Before you start your working holiday in Australia, you need to apply for an Australian Tax file Number (TFN). You can apply for your TFN online at www.ato.gov.au or phone 13 28 61 between 8am to 6pm Monday to Friday. International callers can contact the ATO by phoning +61 2 6216 1111 between the hours of 8.00am to 5.00pm.Phone 13 14 50 for interpreting service if your English is not so good.
Starting your Working Holiday in AustraliaWhen you start your work (and each time you change employers) you will be given an Employment Declaration Form. Your employer is obliged by law to give you one of these forms and ensure that your completed form is sent off to the taxman (ATO) within 28 days of you starting work. When you go to fill this form in you will come to a question asking you to select your resident or non-resident status. How you answer this question is very important.
1. Because your employer is obliged to deduct tax from your wages and the amount deducted is dependent on how you have answered this question. There are 2 different rates of tax. One rate for residents and a higher rate for non-residents. Non-residents pay tax on every dollar they earn and the rate of tax deducted starts at 29% (for the first $414) and steadily increases as you earn more.
2. The amount of tax you may be eligible to claim back when you leave Australia is also dependent on how you answer this question. Non-residents are not eligible for the tax free threshhold, currently $6000 or any of the other tax concessions available to residents and so the only amount of tax they could be entitled to get back is the small pro-rata amount built into the tax scale i.e. when your employer pays you the amount of tax to be deducted is shown on a scale set by the taxman. There is a resident scale and a non-resident scale designed to calculate the tax on your wages as if you were going to receive the same amount each week for 52 weeks of the year. If you don't work for 52 weeks of the year then you will be entitled to claim back the small pro-rata amount included in each tax deduction from your wages.It is a complete myth that you will automatically get all your tax back when you leave Australia!
There is a lot of confusion out there amongst, not only working holiday backpackers but also amongst many employers and even some accountants and tax agents.It is very common to hear both backpackers and employers say that you will get your tax back when you leave Australia. If you are, or have declared that you are a Non-resident then this assumption is totally WRONG! and even if you are a Resident for tax purposes it still doesn't mean that you will automatically get all or even any of your tax back. The confusion continues where some employers will insist that you are a Non-resident for tax purposes and direct you to fill in your Employment Declaration accordingly. They have NO RIGHT to do this as Australias' tax system is a 'self assessing system' meaning the relationship we have with regards tax is purely between 'us' (as individuals) and the taxman (and possibly the Administrative Disputes Tribunal or the Australian Federal Court if there is a dispute).
Some employers and their accountants think they have to treat you as non-residents even if you declare yourself to be a resident. To help both them and you to decide the issue read the following and then if still not sure seek further information from the Australian Tax Office (ATO).The simple rule of thumb to help decide if you are a Resident or a Non-Resident for tax purposes in Australia is this: If the nature of your working holiday visit to Australia is one of mostly travel with only a little bit of work here and there, then you are probably going to be a Non-Resident for tax purposes and happy to pay tax at the correct rate because you don't want hassles and possibly a big tax bill at the end of your visit.... However, if the nature of your working holiday visit to Australia is more one of work i.e. many travellers feel that the only way to truly learn about a country is to live and work in it, then the chances are that you will become a Resident for tax purposes. This is especially so if you intend to apply for a second 12 month extension of your working holiday visa and or if you can show that you lived and worked in the same place for at least 183 days i.e. 6 months within the same tax year i.e. between 1st July and 30 June the following year. At the end of the day, the matter of whether you are a resident or a non-resident for tax purposes is between you, the taxman and if you both can't agree, the court.
Superannuation contributionsIf your monthly wage is more than $A450, your employer must contribute an additional sum equal to 9% of your wage into a superannuation (pension) account for you. If you entered Australia on an eligible temporary resident visa you can, in most cases, access your contributions when you leave Australia, although the contributions will be taxed. To check your eligibility to claim your superannuation and to apply for your payment, visit www.ato.gov.au/departaustralia.
In summary, it is important to keep records of all your earnings (pay slips) including superannuation, work related outgoings i.e extra ordinary expenses incurred as a result of your work (may be tax deductible), employer details i.e. business name, address etc, start and finish dates with different employers etc. Make sure your employers have an up to date address to which to send important end of tax year summaries etc.Don't let a failure to take Tax matters seriously spoil your otherwise great Australian working holiday experience!