Over 570,000 backpackers travelled Australia in 2009 and many did so on Working Holiday Visas (WHVs) to help cover the costs. Tax is the last thing backpackers think about when in Australia; that is, until it comes time to leave or file their tax return…
Having arrived in Australia under a WHVs a number of years ago I have first hand experience of how difficult it is to understand a new tax regime, especially one which is obscured by myths, hearsay and misleading information. For many backpackers this is their first experience of tax and may be their first job which just makes things worse!
In this article I try to bust some of the myths and address some issues surrounding tax in Australia for WHVs holders.
You don’t have to pay tax in Australia if you are a backpacker/WHV
“The only two certainties in life are death and taxes.” – B. Franklin
One of the biggest, and most inaccurate, things I was told by other backpackers when I arrived in Oz.
Put simply, if you work in Australia you will have to pay tax on your earnings. The rate of tax that you pay depends on your individual situation, how much you have earned, other income you have received and deductions you may (or may not!) be entitled too.
Typically, if an individual is travelling frequently, employed in casual roles and not classed as an Australian resident for tax purposes, they will pay 29% of all earnings. This is because the Australian Tax Office (ATO) assumes they have income in another country and place a flat rate on all earnings to simplify the process.
Tax agents can get you 100% of your tax back
Tax is a complex matter and using a tax agent to help you can be a good call if you are unsure of some aspect of your return. However, any agent that promises to get you all of the tax you paid returned to you should be treated with caution.
They may be trying to mislead you or they could be lying to the tax office on your behalf – either way, you will end up in a lot of trouble. You will always be made to sign a document taking responsibility for the actions of the tax agent.
If you want to get an estimate of your tax liability or refund due, the ATO has free calculators that you can use.
How do people get a tax refund then?
In some cases refunds are received through providing incorrect information to the ATO, either directly or indirectly through a tax agent. This is a dangerous move as Australia has agreements with many countries to prevent tax evasion; allowing them to pursue individuals even when they return home.
In other cases individuals are genuinely entitled to a tax refund. The main way this occurs is when an individual has not worked for the full 12 months of the financial year. Some WHV holders are treated as Australian residents for tax purposes. In this case, if they have only worked for 3 months of the financial year, they may be entitled to a refund of some or all of this tax. Again, the ATO provides calculators to estimate this.
Conclusion
Tax is a complex matter – don’t take advice from friends, neighbours or countrymen. Find a registered tax account and avoid those that promise to get you 100% of your tax back.