Working holiday makers (WHMs) play a significant role in Australia's economy. They not only boost international tourism but also provide essential seasonal labor in sectors like agriculture, horticulture, tourism, and hospitality, especially in regional areas.
Recognizing a decline in WHM numbers due to factors like exchange rate fluctuations and economic changes in their home countries, the Federal Government took action. Many WHMs, being non-residents, couldn't benefit from the tax-free threshold and were taxed at 32.5% from their first dollar of income, with higher rates for higher incomes.
To address this, the government introduced reforms to make Australia more appealing to WHMs while ensuring fair taxation. One significant change was the implementation of new tax rates starting from January 1, 2017. Under these rules, WHMs are taxed at 15% on the first $37,000 of their Australian income, with the remainder taxed at resident rates. These new rates are designed to benefit most WHMs, who would otherwise face higher non-resident tax rates.
|
Taxable income |
Marginal tax rate (ignoring Medicare levy) |
||
|
WHM |
Resident |
Non-resident |
|
|
Nil to $18,200 |
15% |
0% |
32.5% |
|
$18,201 to $37,000 |
15% |
19% |
32.5% |
|
$37,001 to $90,000 |
32.5% |
32.5% |
32.5% |
|
$90,001 to $180,000 |
37% |
37% |
37% |
|
$180,001 and over |
45% |
45% |
45% |
Tax Rates for Working Holiday Makers (WHMs) in 2019 and 2020
WHMs are subject to specific tax rates, regardless of their residency status. While non-resident WHMs generally benefit from these rates (as they're lower than non-resident rates), the story changes for resident WHMs.
Comparison of Tax Rates:
- Resident Taxpayers: Normally have a tax-free threshold of $18,200. This means their first $18,200 of taxable income isn't taxed. However, if they're also WHMs, a 15% tax rate applies to the first $37,000 of Australian-sourced income. So, resident WHMs end up paying more tax because the tax-free threshold doesn't apply to any part of their Australian income.
For detailed legislation, refer to the Income Tax Rates Act 1986.
For further assistance, you can reach out to Tax Ideas Accountants & Advisers at
+61 2 83181545 or book an appointment via live calendar.
