Despite numerous calls on the Federal Australian Government to reverse their previous announcement to tax certain temporary visa holders as non-residents, The 3 May 2016 Federal Budget contained no relief. Accordingly, from 1 July 2016, an individual in Australia on a working holiday visa will be taxed at 32.5% from the first dollar of income earned. Previously, when these visa holders were in Australia for more than 6 months, they would have been able to be taxed as Australian residents with the benefits of the tax free threshold and lower tax rates.
The 32.5% tax rate would only have kicked in when the individual’s taxable income exceeded $37,000. For an individual earning more than $37,000, this change is an additional tax burden of nearly $8,500.
Further lobbying with the Federal Australian Government is expected and while there was a cryptic comment that further details may be released prior to 1 July (possibly as a 2 July 2016 election sweetener to the Australian farming industry), employers should be prepared to apply the higher tax rate and individuals should be ready for the additional slug to their pay packet. Should you have any questions in relation to this or any of the other Federal Budget measures, please refer to Pitcher Partners’ Federal Budget Analysis. Federal Budget 2016-17 | Commentary | Pitcher Partners