If your monthly wage is more than $A450, your employer must contribute an additional sum equal to 9.5% of your wage into a superannuation (pension) account for you. If you entered Australia on an eligible temporary resident visa you can, in most cases, access your contributions when you leave Australia, although the contributions will be taxed.
Australia operates under a tax system of Pay-As-You-Go. Meaning that instead of paying one lump sum of tax at the end of the tax year, the employer Withholds the appropriate amount of tax from your wages. The payslip provided by your employer usually provides detail of amount of salary paid and amount of tax withheld. At the end of financial year (30th of June), you have to submit a tax return to the Australian Taxation Office (ATO). Allowing the ATO to calculate whether you have paid enough taxes on the wages you earned. If you have paid less than you should, you get a tax bill. If you have paid more taxes than you should, you get a tax refund.
Not everybody pays the same amount of tax. The tax payable differs depending upon whether you are a resident or a non-resident for tax purposes. This will be different for permanent residency under immigration law. Many working holiday makers and students have been deemed to be a resident for tax purposes. There are various criteria for working out if you are resident or not. You can use the residency calculator at ATO’s website or talk about your situation with a tax agent. Usually, you will be classified as a resident if you have stayed more than six months in Australia in one location and established a living pattern.
For example, if you earned $10,000 during one financial year, you could pay $600 in tax as a resident or $2900 in tax if you are a non-resident. As you can see, there is a significant difference.
According to our experiences, most working holiday makers are residents for tax purposes. Also, Australian taxation system has many incentives for low-income earners, in particular for people earning under $30,000. Therefore, many working holiday maker and students often end up with a significant amount of tax refund.
There is a perception amongst working holiday makers that you can receive all the tax back if you lodge your tax return. Although it is true that
many working holiday makers receive a large amount of refund, it is not true that all working holiday makers receive all the tax back. The
amount of tax refund that you receive depends on upon various factors including:
- total amount of your income
- total amount of tax withheld by your employer
- Duration of your stay in Australia in a financial year
- Whether you have any allowable deductions e.g. work related expenses
For example, a person who has stayed in Australia for 12 months in a financial year (1 July 2014 to 30 June 2015) and has earned $15,000 and paid $2,000 in tax, will receive a full refund of $2,000 once they lodge their tax return. However, a person who has stayed in Australia for 12 months in a financial year and has earned $18,000 and paid $2,000 in tax will only receive a refund of $1550.
Under Australian law, you must file a tax return if you earned over $6000 in one financial year or your employer has withheld any tax from you
wages (even if you received less than $6,000). Apart from the legal requirement, it is usually advantageous for an employee to lodge a tax
return. From our experiences, more than 98% of people who submitted their tax return was entitled to a tax refund. Some people believe that
lodging a tax return is difficult or complicated. However, there are many tax professionals out there who can assist in the preparation of
your tax return. The only documents that are usually required are:
- payment summaries
- your tax file number, and
- a form of identification.
Use the tables below if you were an Australian resident for tax purposes for the full year and you are entitled to the full tax-free threshold.
These rates do not include the Medicare levy.
Tax on this income
|0 – $18,200||Nil|
|$18,201 – $37,000||19c for each $1 over $18,200|
|$37,001 – $80,000||$3,572 plus 32.5c for each $1 over $37,000|
|$80,001 – $180,000||$17,547 plus 37c for each $1 over $80,000|
|$180,001 and over||$54,547 plus 45c for each $1 over $180,000|
The above rates do not include the Temporary Budget Repair Levy; this levy is payable at a rate of 2% for taxable incomes over $180,000.
What is payment summary?
Payment summary is a statement from the employer outlining the full amount of wages you earned and the amount of tax paid in a financial year. This document is quite essential in lodging your tax return. Employers are legally required to give the payment summary to you within two weeks after the end of financial year (by 14th of July) or within four weeks since you leave the company. Payment summary must be collected from each employer you have worked for in that financial year. If you do not have a payment summary you might have to provide other records like final payslip and statutory declaration
Although it is legal to lodge your own tax return, many working holiday makers find this difficult due to difficult tax terms and issues e.g. am I a resident or non-resident. A registered tax agent, like Tax Back, can assist people in lodging their tax return to ensure that the tax return is correct and that the clients get the right amount of refund. If you require assistance or have any queries, please contact us at any time.