Working Holiday Tax in Australia

Australia is a great place to travel and there are lots of opportunities to work whilst you’re here. Unfortunately, a working holiday isn’t automatically a tax holiday and, for the new arrival, the Australian tax system can be a minefield! Travellers who earn income while in Australia will be expected to pay tax on their earnings.

New rules from 1 January 2017

The tax system was changed for working holidaymakers from 1 January 2017.

From that date, if you have the following working holidaymaker visa subclass you will be affected by the new rules:

  • 417 (working holiday)
  • 462 (work and holiday)

How the new rules work

From 1 January 2017, you will be taxed at 15% on the first $37,000 of income which you earn. Thereafter, you will pay tax at ordinary rates. This means you won’t be eligible for the tax-free threshold.

What about superannuation?

You should be paid super by any employer you work for whilst in Australia. You can then apply for a refund of that super once you leave Australia. This will be paid to you as a Departing Australia Superannuation Payment and will be taxed at 65% (from 1 July 2017).

Starting work

When you get a job in Australia, you should advise your employer that you are on either a 417 or 462 visa type so that they know to deduct tax at the special 15% rate.

Resident or non-resident?

Although your working holiday maker status means you’ll be taxed at special rates, you’ll also be regarded as non-resident for tax purposes.

How does your tax treatment differ if you are a non-resident?

Firstly, you will be taxed only on income you earn in Australia.

Travellers can’t claim living expenses while in Australia as a living away from home allowance or deduction against your taxable income.

That’s the bad news. The good news is you will be exempt from the 2% Medicare levy, which residents have to pay to cover basic medical costs. Tax is only paid on Australian income. Also interest on bank accounts is only taxed at 10%.

When to lodge your tax return

The Australian financial year ends on June 30, and tax returns should be lodged after that date. If not enough tax has been taken out whilst you were working in Australia, you’ll have to pay the shortfall. But if you’ve paid too much, you’ll get a refund.

If you are leaving the country before the end of the financial year it is possible to lodge your tax return early, but you will need to collect a “payment summary” from every employer and provide details of other income you’ve earned in Australia.

Nobel Thomas can take the pain out of the process by preparing and lodging your tax return for you. We can also advise you exactly which deductions you’re entitled to and which you aren’t.


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