The Working Holiday Maker visa program was established in 1975 to promote closer ties between Australia and currently 42 other countries, directed towards young adults wishing to work and study in Australia for up to 12 months.

A person is considered a Working Holiday Maker in Australia if they have either a visa subclass 417 (working holiday), or 462 (work and holiday). Those holding these visas are considered non-residents for tax purposes, but the Working Holiday Maker rules allow a more concessional treatment of taxable income than non-residents.

Working holiday makers must apply for an Australian tax file number. They are taxed at 15% on their first $37,000 of income, and the balance is taxed at ordinary marginal rates. They have no access to the tax free threshold and are not required to pay the Medicare Levy. Working holiday makers are required to lodge a tax return when taxable income exceeds $37,000, or they carried on a business, or they wish to claim any deductions. Tax returns can be lodged early if leaving Australia permanently before 30 June.

Employers of working holiday makers are required to register with the ATO in order to withhold tax at 15%, otherwise will withhold tax at non-residents rates with the first $90,000 taxed at 32.5%. Employers are also required to pay superannuation which can be accessed when leaving Australia as a Departing Australia Superannuation Payment (DASP) and is taxed at 65%.

The working holiday maker rules have recently been in contention with the ATO appealing a Federal Court decision to allow a working holiday maker to be assessed at resident rates. The outcome will only impact working holiday makers found to be Australian tax residents from certain countries.

Author: Danielle Pomersbach