Nobody works out your tax during the year. Your employer withholds an amount each payday against a guess about the twelve months ahead, and the real figure is settled once, when the return is lodged.
Why is a working holiday year so often over withheld?
Withholding is a running estimate, not a calculation. Payroll deducts each week as though this week repeats for twelve months, so any year that starts late, ends early or changes shape misses the real liability. A working holiday year does all three.
- Arriving or leaving part way through the financial year, which runs 1 July to 30 June
- Weeks worked before the TFN reached the employer, withheld at 45% rather than 15%
- An employer not registered with the ATO to employ working holiday makers, withholding at foreign resident rates
- Deductions that reduce taxable income and were never accounted for during the year
- A 2% Medicare levy charged to someone not entitled to Medicare
How do you know whether you are owed anything?
You do not know until the year is reconstructed. The calculation compares the tax that should have applied to your actual income against the total already withheld across every employer, and then adds the items withholding never sees.
There is no average refund worth quoting. Two backpackers who earned identical wages can finish thousands apart on the strength of a residency position, a Medicare entitlement and a 45% period, and none of those is visible from the payslips alone.
What decides the size of your refund?
Five facts about your own year decide almost all of it, and you already know four of them. The fifth, your residency position, has to be worked out rather than recalled.
- Whether there was a period without a TFN on file. Every week at 45% instead of 15% is 30 cents in the dollar sitting with the ATO waiting to be claimed.
- Whether every employer was registered as a working holiday maker employer. An unregistered one withholds at foreign resident rates, and the excess is recoverable.
- When you arrived and when you left. A part year is the most reliable source of over-withholding.
- Your Medicare position. Entitlement to Medicare is what makes the 2% levy apply, so a passport from a country without a reciprocal agreement usually means the levy should not have been charged at all.
- What you can substantiate in deductions. Boots, tools, sun protection, the work share of a phone, and last year's agent fee.
Where does it stop being arithmetic?
At the residency item, where no calculator helps. Residency is a judgement about a year as a whole, it turns on details most people never think to check, and it is easy to get wrong in both directions.
For some people a residency finding changes the rates applied to everything they earned, so a position is only taken after the year has been gone through properly. Our guide to tax residency on a working holiday visa covers why it cannot be self assessed with confidence.
When does the refund arrive?
Refunds on electronically lodged returns are generally paid 7 to 14 business days after lodgement, into a nominated Australian bank account. It runs a few days longer through the July to September peak, and considerably longer if the return was lodged before employer income statements were finalised.
The account is the part worth planning. The refund pays to an Australian account and nowhere else, so anyone leaving the country needs that account alive for at least four to six weeks after lodgement. Our guide to how long a refund takes covers what holds one up.
Can you still claim after you have gone home?
Yes, and a surprising number of people never do. A return can be lodged from overseas for the year you left, and unlodged earlier years can still be lodged. Nothing about being in another country closes the file.
The years that go unclaimed are almost always the short ones, where someone worked three months, assumed the amount was too small to bother with, and left. Those years hold the highest proportion of over-withholding, because a three month year taxed as though it were twelve is over-taxed by construction.
What actually changes the outcome?
Two things, and neither of them is effort. The first is whether every employer for the year is accounted for, because a forgotten job is both the most common cause of a later ATO amendment and a common cause of a refund being understated. The second is whether the items that withholding cannot see were claimed at all: the Medicare position, the residency position and the deductions.
Not aggressive claims, which come back at you, but a complete picture of a year worked across several employers, several states and often two financial years. Running the numbers through the calculator gives you an indication, and preparing the tax return properly is what settles it.