If you are taking an extended holiday in Australia, working at the same time is a popular way to see everything the country has to offer. Many thousands of backpackers and holiday-makers do it every year, so you’re not alone.
But while backpacking across Australia has been popular for decades, Australia’s tax rules have recently changed. Backpackers should be aware of their tax obligations to ensure they are getting taxed the right amount while they are here.
The backpacker tax rules you might have heard about
Several years ago, the Federal Government changed the tax rules that apply to backpackers and working holiday makers. So, if you rely on unofficial websites or friends who have previously come here as a source of information, it might be out of date.
Previously, all visitors from partner countries to the ‘Working Holiday Maker’ program could apply for a holiday visa. With these visas travellers were effectively working and paying tax in the same way that Australian citizens were. It was a generous scheme because Australian citizens generally do not pay any tax on the first $18,200 earned. This meant backpackers earning below this amount, could claim back any tax they paid during the year on their return.
Unfortunately, these golden days are over.
Australian Backpacker Tax (Working Holiday Maker tax)
The new ‘Backpacker Tax’ stills give preferential treatment to working visitors when taxing their income. The tax rate is a flat 15% for the first $45,000 of earnings.
2024-25 Rates:
| Taxable Income | Tax rate |
| $0 – $45,000 | 15c for each $1 |
| $45,001 – $200,000 | $6,750 plus 30c for each $1 over $45,000 |
| $200,001 and over | $53,250 plus 45c for each $1 over $200,000 |
There are two classes of visa this tax change applies to. If you are travelling in Australia on a 417 visa (a working holiday visa) or a 462 visa (a work and holiday visa) then you are subject to the 15% tax rate. Very few backpackers will earn more than $45,000 during their stay, however if you do, you can read more about your tax rate here.
A bonus when you leave
Under Australia’s compulsory retirement saving scheme, employers must contribute a fixed percentage of their employees’ wages into a superannuation account. Australians can only access these mandatory savings from the age of 55 if retired, or otherwise after 65. The superannuation rules apply equally to all employees in Australia, including backpackers. So, if you are working in Australia and earning wages, this legally entitles you to have money paid into a superannuation account on your behalf.
Superannuation is paid at 10% of your ordinary, pre-tax earnings. If a backpacker earns $20,000 in Australia, $2000 will be contributed to their superannuation account.
If you never plan to work in Australia again when you leave, you can access this superannuation via the ‘Departing Australia Superannuation Payment’ (DASP) scheme. To apply, all you need are your visa details and tax file number. An important note is that tax on the DASP is 65%.
For example, Max travelled around Australia on a 417 visa for eight months, earning $20,000 across different restaurants and bars:
- At the 15% tax rate, he paid $3,000 in tax on his earnings ($20,000 x 15%).
- His employers paid $2000 into his superannuation account ($20,000 x 10%).
- When Max departed Australia, he applied for his DASP and receives $700 after tax ($2000 – ($2000 x 65%)).
Other things you need to know
Apart from your visa, you need a tax file number (TFN) to work in Australia. It is how the tax authority matches employer payments and wages to employees.
Australia has a very high rate of tax compliance, and strong penalties for those who do not comply. This means many employers will refuse to hire employees without a valid TFN. If you need TFN, just get in touch with us at [email protected] and we’ll talk you through the process.
Why is my pay less than my hourly rate?
Unlike many countries, Australia does not require citizens (or backpackers) to actually ‘pay’ a lump sum of their income as tax at the end of the year. Instead, employers collect tax on behalf of the Government. Your employer withholds the taxes you owe from the amount they pay you. The system is known as Pay As You Go (PAYG) withholding. It administers tax by putting money aside throughout the financial year, so that you don’t have to.
This is why your wage is lower than the number of hours you have worked multiplied by your hourly rate. However, always check with your employer if there is any confusion or you believe you have been underpaid.
If you need any more help navigating the Australian backpacker tax rules, drop us an email on [email protected] or send us a message on Facebook to chat with our qualified tax accountants directly.
