What is the Backpacker Tax Australia 2017?

Feb 28, 2017

Backpackers working in rural Australia
Backpackers working in rural Australia

From the 1st of January 2017, the Australian Government made some changes to the way people on working holiday visas were taxed. These changes are what is now commonly referred to as the Backpacker Tax. Now that the dust has settled, we’ve broken it down to explain how this will impact you and your time in Australia.

Who’s affected?

Anyone intending to work or already working in Australia on either a 417 or 462 visa. These are essentially the same thing, and only vary based on the country from which your passport is issued. You can view a list of the countries in each category on the department of immigration website: 417 and 462.

Is it still worth coming to Australia with these changes?

Even though the tax will increase for many, Australia has the highest minimum wage rates in the world (seriously, just ask the OECD), so if you’re smart about your travels and spending you shouldn’t have anything to worry about.

Australian cities also consistently rank as some of the world’s most liveable - see what The Economist and ABC News say! You also won’t find a better combination of weather, wildlife, beaches and seriously cool stuff to do anywhere on the planet. Maybe we’re a little biased but we know you’ll love it!

What actually changed?

Previously, you could work in Australia and pay zero tax until you started earning over a certain amount, so long as you were an Australian resident for tax purposes (most foreigners doing any kind of extended work qualify as one, see here). Up to $18,200, you were taxed at 0%, with a 19% tax rate kicking in above that and then increasing on a sliding scale. From the 1st of January 2017, all earnings are now taxed at 15% up to $37,000, at which point you begin paying the same as the rest of Australia. The below tables explain the old and new tax rates:

Previous rates for everyone (and current rates for permanent residents):

Taxable income Tax on this income
0 – $18,200 Nil
$18,201 – $37,000 19c for each $1 over $18,200
$37,001 – $87,000 $3,572 plus 32.5c for each $1 over $37,000
$87,001 – $180,000 $19,822 plus 37c for each $1 over $87,000
$180,001 and over $54,232 plus 45c for each $1 over $180,000

Source: ATO

Current rates for working holiday visa holders only:

Taxable income Tax on this income
$0–$37,000 15% on each $1 up to $37,000
$37,001–$87,000 32.5% on each $1 over $37,000 to $87,000
$87,001–$180,000 37% on each $1 over $87,000 to $180,000
$180,001 and over 47%* on each $1 over $180,000

Source: ATO

How much is this going to cost me?

This really depends on when you work and how much you earn. The good news for anyone already in the country who did any work in 2016 or earlier is that you won’t have to pay anything extra - the changes only apply for money earned from 1 January 2017 onwards. If you’re reading this after already having worked in Australia in 2017, then you may need to consider this.

Tax rates can seem complicated, but it’s important to remember that in Australia (like most countries) you only do your tax once, at the end of the financial year at June 30 (If you are leaving Australia permanently before the end of June, then see here about early tax returns). In general your employer will deduct money from your wages each time you get paid, so that you shouldn’t owe anything at tax time.

To help explain the changes we’ve put together some examples below to show the difference between the old and new rates, based on some common work scenarios involving the backpacker tax:

Example 1

Jenna does 12 weeks worth of fruit picking and gets paid $25 per hour, 40 hours per week. She earns $1,000 (gross) per week before leaving her job and travelling the country, and does no other work.

  • Tax Used to Be - $0
  • New Backpacker Tax (weekly) - $150
  • Total Tax Payable - $1,800

Example 2

Daniel gets a full-time job shortly after arriving in Sydney in September and gets paid $1050 per week. He works there for 11 months before returning home to Germany at the end of June. He earns $49,350 in total.

  • Tax Used To Be - $7,585
  • New Backpacker Tax - $9,564
  • Extra Tax Per Week - $42

As you can see, the more you earn the less the changes will affect you. There is definitely an incentive to settle somewhere for a while and earn as much as you can! Don’t forget that the Australian Government may allow you to extend your visa into a second year by doing 3 months of work in a regional area.

I’m working now, or I intend to, what do I need to do?

Not a lot, most likely. In Australia your employer should deduct whatever tax you owe each time you get paid, whether that is weekly, fortnightly, or monthly. When you do your tax return the amount you’ve paid is then generally pretty close to what you should have, meaning you are most likely to get a small refund, if any adjustment is required at all. The only thing you’ll need to do is advise them of your tax residency status when you begin work

Can I just lie and say I’m Australian? How would they know?

While in theory it is possible to lie on your tax return to minimise what you pay, it is important to remember that this constitutes a potentially serious crime in Australia. If you get caught and are only here temporarily, then it is entirely possible you’ll be kicked out of the country! If you’ve already left and get caught, then you may very well receive a black mark against your name, meaning you can’t enter Australia in the future. Even if you don’t intend to come back, it is still possible the government could issue criminal charges against you, so it’s always best to do the right thing!

How can I get more information?

If you think the changes to the backpacker tax may apply to you, then you can read more about it on the ATO website, and also the department of immigration. Please satisfy yourself of the rules as they apply to your circumstances. This article is not tax advice!

For taxation advice we recommend contacting an Australian accountant, Australian taxation lawyer, or immigration lawyer.

Other Resources and Links

417 Visa Info

462 Visa Info

An explanation of the changes from the Australian Tax Office

Who is an Australian resident for tax purposes?

Please satisfy yourself of the rules as they apply to your circumstances. This article is not tax advice!

Do you have any questions about the backpacker tax or thoughts? Tell us below!

Author: Darby Nash