Backpacker Tax Return Specialist

The backpacker tax return for the financial year 2016/17 is complicated in the sense that two tax brackets will be applied for two sets of periods during the financial year.

If you are holding a visa class 417 (Working Holiday) or 462 (Work and Holiday), please read on, as the way your tax return is handled will impact how much refund or how much more tax you have to pay.

From the period of 1 July to 30 December 2016, a 32.5% tax bracket will be applied for anything up to $80,000, from 1 January 2017 to 30 June 2017, the first $37,000 of the income is taxed at 15% with the balance taxed at Ordinary Tax Rates.

Also on the ATO website, they had already clearly defined that

“Many people who come to Australia for a working holiday or to visit will remain foreign residents for tax purposes. This includes people on visa subclass 417 (working holiday) or 462 (work and holiday) (backpackers)”

Income tax bracket
0 – $80,000
32.5 for each $1
$80,001 – $180,000
$26,000 plus 37 cents for $1 over $80,000
$180,001 and over
$63,000 plus 45 cents for each $1 over $180,000

However, for backpacker, the tax rate is being reduced from 1 January 2017 to 15 cents for the first $37,000.

backpacker tax return

Backpacker tax return specialist

To maximize the tax refund position for backpackers, it is crucial to adhere to the following tips.

Backpacker Tax Return Rate Adjustment

Backpackers encounter a reduced tax rate from January 1, 2017, at 15 cents for the first $37,000. Here’s how to optimize your tax refund:

Tip 1: Verify PAYG Summaries

Ensure you receive two PAYG summaries from your employer, covering the periods from July 1, 2016, to December 31, 2016, and January 1, 2017, to June 30, 2017. Check for the ‘H’ code next to gross payments for backpacker employer registration to benefit from the reduced tax rate.

Tip 2: Leverage Professional Assistance

Engage EndureGo Tax, a professional CPA accounting firm, to assist in claiming work-related deductible items. Increasing deductible items lowers taxable income, potentially leading to a more favorable refund position.

Work-Related Deductible Items:

  • Mobile Phone
  • Internet
  • Uniform
  • Laundry Expense
  • Stationary
  • Traveling Expenses
  • Accounting Fee
  • Bank Fee
  • Sunscreen or Sun Lotion (if working outside)

Our qualified accountant ensures the validity and acceptance of work-related deductible items by the Australian Taxation Office.

Tip 3: Optimize Deduction Application

The technique used to apply work-related expense deductions impacts the end tax position. Proper application can result in significant tax savings.

Example:

  • No Deduction: $10,000 x 32.5% + $10,000 x 15% = $4,750
  • With $2,000 Deduction (Attributed to Second Half): $4,450
  • With $2,000 Deduction (Attributed to First Half): $4,100
  • Equal Basis Across Two Periods: $4,275

Correct application technique can lead to tax savings of $650.

Pitfalls of Backpacker Tax Return

Be cautious of potential pitfalls in backpacker tax returns, such as employers not being registered as backpacker-approved, not receiving two PAYG summaries, and the income being subject to 32.5%. We can assist in seeking adjustments to the tax rate via a private ruling.

Part-Year Resident Consideration

If holding a student visa or other applicable visas, backpackers can potentially be considered residents for Australian Taxation Purposes. This can lead to significant refunds, and our team can guide you through the process.

This year’s backpacker tax return is intricate, and success relies on your tax agent’s ability to navigate complexities. Contact us at 0410-829-900 for expert assistance in maximizing your tax refund.