My taxes and my super

We understand it can be unclear when reading about taxes and super in Australia. In every country it always seems more difficult than it is, but we will try to explain to you in short below what these two things are.

Super

So your SUPER is your pensionfund. When you work in Australia your employer will put a percentage into a superfund. This can be opened by yourself (for example the Commonwealth Bank offers super-accounts) or you can have your employer open one.

If you have your employer open a super account for you, you can also give these details to your next employer so they can put their super also in the same account.

We have taken the following text of the website of the ATO (Australian Taxation Office).

If you’re an employee, you are typically entitled to compulsory super contributions from your employer. From 1 July 2014, these super guarantee contributions must be at least 9.5% of your ordinary earnings, up to the ‘maximum contribution base’.

Generally, you’re entitled to super guarantee contributions from an employer if you’re:

  • 18 years old or over, and
  • paid $450 or more (before tax) in a month.

It doesn’t matter whether you’re full time, part time or casual, or if you’re a temporary resident of Australia.

From 1 July 2017, a tax rate of 65% applies to departing Australia superannuation payments (DASPs) made to former temporary residents who were working holiday makers (WHMs).

You are classified as a WHM if you hold or have held:

  • a subclass 417 (working holiday) visa
  • a subclass 462 (work and holiday) visa
  • an associated bridging visa.

This change is related to the income tax rate for working holiday makers which was introduced by the Australian Government in December 2016 and effective from 1 July 2017.

DASP tax rate for WHMs

The 65% tax rate will come in effect if the following apply:

  • you ever held a subclass 417 or a subclass 462 visa, or associated bridging visa
  • your DASP includes super contributions made while you held the above visas
  • the DASP is paid to you on or after 1 July 2017.

The 65% tax rate applies to the taxed element, and untaxed element, of the taxable component of your DASP, including where those elements include any super you may have earned while working under a non-WHM visa. The tax-free component will continue to be subject to a Nil tax rate.

Visa validation

WHMs are required to provide visa information when submitting DASP applications. We verify visa information entered in DASP Online applications with the Department of Immigration and Border Protection (DIBP). To enable this verification process, we hold all DASP applications for 14 days before forwarding them to super funds for processing.

DASP applications are generally processed within 28 days. You can only submit an application once you have left Australia and your visa is cancelled or expired.

For more information, check the ATO website.

 

TAXES

When you have a job in Australia you are also entitled to pay your taxes.

Australian financial years start on the 1st of July and end the 30th of June.

Also below information we have taken off the ATO-website.

From 1 January 2017 – as a working holiday maker – the first $37,000 of your income is taxed at 15%, with the balance taxed at ordinary rates.

You are a working holiday maker if you have a visa subclass:

  • 417 (Working Holiday)
  • 462 (Work and Holiday).

When you lodge a tax return, we will work out how much tax you should have paid. If you paid too much, we will give you a refund. If you have not paid enough, we will send you a bill.

When you start work, you give your employer a TFN declaration. This tells the employer everything they need to know to work out how much tax to withhold from your pay.

Your employer will check if you have a visa subclass 417 (Working Holiday) or 462 (Work and Holiday), but you should tell them anyway to ensure they tax you correctly.

Only employers of working holiday makers are required to register with us as employers of working holiday makers. Working holiday makers do not register.

If your employer is registered with us they will withhold tax from your pay at 15% on the first $37,000 of income.

Example 1

Gorge is on a 417 Working Holiday visa and has started work for Paul's pickles. As Paul is a registered employer of working holiday makers, 15% tax will be withheld from Gorge's pay.

Gorge earned $500 in the first week and had $75 tax withheld.

End of example

If your employer is not registered with us as an employer of working holiday makers they must withhold tax from your pay using foreign resident tax rates. Foreign resident tax rates start at 32.5%.

Example 2

Aleks is on a 417 Working Holiday visa and started working for Pamela's berries. As Pamela is not registered as an employer of working holiday makers, Pamela will withhold tax at the foreign resident tax rates starting at 32.5%

Aleks earned $500 in the first week and had $162.50 tax withheld.

End of example

Started work before 1 January 2017 – TFN declaration

If you were working for an employer before 1 January 2017 you will have given them a TFN declaration when you started. There is no need to give them a new TFN declaration, but you should tell them about your visa subclass anyway to ensure they tax you correctly and you don't end up with a debt.

Finishing work – payment summary

When you finish work, you will receive a payment summary showing how much you earned and how much tax was withheld from your pay. You use the information in the payment summary to complete your tax return.

Only income earned from 1 January 2017 is eligible for the working holiday maker tax rates. You will receive a separate payment summary for any income from this date.

Your employer will also report the details from the payment summary to us.

If you worked for the same employer before and after 1 January 2017, your employer will give you two payment summaries. Income earned before 1 January 2017 is taxed at ordinary rates. Income earned from 1 January 2017 is taxed at 15%. When you lodge your tax return it is important that your income is included correctly to ensure that you aren't over-taxed.

Lodging a tax return

The Australian income year ends on 30 June each year. You are required to lodge a tax return to make sure you have paid the right amount of tax.

If you leave Australia permanently before 30 June, you can lodge your tax return early.

When you lodge a tax return, we work out how much tax you should have paid based on your actual income for the year. If too much was withheld from your pay, we refund you the difference. If you have not paid enough, we will send you a bill.

We automatically apply the correct tax rates and thresholds based on the information you include in your tax return. Make sure that any income you earn as a working holiday maker from 1 January 2017 is correctly shown on the tax return.

Example 3

Louie lives in Belgium and is planning a working holiday in Australia.

In preparation for his trip Louie applies for a TFN, indicating that he is not an Australian resident for tax purposes. He is granted a 417 visa before his arrival in Australia.

On 10 January 2017, Louie starts work with Bob's mango farm in Far North Queensland. As part of the normal employment process, Louie gives Bob a TFN Declaration and tells him that he is a working holiday maker on a 417 visa.

As Bob is a registered employer with us, the first $37,000 of Louie's income is taxed at 15%.

Louie is paid weekly and earns $100 a day. After 5 days work, Louie receives his first pay of $500, from which $75 tax is withheld and sent to us.

Louie finishes working for Bob in April after earning a total of $6,000. Bob gives Louie a payment summary showing he earned a total of $6,000 and had $900 tax withheld.

On 1 July 2017 Louie lodges a tax return indicating he is a non-resident. He shows his $6,000 working holiday maker income, tax withheld of $900 and $500 deductions related to his employment.

Once processed, Louie receives a Notice of Assessment showing a taxable income of $5,500 and a tax on taxable income of $825.

As Louie paid $900 in tax, he receives a refund of $75 paid directly to his Australian bank account.

End of example

Lodging a 2017 tax return early

If you lodge your 2017 tax return before 1 July 2017 you need to provide additional information. To make sure we tax you correctly, attach a note showing:

  • income earned from 1 July 2016 to 31 December 2016
  • working holiday maker income earned from 1 January 2017 to 30 June 2017
  • any deductions associated with the income periods.

Do not submit two separate tax returns for 2017.

Tax comparison

The working holiday maker tax rate is different to the tax rate for Australian residents.

The working holiday maker tax rate is 15% until you earn $37,000.

Australian resident taxpayers get the first $18,200 tax free (known as the tax free threshold), and then pay 19% until they earn $37,000.

Our Individual income tax rate page shows the most up to date rates and thresholds, including those above $37,000. Australian residents, foreign residents and working holiday makers pay the same tax rates on income over $37,000.

The following examples will give you a good idea of how this works, and the key differences between working holiday makers and Australian residents.

Example 4

Klaus is a German backpacker on a 417 visa and earned $37,000 between 1 January 2017 and 30 June 2017.

Klaus will pay 15% of his income in tax.

$37,000 × 15% = $5,550

Klaus:

  • does not pay the Medicare levy (he is not entitled to use the Medicare system)
  • is not entitled to the low income tax offset (as a foreign resident).

In total, Klaus will pay $5,550 tax.

End of example

 

Example 5

Richelle is an Australian resident and earned $37,000 in the 2017 income year.

Richelle gets the first $18,200 of her income tax free. Richelle will pay 19% tax on the income between $18,200 and $37,000.

That works out to be:

($37,000 − $18,200) × 19% = $18,800 × 19% = $3,572

In addition, Richelle also:

  • pays the Medicare levy of 2% = $37,000 × 2% = $740
  • is entitled to a credit for the low income tax offset = $445

In total, Richelle pays $3572 + $740 − $445 = $3,867 tax.

End of example

Impact on the tax free threshold

Most working holiday makers will be foreign resident taxpayers and not be eligible for the tax free threshold.

If you are a resident, you will be eligible for the tax free threshold but it will be impacted by any working holiday maker income you earn. Any working holiday maker income is dealt with first and effectively reduces your tax free threshold.

Example 6

Ian is a working holiday maker and his circumstances allowed him to claim residency for the whole 2017 year which entitles him to a tax free threshold of $18,200.

Ian earned $15,000 for the period 1 July 2016 – 31 December 2016 and $5,000 for the period 1 January 2017 – 30 June 2017.

Ian will be taxed at 15% on the $5,000 earned as a working holiday maker. The first $5,000 of the tax free threshold is then used by the working holiday maker income leaving $13,200 of the tax free threshold. The tax free threshold applies to the $13,200 of ordinary income and this is taxed at 0%. The remaining $1,800 of the ordinary income is taxed at 19%.

tax rates.jpg

For more information, check the ATO website.