Resident For Tax Or Not

Most people who come to Australia for a working holiday or visit are not Australian residents for tax purposes. This includes people on subclass 417 or 462 visas (working holiday makers or backpackers).

This is because most working holiday makers (WHMs), consistent with their visa requirements, don’t intend to stay in Australia. They only intend to have a holiday while working some of the time.

Someone on a 417 Working Holiday or 462 Work and Holiday visa will be taxed differently depending on if the employer is registered with the ATO as a Working Holiday Maker (WHM) employer. Working holiday makers do not need to register themselves with the ATO. If the employer is registered with the ATO as a WHM employer, they will withhold tax at a rate of 15% for the first $45,000 you earn during 2020–21 and later income years.

Higher tax rates will apply above these thresholds. Source: https://www.ato.gov.au/Rates/Schedule-15—Tax-table-for-working-holiday-makers/

If the employer is not a registered WHM employer they must withhold tax at the foreign resident rates, starting at 32.5% for the first $90,000.

WHM’s don’t need to lodge a tax return or a non-lodgement advice if both of the following apply:

• All of your income was earned as salary or wages while you were a WHM.
• The total of your taxable income for the income year was less than $45,001 for 2020–21 and later income years.
• You will need to lodge a tax return if you want to claim any deductions.

2 types of subclass 403 visas:

• One is the 403 Seasonal Worker Program (SWP) ;
• the other is the 403 Pacific Labour Scheme (PLS).

The SWP visa is a temporary visa that is valid for up to 9 months and one must:

• Continue to be employed by their sponsor,
• Only do the work in the industry covered by the visa,
• Not work for yourself or anyone other than the sponsor,
• Comply with all visa conditions and Australian laws.

If you are a worker in the SWP, your employer must withhold tax at a flat rate of 15% on all payments made to you. Workers under the SWP are non-residents of Australia for tax purposes. They may become a resident for tax purposes if they stay in Australia after working on the program.

***Seasonal workers are not required to lodge tax returns unless you have other Australian or foreign income outside of the program. You do not declare the income earned and cannot claim any work-related deductions. If seasonal workers do lodge a tax return you should not include your income from the SWP in your tax returns. Only other Australian or foreign income is declared.

The 403 Pacific Labour Scheme (PLS) includes 9 Pacific countries and Timor-Leste.  This is a temporary visa that is valid for up to 3 years. This scheme covers people working mainly in hospitality, tourism, aged and disability care, agriculture, forestry, and fishing. The obligations imposed are the same as the earlier points, BUT

If you are a PLS worker, your employer must withhold tax at resident rates using regular tax tables.

PLS workers are considered to be residents for tax purposes because you can work in Australia between a minimum of one year and up to three years or longer. PLS workers are protected by Australian workplace laws, in the same way as Australian workers.

PLS workers are required to lodge tax returns and must include other income earned in Australia and outside of Australia.

Should you require any additional assistance please don’t hesitate to contact us.

Other Individual Tax Information & Articles:

• April 2023: No more Low and Middle-Income Tax Offset (LMITO) to lower tax bills or increase tax refunds.