Hi All,
I have been reading all posts in relation to the working holiday maker working as a sole trader with an ABN. The answers on this website are either vague or conflicting.
One answer by JodieATO on 20 December, 2020:
'As a sole trader, you'll pay the same individual tax rates based on your personal situation, which in your case would be 15% of the first $37,000 as you're a WHM'.
Another answer by DanielleATO on 4 January 2023: '
'If you are a WHM, and your employer is registered with us as a WHM employer. They will withhold tax at a rate of 15% for the first $45,000 you earn during 2020–21 and later income years. These rates do not apply to business income.'
I have searched legal data bases to find out the right answer and found the following in the Income Tax Rates Act 1986, section 3A:
a holder of a 642 visa is a 'working holiday maker';
an individual's 'working holiday taxable income' is his assessable income derived from sources in Australia while he is a working holiday maker (i.e. whilst he holds a 642 visa).
In Schedule 7 Part III the rate of tax payable by the working holiday maker is stated to be 15% under a threshold.
If the person works as a sole trader they are deriving income from an Australian source whilst the person is a holder of visa 642. Therefore the tax rate applicable under this Act should apply and be 15%.
I could not find any other piece of legislation or ruling that overrides the clear definitions and tax rates in the Income Tax Rates Act.
It appears that JodieATO was correct (all income, including as a sole trader is taxed at 15%) and DanielleATO was incorrect (only employment income with registered WHM employers is taxed at 15%, sole trader income is a business income and taxed depending on residency status).
I would like someone to clarify this taxation situation. If it is true that sole trader income whilst on 642 visa (i.e. working holiday maker) is taxed differently despite the definitions and rates in Income Tax Rates Act, could someone, please, point me to the source of the information (legislation, ruling, etc).
I apologise for the lengthy post but wanted to make sure that the source of my confusion is well understood.
A clear answer would be highly appreciated.
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