If you’re on a Working Holiday Visa (Class 416 or 472), keep reading—we’re about to show you the top three do’s and don’ts for maximizing your backpacker tax refund.
Understanding the Backpacker Tax Rates
Since the 2016 federal budget, the Australian Government has classified holders of Visa Class 416 or 472 as non-tax residents. This means the ATO taxes them at 32.5% from the very first dollar earned between 1 July 2016 and 31 December 2016. This is called the non-resident tax rate.
However, if you earned income between 1 January and 30 June 2017, and your employer is registered as a working holiday-approved employer, you qualify for the concessional tax rate of 15%.
To ensure you maximize your refund, follow these three essential tips:
1. Split Your PAYG Summary into Two Periods
If you worked for the same employer before and after 31 December 2016, ask your employer to issue two separate PAYG summaries:
One for 1 July 2016 – 31 December 2016
Another for 1 January 2017 – 30 June 2017
Make sure the second PAYG includes an “H” code next to the gross payment. The H code confirms your employer is a registered working holiday employer and qualifies your income for the 15% concessional rate.
2. Recalculate Income If Your Employer Doesn’t Split It
If your employer refuses or fails to split your PAYG, speak with a qualified accountant to recalculate your income by period. This can significantly affect your tax amount.
For example, if your PAYG summary shows $10,000 paid from 1 November 2016 to 30 June 2017, and most of it was earned after 1 January, failing to recalculate could result in $3,250 in tax instead of just $1,500.
We recently helped a client who faced this issue. Her employer issued a single PAYG, and an accountant told her she owed an extra $6,000 in tax. After she came to us, we applied for a private ruling from the ATO—and she ended up receiving a $500 refund instead.
3. Allocate Deductions Strategically
How you allocate your work-related deductions matters. For instance, we helped a client apply a $1,000 deduction to income earned in the first half of the year, which is taxed at a higher rate. As a result, she received a much larger refund than if she had applied it to the second half.
If you became a tax resident during the financial year, your accountant must note this correctly. You may qualify for a pro-rated tax-free threshold of $18,000, which significantly reduces your tax liability.
Let the Experts Maximize Your Backpacker Tax Refund
Maximizing your Backpacker Tax Refund is complex this year, and a simple mistake can cost you thousands. At EndureGo Tax, we specialize in helping backpackers legally minimize their tax liability and maximize their refunds.
Call us today at 0410-829-900 to get the expert help you deserve.
