Are you holding Visa Class 416 or 472, which belongs to a working holiday visa, if you are, please read on, as we will show you the three Do’s and Don’ts of maximizing your backpacker tax refund. The first thing to note is that since the 2016 federal budget, the Australian Government has already passed legislation to deem the people holding the visa class 416 or 472 as non-tax residents, which means they will be taxed at 32.5% for the 1st dollar they make for the wages derive from the period of 1 July 2016 to 31 December 2016. This is the term the nonresident tax rate. However, if you are on the 416 or 472 visa, your payment derived from 1 January to 30 June 2017 will be taxed at the concessional rate of 15%. However, your employer must be registered as a working holiday visa-approved employer for the concession to take place. Please follow the three tips as follow to ensure you will maximize your tax refund for the backpacker tax return.
- If you had been working for the same employer before 31 December 2016, ensure your employer gives you two PAYGs separated into two periods one for 1 July 2016 to 31 December 2016, and another for 1 January 2017 to 30 June 2017. It is also important to note that the PAYG for the period of 1 January 2017 to 30 June 2017 will have a code of H next to the gross payment. The code of H means that your employer is a working holiday-approved employer, and is able to pass the concessional tax rate of 15% to your payment.
- If your employer cannot split the income into those two separate periods, please talk to your accountant and recalculate the exact payment for each period, as it could mean a huge difference in the tax amount. For example if your employer only issue a PAYG summary showing $10,000 being paid from 1 November 2016 to 30 June 2017, and if those payments are received after 1 January 2017, then if you do not recalculate the amount, it could be $3,250 tax rather than $1,500 tax. We have a client recently, and her employer issued the wrong PAYG summary to her, and the mistake was the employer did not split the income into those two periods, and one accountant did her tax return, and told her she need to repay an extra $6,000 tax on top of the PAYG the employer already withheld, however, when she came to our office, we did a private ruling for her to Australian Taxation office, and she got a refund of $500.00
- The way the work-related deduction is allocated will also affect the amount of tax refund you will get. We had helped a client to allocate a work-related deduction of $1000 to the income derived in the first half of the financial year, and because it has a higher tax rate, we were able to help the client to save a significant amount of tax as a result.
- If you become a tax resident during the financial year, then it is important your accountant mark that down carefully, as you are able to enjoy the tax-free threshold of 18,000 pro rata for the par year tax resident, and this will be an effective tool to reduce the tax liability.
This year’s backpacker tax return is very complicated and as such you need to find a highly experienced tax accountant to help you maximize your backpacker tax refund, please give us a call at 0410-829-900.