
These rules may look unprofitable for holidaymakers, but there is good news. You do not have to pay the Medicare levy because you are not an Australian resident for tax purposes. Residents have to pay a two per cent Medicare levy to cover certain medical costs. Your taxes will only be based on your income in the country. Also, the interest on your bank accounts will only be taxed at 10%.
In November 2019, the Full Federal Court decided that working holidaymakers who are Australian residents for tax purposes should be taxed at ordinary rates. If this situation applies to you and you are from the countries listed below, you could get a refund once the final decision has been given:
- United Kingdom
Currently, the rate remains, which is 15% for $37,000, which applies to both residents and non-residents. If you wish to get a refund from your taxes, you should provide records, including your residency status (as an Australian resident) and locations where you spent and stayed in the country. These documents can be anything from your credit card and bank statements to rental receipts. You should also provide employment and travel records, along with your visa applications.
What Do You Need to Know about Superannuation?
Your employer is required by law to pay you superannuation, which many people simply call “super.” You will not receive the money yet while you are in the country. But you can apply for a refund once you leave. This super for working holidaymakers is known as the Departing Australia Superannuation Payment. It is taxed at 65%, which is quite hefty.
Lodging Your Tax Return
Since the financial year ends on the last day of June, you should lodge your tax return after this date. Some employers may not take enough tax out of your income. If it is your case, you will have to pay the remaining amount that you still owe to the government. On the other hand, if your employer did pay more than what it is required, you will get a refund.
For comprehensive information, visit our dedicated working holiday tax return page.