A Backpacker's guide to Australian tax and other topics






Backpackers not holding a Working Holiday visa are generally not entitled to work under the terms of their visa. But if they do in fact work, then they are subject to Australian tax in exactly the same way as Working Holiday visa holders.

Before starting work in Australia, a person must obtain an official Tax File No.; otherwise tax will be deducted from all wages received at the rate of 47%. When applying for the Tax File No, proof of identity must normally be supplied. An application form to obtain a Tax File No. can be obtained from the local Tax Office.  However, a backpacker can now obtain a Tax File No. online from the Tax Office's website. This has the added advantage that under this arrangement proof of identity does not have to be supplied. If a backpacker expects to be self-employed during any part of his stay in Australia, then he should obtain an Australian Business No. (ABN) from the Tax Office. Otherwise tax will be deducted at 47% from his payments. The ABN can be otained online. Sometimes you will be offered work either a) on a self-employed basis or b) as an employee. To help you decide which is the more appropriate basis in any given circumstances, the Tax Office has a calculator on its website which will help you in deciding. To sum up then, if you are going to Australia on a working holiday, be sure to apply for a Tax File No. (and an ABN, if necessary) before seeking work. After obtaining a Tax File No. and before beginning work, an employee must complete an Employee Declaration form. This requires the person to state whether he is a tax-resident or not. If he is not a tax-resident, the employer must deduct tax at non-resident rates i.e. 32.5%. Later, when completing his Tax Return, a taxpayer must also state whether or not he is a tax-resident.

The Australian financial year runs from the 1st July to the 30th June. Every backpacker should file an Australian Tax Return as soon as possible after the 30th June each year. If the backpacker is leaving Australia before the end of the financial year i.e prior to 30th June, then he can complete a Tax Return for the year in advance and lodge it with the Australian Taxation Office. This must be a paper Return. A backpacker can now file his Tax Return online and, of course, from anywhere in the world. A backpacker does not need a tax clearance certificate from the Tax Office before leaving Australia or transferring funds overseas.

When completing the Return, it should be noted that the deductible expenses available to Australian employees are more generous than for many overseas countries. For example, taxpayers can claim as deductions from income "all expenses incurred in earning income". This will include travel on duty, protective clothing and footwear, washing and laundry of protective clothing, cost of training courses, trade union fees, tools, work-related use of private phone, relevant books and publications, licences and registration fees, stationery used for work, bank charges re deposit of wages, tax agent fees, donations to charities etc. A backpacker cannot claim the cost of his living expenses in Australia as a living-away-from-home deduction or allowance. A taxpayer can claim up to $300 in work-related expenses before he will be required to provide receipts to the Tax Office if audited.

Most people in Australia engage a Tax Agent to lodge their Return. The Tax Office will send any refund to the Tax Agent if an agent has been engaged. Tax Returns can be lodged from an overseas location as well. In such a case, the best solution would be to contact an Australian-based Tax Agent through the Internet. As previously mentioned, a backpacker can also file his Tax Return online

How does the taxation of backpackers differ from the taxation of Australian workers in general?

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Patrick J. Kissane, LLB, FCA,

Registered Tax Agent,

Chartered Accountant.

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