Top Tips for Claiming Tax Back in Australia
If you fancy a change of scenery but don’t want to break the bank, Australia is one of the most fun and rewarding countries to work abroad.
However, it’s important to bear in mind that when you start, for a set amount of time, you’ll automatically receive a hefty tax on any salary you make.
Foreign residents and holidaymakers working in Australia receive a whopping 32.5% tax on their earnings.
That’s just about 1/3 of your income!
Rest assured, though – there are number of ways you can claim this back at the end of the tax year.
Here are a few tips to make sure you know what to expect, what you’re entitled to, and how to claim tax back.
Our average Australian tax refund is AU$2600
The Basics – Who gets taxed what in Australia?
If you’re not originally an Australian citizen, for your first six months in the country you’ll be automatically taxed as a Foreign Resident.
You’ll still need a visa to work and stay in Australia but will be subjected to heavy taxation on your income for approximately the first 183 days of your employment.
The first dollar earned by a backpacker there, regardless of residency status, is taxed at the working holiday maker tax rate of 15% up to:
- $37,000 in a tax year for 2019–20 and previous tax years
- $45,000 for income years 2020–21 and after
When filing your Australian tax return, you must specify whether you are a resident or a non-resident for tax purposes. Backpackers are typically non-residents.
A working holiday visa is valid for up to a year, but you’ll be taxed as a non-resident for the entire duration of your stay.
You are excluded from foreign residency tax if you’re an overseas student, in which instance you’ll be taxed as an Australian resident if you choose to work alongside your studies.
Also, if you stay in Australia for more than six months, and have a consistent contract or place of employment, you’ll be treated as a resident for tax purposes and will be eligible for some form of tax reclaim in Australia in the next tax year.
Another thing that’s extremely important for foreigners travelling to Australia for work, is to register for a Tax File Number.
If you don’t provide your employer with this within the first 30 days of your employment, you could be subject to emergency tax ON TOP OF the 32.5% you’re already paying as a foreign resident.
This means around 45% of your earnings would be withheld as tax!
As part of the tax refund process, we give all our customers a short questionnaire to check their residency status.
Bear in mind you are exempt from the 2% Medicare levy if you are not taxed as an Australian resident.
What can I get back?
It’s important to bear in mind that you’re only eligible for a full rebate under certain conditions.
If you’re staying in Australia for less than six months or 183 days, you will not reach the point where you qualify as a resident for tax purposes, and will therefore not be entitled to a tax-free bracket.
This means you would be unable to claim back on the tax you incurred as a foreign resident: the same applies for a working holiday visa.
However, if you were subject to emergency tax at any point during your time in Australia, you are entitled to claim that back regardless of your visa or the length of your stay.
If you aren’t eligible for a rebate due to the length of your stay or the nature of your visa, don't worry!
You should still be eligible to claim back any superannuation withholding that occurred with your salary.
Superannuation is a percentage of your salary put aside for the purposes of a retirement fund, and obviously, if you’re not staying in Australia until retirement you are entitled to retrieve that money.
You are eligible to apply for remuneration on your super as soon as your visa expires and you leave Australia.
Super is equal to about 9.5% of your earnings and is paid by your employer on your behalf every month, or every quarter.
The average superannuation refund with Taxback is around AU$1,908. So even if you can’t claim back the tax you paid as a foreign resident you can still walk away with a tidy sum, if you claim Australian super!
Free Australia Working Holiday Guide
Submitting Tax Returns
You’re obliged to file an Australian tax return if you’ve paid tax of any kind during your stay, even on a working holiday visa or as a foreign resident.
The Australian financial year runs from 1 July to 30 June, and because it’s necessary to submit a return for every year you were paying tax, you may have to submit more than once depending on when you arrived and how long you stayed.
If you’re a foreign resident you may be eligible to submit a tax return early if you’re leaving Australia permanently, are ceasing to be an Australian resident for tax purposes or no longer receive Australian-sourced income (i.e you’ve left your job and aren’t due to receive any outstanding salary).
If you don’t submit the appropriate returns by 31 October, you could face a penalty fare AND miss out on any refunds you could be eligible for.
It may seem like a hassle, especially if you’re no longer living in Australia, but we can help to make the process as streamlined as possible.
Remember, it’s completely free to get a tax refund estimation with us, and the average refund we can get you is AU$2,600 for your income tax and AU$1,908 for your superannuation refund.
To find out more about claiming tax back in Australia or how much you could be owed, click here or contact australia@taxback.com.
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