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Re: Does working holiday maker eligible to be resident of tax purpose?

This post is archived and may not be up-to-date.

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Enthusiast

Views 5086

Replies 15

Hi All
Today I had a disagree with someone about could now Working holiday maker can still be eligible be resident of tax purpose?

https://www.ato.gov.au/Individuals/Ind/Resident-for-tax-if-WHM-/?=redirected

They claim the link above shows some of the WHM can still be eligible to be resident of tax purpose, so they encouraged others claim yes on the question asked are they tax resident when they fill the Tax File Number Declaration.

Please kindly answer this question for us.

Regards
15 REPLIES 15
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Initiate

Replies 0

Yes you can, but the ATO is strict on who truely qualifies when you lodge your tax return.

And in any case the WHM 15% tax will still apply to all income while on a WH Visa, up to 37000. 

No tax-free threshold unless your visa changes, unfortunately.  It will then be reduced for WHM income made.

After 37000 the tax rates are generally the same anyway, whether resident or non-resident or whm visa.

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Enthusiast Registered Tax Practitioner

Replies 13

Hey @Joe675,


Yes, backpackers can still be deemed resident for tax purposes by meeting the ordinary concepts (resides) test as described in TR 98/17, or if they meet the 183 Day Test as per s. 6(1) of the Income Tax Assessment Act 1936.

The benefit will be that the person may be eligible for certain tax offsets (tax credits) which lower tax liability (and increase refund or reduce debt). If this person is from a country with a reciprocal health agreement with Australia, and meets the conditions of eligibility for Medicare, the person may be required to pay for the Medicare Levy.

If a person has been in Australia for 365 days during the financial year, then the Low Income Tax Offset (LITO), which is a tax credit of $445, is equal to the Medicare Levy at a taxable income of $26430.
($26430 - $21970) x 10% = $445 Medicare Levy

In that circumstance it wouldn’t matter from a tax perspective whether the backpacker is a resident or a foreign resident for tax purposes.

If the taxable income is more than $26430 but less than $37000, the Medicare Levy would exceed the LITO of $445. From $37001 Taxable Income and upwards, LITO will be phased out (decreased).

So residency for tax purposes isn’t the be all and end all for backpackers to get a higher refund, it’s not quite that black and white.
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Enthusiast

Replies 12

May I ask the name of your firm please?
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Enthusiast Registered Tax Practitioner

Replies 0

Taxably Smiley Happy

 

You can find us on FB and chat via FB messenger.

 

 

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Initiate

Replies 10

Taxably may well be right, but it doesn't correspond with recent ATO edicts, and raises a number of further issues.  We had requested a ruling some weeks ago and yesterday they promised a response in the next week.  There are 200,000+ taxpayers like yourself in the dark.

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Enthusiast Registered Tax Practitioner

Replies 0

Please share the outcome. I'd love to find a proper ruling on this! I deal with this matter frequently.

 

TIA!

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Enthusiast Registered Tax Practitioner

Replies 8

Any response on the ruling yet? We’re currently representing a backpacker residency matter at AAT. Backpackers can still be deemed resident for tax purposes.

Initiate

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Nothing yet. I suspect it has to go to a higher level, and will take some time.  It seems there is no actual law supporting the current treatment.  It also involves other offsets and agencies eg Medicare.  May be wise to defer the AAT matter until some clarity arises.

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Enthusiast Registered Tax Practitioner

Replies 6

AAT matter already had a hearing. We’re waiting on a decision now.