When working holiday makers withdraw their superannuation through the DASP process, a withholding tax of 65% applies to the taxable component of the payment. This is the tax rate that applies specifically to holders of working holiday visas (subclass 417 and 462) and is higher than the rate that applies to other temporary visa holders.
What the taxable component is
Most super payments consist of two components: a taxable component and a tax-free component. The taxable component includes employer contributions and the earnings on those contributions. For most working holiday makers, the majority of the super balance is taxable. The tax-free component, if any, passes through without withholding.
What 65% means in practice
If your super fund holds $2,000 and it is all in the taxable component, you will receive $700 after the 65% withholding tax. If your balance is $5,000, you will receive $1,750. The withholding tax is substantial, but the remaining amount is still money that was contributed on your behalf as part of your employment and would otherwise sit unclaimed in the fund.
Why the rate is higher for working holiday makers
The 65% rate was introduced specifically for working holiday visa holders as part of the backpacker tax changes that came into effect in January 2017. The government's view is that this rate is appropriate given the concessional tax treatment working holiday makers already receive on their income through the 15% working holiday maker tax rate.
Is there any way to reduce the tax
For most working holiday makers, the 65% rate is fixed and cannot be reduced through the standard DASP process. The tax is withheld by the fund before the payment is made, so you receive the net amount directly. There is no mechanism to lodge a return to claim any of the withholding back in most cases.
Make sure you claim your super rather than leaving it unclaimed. Even after the withholding tax, the amount you receive is money that was earned as part of your employment in Australia.
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