Working holiday makers in Australia pay a flat tax rate of 15% on all income earned up to $45,000 per year. This is known as the backpacker tax or the working holiday maker tax rate and it applies specifically to people holding a Working Holiday Visa (subclass 417) or a Work and Holiday Visa (subclass 462).
How the 15% rate works in practice
The 15% rate is a flat rate, which means every dollar you earn is taxed at the same rate up to $45,000. You do not receive a tax-free threshold the way Australian residents do. Australian residents can earn up to $18,200 before paying any income tax, but that threshold does not apply to working holiday makers. Your first dollar of earnings is taxed at 15%, as is your last.
On weekly earnings of $1,000, this means $150 is withheld and $850 reaches your account. On $1,500 per week, $225 is withheld. These are straightforward calculations because the flat rate removes the complexity of different tax brackets applying to different slices of income.
What if you earn more than $45,000
Earnings above $45,000 are taxed at 32.5% up to $120,000, and higher rates apply above that. Very few working holiday makers reach these income levels during a single visit, but it is worth knowing if you are planning an extended stay with high-paying work.
Qualifying for the 15% rate
To have the 15% rate applied, you must have registered your TFN with your employer and completed a Tax File Number Declaration form indicating that you are a working holiday maker. Without this, your employer will withhold at 47%. You also need to be working for an employer who has registered with the ATO as an employer of working holiday makers. Registered employers are required to apply the correct rate.
Does anything come back through the tax return
The 15% rate is a flat tax and there is generally no automatic refund for working holiday makers the way there sometimes is for residents. However, if your employer withheld too much for any reason, for example if they used the wrong rate during a period before your TFN was on file, then yes, a tax return will result in a refund of the overpaid amount.
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