Working Holiday Tax 2016: Is Australia’s Budget taking Backpackers to the Cleaners?

In 2015 the international backpacker community and the Australian travel industry were up in arms (and still are) when the Australian Government announced plans to ‘remove’ the tax free threshold for Working Holiday Makers. If the budget passes, this would mean that visitors in Australia on a Working Holiday Visa will have to pay a hefty 32.5% income tax from the very first dollar earned, as of July 2016. In December 2015 it all came to a head and the bill finally passed through parliament. Thanks continuous lobbying from Farmers and the Australian Tourism Industry the 32.5% the Turnbull Government had proposed to tax ‘backpackers’ never came to pass. Instead a ‘happy medium’ of 15% was agreed on BUT the sneaky bastards said nothing about backdating tax payments and chasing backpackers for tax money!

What a lot of people don’t know is that the ATO (Australian Tax Office) was always supposed to tax Working Holiday Makers at 32% with no tax free threshold as the backpacker was always supposed to be classified as none residents BUT what happened in reality was very different. Companies like TaxBack who have made a living from processing backpackers tax returns and employers were never eductated about this supposed ‘fact’ and the ATO was too god dam stupid to even realise.

As backpackers we were just told to tick “permanent resident” on our tax form, we didn’t know any better and the ATO had no procedure to check this so they would just apply the tax free threshold. As with most government departments the ATO is poorly run, use outdated systems and do everything they can to divert the publics attention away from the FACT that they royally chuffed this one up! Unbelievably they are so brazen that they are even chasing those poor unsuspecting and budget tight backpackers for backdated tax ‘owed’… ARE YOU KIDDING??

Nope, we know for a fact that their auditing department is in overdrive, a dear friend received a $2500 tax bill for tax that she had previously received back from the ATO… if that is not just dam right scandalous behaviour we don’t know what is! 

Will Working Holiday Makers be taxed more as of 2016?

Yes! This bill has now passed which means you will pay 15% from he 1st dollor you earn in Australia . While the government certainly needs to raise certain taxes to balance the books, this particular tax hike is already proving to be very unpopular. Australians appreciate Working Holiday Makers and their contribution to the economy and realise that these are the wrong people to be milking for cash. It was also assumed that the treasurer is purposely overestimating the expected revenue from the tax but we know know that this may not be the case as they attempt to back date payments and chase backpackers who have even left the country.

What should I do if I am planning a Working Holiday in Australia?

Make sure you know what your stuff, check out this link for some more information from the ATO –

How much tax do Working Holiday Makers currently pay in Australia?

The working holiday maker tax rate is now 15% until you earn $37,000, it then increases to 32.5% for income earned up to $87,000

Are Working Holiday Makers “residents of Australia for tax purposes”?

Nope. Under the new legislation, all Working Holiday Makers are treated as non-residents of Australia.

Is it even worth working in Australia anymore?

HELL YEAH! Who isn’t used to being screwed by the tax man these days, it never stopped us before. Honestly I think it comes down to our lifestyle choices really. Working in Australia is so valuable to our journey, it gives us opportunities to learn things that we would never get the chance to at home. It immerses into Aussie culture and provides us valuable funds for the many Aussie adventures on our bucket list because lets be honest, very few of us have the luxury of travelling with unlimited funds so if we don’t work we wont be able to eat.