Could anyone please advise whether I am entitled to the partial tax-free threshold and if my understanding below is correct?
On the 12th of August 2019, I got a job and commenced my employment as a working holiday maker. Then, I got my TSS visa granted on the 5th of December 2019 and my residency for tax purpose in Australia has been changed from 'Non-resident' to 'Resident' on that day. Overall, I worked for approximately 4 months as a working holiday maker and for 7 months as a tax resident in the income year 2020 for the same employer.
While I was holding the working holiday visa, I earned about $18,500 and I was taxed at the working holiday maker tax rate. When my tax status changed on the 5th of December, I informed my employer about the change and the witholding tax portion has since increased from the following pay run. Then, I earned about $33,000 from December 2019 to June 2020 as a tax resident. For the income year 2020, the total gross income that I earned is therefore about $51,500.
When I lodged my tax return, I was quite surprised to see that I have to pay more money to ATO becase the tax witheld by my employer was not enough per the system although I expected a substantial refund. I believe there must be something wrong with the calculation as it does not seem to have taken into account the partial tax-free threshold which should roughly be around $16,227 ($13,464 + (($4,736 × 7) ÷ 12 - I got this formula from ATO website). If my understanding is correct, I am entitled to the partial tax-free threshold for the income that I made during the time when I worked as a tax resident in Australia (December 2019 to June 2020), and hence I am only obligated to pay tax on the net of my income that I earned while I was a tax resident in Australia and the partial tax-free threshold, i.e. $33,000 - $16,227 = $16,773. Could anyone please advise if I am correct here or I am mistaken?
Currently, the notice of assessment shows that I was taxed at the working holiday maker tax rate for the income that I earned as a working holiday maker (YES - I AGREE WITH THIS), and the system is recognising the total gross income, i.e. $51,500 as one set and because I had already earned more than the tax-free threshold ($16,227) while I was a working holiday maker, it looks like the system is pushing my next chunk of income (that I earned while I was a tax-resident) straight to the higher tax bracket, i.e. 19c for each $1over $18,200. Then, the portion of income between $37,001 – $90,000, I was taxed at $3,572 plus 32.5c for each $1 over $37,000.
Is this correct to consider the total gross income together when taking into consideration the partial tax-free threshold? Or, should it only consider the income that I earned when I was a tax resident for the partial tax-free threshold? Could anyone please help me understand what the correct assessment is here? And, please advise how I can rectify this issue.