Everything you need to know about lodging a Tax Return as a Working Holidaymaker

Tax Residency in short:

• An Australian resident for tax purposes is someone who has been based in one place for a long time and is trying to take steps to make Australia their home.
• A foreign resident for tax purposes is someone who has travelled around a lot, not made them self a member of the Australian community and doesn’t intend to stay in Australia.

But, again, I recommend you read the above guides to work out exactly where you fit.

Once you understand your tax residency, it’s important you understand how it affects your return.

STEP 2: How the tax system for Working Holidaymakers has changed and what your tax residency has to do with it

Since January 1st 2017 there is now a specific tax system for Working Holidaymakers.

Companies now need to register as employers of Working Holidaymakers. If the company is not registered you can be taxed as a foreign resident at 32.5% from the first dollar you earn up to $87,000.

As a Working Holidaymaker, employed by a company who is registered, you will only get taxed at 15% from the first dollar you make up to $37,000. Then taxed 32.5% on anything earned over $37,001.

Tip: If you’re not sure your employer is registered you can call ATO on 13 28 61 to see if your employer is withholding the right tax.

Before the tax system changed, Working Holidaymakers were able to claim residency if you stayed in one place long enough but now most are treated as foreign residents.

As a resident for tax purposes, you are entitled to an $18,200 tax-free threshold. Earnings above that threshold will be taxed at 19%, up to the next boundary of $37,000.

As a Working Holidaymaker (not attempting to make Australia your home), you cannot claim Australian tax residency and therefore are not entitled to the $18,200 tax-free threshold. Which means you don’t get quite as much tax back, but it does make your tax return so much easier to do.

Tip:  Working Holidaymakers can’t claim that much money back anymore. So, paying for a tax agent might not be worth it. I have included some resources at the end of this guide that you can use to get some free advice and support.

If you claim that you are an Australian resident for tax purposes, be careful. The ATO is cracking down on people falsifying their residency, which could mean you paying back your tax return. So make this decision carefully.

Next: Prepare All Your Documentation.

It’s always a good idea to get all your information in one place before starting your application to lodge.  

STEP 3: Start collecting your Employment Information

Collect all employment information to prove that you worked for a certain employer, exactly what you earned and what tax was withheld. To do this you should collect the following information:

1. Payment Summaries or Final Payslips: At the end of each tax year, you will receive a Group Certificate/Payment Summary from your employer which shows how much you have earned and how much tax was deducted. If you haven’t received one by the end of July get in touch with your employer. It makes your tax return so much easier, but you can also just use your final payslips.
2. Your employers ABN number: An ABN number is the business number your employer is registered under and will help the ATO track how much you earned with them.
3. Super contributions: Have a good look at your Super contributions and outline any extra contributions that your employer may have made. This will save you a lot of time when you lodge.
4. Your Bank Account information(BSB, Account name & number). You will need the details of all bank accounts you have in Australia and the amount of interest you have earned. You will elect a bank account to be paid into or out of and the ATO will evaluate if you have paid the right about of Tax on your interest earned.

STEP 4: Work out what deductible Work-Related Expenses apply to you and pull together proof.

Deductible expenses that are available to Australian employees are more generous than many overseas countries. Deductibles can take your income down and possibly increase your tax return.

Taxpayers can claim deductions from income on all expenses incurred while employed ( known as work-related deductions). You could claim anything from the use of your private phone for work purposes to buying and washing protective clothing.

What you can claim and how to do it:

1. First, download the ATO APP. It is brilliant for keeping track of your deductions and will feed straight into your tax return as soon as you hit submit. You can also use it to save your receipts and records.
2. Read the following Guides to see if any of the available deductions apply to you. They are easy to flick through and show you how to add these deductibles to your ATO app.

1. 1. Eligible deductions
   2. The Ultimate Guide to Tax deductions in Australia
   3. Do you use your mobile phone for work?
   4. Clothing and laundry 
   5. Travel expenses 
   6. Car expenses
   7. Gifts and Donations
   8. Claiming home office costs

Summary

Now that you understand your tax residency, How the tax system works for a Working Holidaymaker, and what information you will need to prepare. You have successfully taken your first step in lodging your return. Congratulations!! It’s nearly over!