Working Holiday Visa Tax Residency Rules will Change from 1 July 2016

whv australia tax changesIn the 2015–16 Budget the Government announced that it will change the tax residency rules of temporary working holiday makers from that of resident, to that of non-resident, from 1 July 2016.

Currently, those on Working Holiday visas may be treated as Australian tax residents if they meet the tax residence requirements. The ATO typically seeks to treat anyone in Australia for longer than six months as a tax resident under the current law. This allows the taxpayer to enjoy a tax-free earnings threshold and access to the low-income tax offset. This also means income earned under $37,000 is taxed at a lower income rate of 19%.

However, the changes announced in the Budget look to remove the ability for people who are temporarily in Australia on working holidays to be classified as Australian tax residents, regardless of whether they meet the current tax residence requirements. This will mean that those affected will be taxed at 32.5% from the first dollar of income up to $80,000.

The measure will take effect from July 2016, and is expected to generate $540 million in revenue by 2019.

The net monetary impact to the average working holiday-maker of these announced changes could make them roughly about $2420 worse off for a single year’s stay in Australia.

Working holiday visa tax changes will affect tourism

This may well have ramifications across the leisure and tourism industry in Australia to which international backpackers currently contribute a great deal of expenditure. Then there is the consideration around impacts to the fruit-picking and farming industries which rely heavily on this section of the community for labour.

tax changes to working holiday visas will affect fruit picking and farming industry in Australia

Based on the announcement, the changes will not impact tax returns lodged by backpackers for the years ending June 2015 and June 2016.  Working holiday-makers currently in Australia may therefore be less concerned with this unless they are considering applying for a second-year visa and working in Australia from 1st July 2016 onwards.


The temPay platform has tax residency rules in the TFN declaration for contractors/temps; from the 1 July 2016 those on working holidays must select that they are “not a resident for tax purposes”.  If you have any queries, please do not hesitate to contact us here.