Part year residency for tax purposes

[#1]

FY17/18
I came to Australia with the intention of staying. I had a 417 WHV from 9/07/17, a bridging visa from 14/12/17 and a 457 from 23/04/18.

1. What date do I become resident for tax purposes?

I earned $50k while on WHV, $30k while on bridging visa and $20k on 457 visa.

2. Do I receive a tax free threshold pro rata for 3 months? (13464 + 4736 × 3/12)

3. If so will this threshold be offset against my 457 income of $20k even though I have earned $80k on whv/bridging?

4. Can i claim medicare levy exemption for the days I was not resident for tax purposes?

[#2 · Accepted solution]

Hi @daniellet2787

Welcome to our community and your first post.

You will need to use the Residency calculator  to determine residency for tax purposes however I would suspect it will be from when your visa changed 14/12/17.

As for your tax expectations that will be influenced by how you complete your tax return therefore once the Notice of Assessment is produced you can contact our Telephony services and they will be happy to discuss any queries you have concerning the outcomes.

Pro rata is not a given when discussing WHV and a mixed year. You may see from one of our other posts recently we are still awaiting technical clarification currently on that and will feedback when it's received. 

Again due to the variables associated to  Medicare levy follow the exemption information online and it should clarify it.

Thanks for your queries and I hope this will give you some direction.

Kind Regards
MarkA

[#3]

Thanks MarkA.
What is the expected response time for a technical clarification on a pro rata threshold when WHV and mixed year residency?

[#4]

Hi @danielle2787

A well timed post. You will be pleased to know I now have information as to how  Working Holiday Makers (WHM) (who transition midway in a financial year) are taxed.

Whilst you are still technically entitled to a pro rata tax free threshold, the way that tax is imposed on the working holiday maker component of your taxable income, can mean that you do not get the benefit of the tax free threshold in the tax year your Visa's transition.

Effectively, the 15% rate for working holiday maker income is worked out ‘first’ -and then any other income is taxed to the extent that it falls into any higher income bracket because of the treatment of the working holiday maker income.

For example, if an individual earns $18,200 as a working holiday maker during the year and earns 18, 800 as a resident  then the total taxable income is $37,000.

The first $18,200 is taxed at 15% as working holiday maker income.  The remaining 18,800 is taxed as a resident, taking into account the working holiday maker income. Hence this amount falls into the resident tax rate of 18,201 to 37,000 of 19%. The 18,800 amount is thus taxed at the rate of 19% and the tax free threshold cannot be utilised for this component of the taxable income.

If the normal income received was greater than 18,800, then this would push the tax rate of such income into the next resident rate of the  tax band of 32.5% for taxable incomes between 37,000 and 90,000.

Tax Rate Summaries

Working Holiday Makers

Tax rates for working holiday makers for the 2018-19, 2019-20, 2020-21 or 2021-22 year of income

Item

For the part of the taxpayer ' s working holiday taxable income that:

The rate is:

1

does not exceed $37,000

15%

2

exceeds $37,000 but does not exceed $90,000

32.5%

3

exceeds $90,000 but does not exceed $180,000

37%

4

exceeds $180,000

45%

Resident Taxpayers:

Tax rates for resident taxpayers for the 2018-19, 2019-20, 2020-21 or 2021-22 year of income

Item

For the part of the ordinary taxable income of the taxpayer that:

The rate is:

1

exceeds the tax-free threshold but does not exceed $37,000

19%

2

exceeds $37,000 but does not exceed $90,000

32.5%

3

exceeds $90,000 but does not exceed $180,000

37%

4

exceeds $180,000

45%

I hope this now helps understand what is occurring.

Thanks for your query and apologies for not being able to offer a response sooner.

Kind Regards

MarkA