To make full use of your Tax File Number (TFN), link it to the following services (which can help your tax return), make sure none of your information gets lost and save yourself unwanted tax charges. By using your Tax File Number (TFN) to link these services, you are connecting it to all of this information for the Australian Tax Office (ATO) to keep track of you and the costs you need to/can claim back.
Link your Australian bank account & TFN:
Provide your TFN to your Australian bank account so that your bank pays tax to ATO out of your interest and payments.
If you don’t link your bank account to your TFN, the bank will pay the highest marginal tax rate out of your payments.
Therefore, even if you don’t lodge a return, the ATO will still get tax off you. If you have paid the highest rate and lodge your tax return you will get the right amount of money back.
myGov: how your Tax File Number links all your Government services:
Sign up for a myGov account: https://my.gov.au “A simple and secure way to access government services”.
This will link you to all of your financial and medical services if you have them set up and will help you lodge your tax return.
- ATO: Sign up for the ATO online service through myGov. Make sure you update all your personal information online, especially if a visa company set up your account. This is where you can update your contact details and postal address.
- Super: Make sure when you apply for a Superannuation account (a compulsory pension your employer pays for you), you add your TFN number. This helps if you ever lose your details or if you want to merge different Super accounts.
- Centrelink/Medicare: Centrelink is the department of human services. This is where your Medicare card information is stored and the only way to get on the Medicare’s online services is linking it in mygov.au.
Tip: If you don’t add your TFN then your employer’s Superannuation guarantee contributions, and any other concessional (before-tax) contributions are subject to 49% (top marginal tax rate – 47%) rather than 15%.
Make sure you keep your Tax File Number safe! If someone else uses your TFN, it can cause serious problems because they could use your name illegally and you could be convicted of a crime. Make sure you are only providing it to the above services, your employer once you’re employed and your tax agent.
The tax system for Working Holidaymakers has changed
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.
Here are some great resources to help you figure out if you are being taxed correctly:
- My favourite is Pay Calculator.com it easily works out your tax and has a great interface. It shows you what weekly and monthly payments look like. It is also one of the best sites because it allows you to add backpacker as a filter.
- ATO’s Tax Calculator
Know your tax payment threshold:
If you work for more than six months it can be a bit of a shocker when you reach your payment threshold and suddenly your tax doubles.
ATO has a great page outlining the amount of money you earn before your tax changes.
On a Working Holiday Visa, if you go over $37,000 you go from being tax 15% a week to 32%. So make sure you take this into account for your budgets.
What next?
Now that you understand tax, let’s find out more about Superannuation (super).
Superannuation is a compulsory pension your employer pays for you. I know what your thinking – I don’t need that! But it’s mandatory for any employer in Australia to pay 9.5% of your wage (as a bonus) to your pension account and you can withdraw a percentage of that when you leave Australia to help you keep travelling the world!
What about Tax Returns?
Don’t worry, I haven’t forgotten about tax returns… they are at the end of this step-by-step work essentials journey.
But here is a very big tip! Lodging a return is something you should not just think about when you leave Australia. You need to do before October 31st every year.
Tip: The Australian income year starts on 1 July and ends on 30 June the following year. You then have from the 1st of July to the 31st of October to lodge a tax return without getting a late fine or interest charge.
So if you work in Australia during the tax year you should lodge before the 31st of October.
In the meantime, I would also advise downloading the ATO App. It helps you keep track of everything and add any work-related expenses to deduct in your tax return
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