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Re: From WHV 417 to Sponsorship TSS 482 - Tax return

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Hi ATO community!

 

I hope you can help me.

 

My income is of approx $60000per annum.

I have been on a WHV from the 01.07.2018 to the 25.10.18 where I have then been sponsored by my employer.

From the 01.07.2018 to the 25.10.18 I was taxed at 15% as per normal taxation requirement for working holiday maker.

When I got sponsored on the 25.10.19 and I then became a resident for tax purposes,  I was already over the $18000 so there was no tax threshold involved and I have been taxed 19% until the end of the financial year.

 

As per normal procedure, as a resident you are supposed to have "back" the taxes paid on the first $18000 at the end of the year (threshold), then depending on your income the ATO will make a balance between the "credit" that should return to you for the taxes paid during the threshold and the "debit" of when you have been taxed "less" (19% instead of 32.5%, etc.).

However, on my case, my first $18000 were all taxed at 15%, but now that I am doing the tax return the ATO is asking me to pay the difference between the 19% and the 32.5% for all the payslips involved when I went over my $37000 of income.

What I don't understand is that:

A resident for a "whole" financial year has got the thereshold allowance taken into consideration when doing the final taxes calculation, in my case I have been paying the 15% on my first $18000 and I am not getting anything back of that + now it looks like I am required to pay also the difference between the 19% and the 32.50 which basically brings my result to having to pay almost $3000 back.

 

I do not understand that as it does not look very fair to me because I basically paid taxes before and after and no allowences are given to me. Can someone kindly explain how the process works and, eventually, what I should do?

 

Also, my employer (who has been the same for the whole financial year) has only processed ONE payment summery where it shows that I have been a resident the whole year. This is not correct as only from the 25.10.18 I become a resident and for that reason an error pops up when I do the tax return online and it says "our records shows you held a 417 visa during the 2018/19 financial year, however no payment summeries are on file with tha information". I talked to my employer who said he cannot change anything and my question is if that discrepancy is also affecting the final result.

 

Thanks a lot for your advices!

 

 

 

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Hi @DeniseTarozzo,

 

I'm sorry to hear that you've had this experience!

 

I think there's been some confusion with the WHM and resident tax rates in general, so I'll try to clarify as best I can.


If you are an Australian resident for the whole financial year, then you are entitled to the tax free threshold of $18,200. This means that your employer will not withhold tax until your income exceeds the threshold outlined for the relevant pay period in the tax tables.

 

Because you have mentioned that you were only a resident from 25/10/2018, you would only receive a part year tax free threshold, which means that you do not receive the full $18,200 that you would have if you were a resident for the whole year. If you would like to see how much of the tax free threshold you may receive, you can view the formula we use here.

 

As a general rule of thumb, you will only ever get a tax refund if the amount of tax that has been withheld is larger than the amount of tax that you were required to pay. This is the case regardless of your level of income.

 

When you are on a working holiday maker visa, you pay 15% tax from the first dollar you earn, regardless of your residency status.

 

So as an example, if you had earned $20,000 from 01/07/2018 - 25/10/2018, this would be taxed at 15% - your employer should have withheld the correct amount and should have issued you a payment summary for this amount separately as a WHM.

 

If your employer only provided you with a single payment summary at resident tax rates, then it is quite likely that they have only withheld tax based on the resident tax rates. If they have not withheld enough tax on your behalf, this will cause you to incur a debt.

 

If your employer says that they cannot change the payment summaries, ask them to issue you with a letter or email outlining the gross and withheld amounts for the period that you were on the WHM visa, so that you can apportion it correctly in your tax return. If they will not do this you will need to work it out yourself, keeping records of your calculations.

 

Once you have this information, you will need to adjust your tax return accordingly. Under "Salary and wages", you will need to split the amounts on your current payment summary, reporting your WHM amounts under one, and your resident amounts under the other.

 

As an example:

 

Payment summary 1 (WHM):

ABC Employer

ABN: XX XXX XXX XXX

Tax withheld: $3,000.00

Gross payments: $20,000.00

Did you earn this income while you held a Working Holiday visa? > Select "Yes"

 

Payment summary 2 (resident):

ABC Employer:

ABN: XX XXX XXX XXX

Tax withheld: $8,000

Gross payments: $40,000

Did you earn this income while you held a Working Holiday visa? > Select "No"

 

Doing this will show your working holiday maker income as "Gross payment type H - working holiday maker"

 

You will then need to complete Adjustments for "Part year tax-free threshold" and "Working Holiday maker net income".

 

You also need to bear in mind that if you are a resident for tax purposes you will be liable for the Medicare levy, unless you have a Medicare Entitlement Statement that shows you were not entitled to Medicare benefits.

 

I'd suggest checking through your tax return and making sure that all of the data is keyed correctly so that the estimate provided is as accurate as possible. If it is still anticipating a debt, then this may mean that your employer has not taxed you correctly in the last financial year.

 

I hope this is helpful, but please let me know if you have any other questions.

 

Thanks,

 

Rachael B.

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Hi @DeniseTarozzo,

 

I'm sorry to hear that you've had this experience!

 

I think there's been some confusion with the WHM and resident tax rates in general, so I'll try to clarify as best I can.


If you are an Australian resident for the whole financial year, then you are entitled to the tax free threshold of $18,200. This means that your employer will not withhold tax until your income exceeds the threshold outlined for the relevant pay period in the tax tables.

 

Because you have mentioned that you were only a resident from 25/10/2018, you would only receive a part year tax free threshold, which means that you do not receive the full $18,200 that you would have if you were a resident for the whole year. If you would like to see how much of the tax free threshold you may receive, you can view the formula we use here.

 

As a general rule of thumb, you will only ever get a tax refund if the amount of tax that has been withheld is larger than the amount of tax that you were required to pay. This is the case regardless of your level of income.

 

When you are on a working holiday maker visa, you pay 15% tax from the first dollar you earn, regardless of your residency status.

 

So as an example, if you had earned $20,000 from 01/07/2018 - 25/10/2018, this would be taxed at 15% - your employer should have withheld the correct amount and should have issued you a payment summary for this amount separately as a WHM.

 

If your employer only provided you with a single payment summary at resident tax rates, then it is quite likely that they have only withheld tax based on the resident tax rates. If they have not withheld enough tax on your behalf, this will cause you to incur a debt.

 

If your employer says that they cannot change the payment summaries, ask them to issue you with a letter or email outlining the gross and withheld amounts for the period that you were on the WHM visa, so that you can apportion it correctly in your tax return. If they will not do this you will need to work it out yourself, keeping records of your calculations.

 

Once you have this information, you will need to adjust your tax return accordingly. Under "Salary and wages", you will need to split the amounts on your current payment summary, reporting your WHM amounts under one, and your resident amounts under the other.

 

As an example:

 

Payment summary 1 (WHM):

ABC Employer

ABN: XX XXX XXX XXX

Tax withheld: $3,000.00

Gross payments: $20,000.00

Did you earn this income while you held a Working Holiday visa? > Select "Yes"

 

Payment summary 2 (resident):

ABC Employer:

ABN: XX XXX XXX XXX

Tax withheld: $8,000

Gross payments: $40,000

Did you earn this income while you held a Working Holiday visa? > Select "No"

 

Doing this will show your working holiday maker income as "Gross payment type H - working holiday maker"

 

You will then need to complete Adjustments for "Part year tax-free threshold" and "Working Holiday maker net income".

 

You also need to bear in mind that if you are a resident for tax purposes you will be liable for the Medicare levy, unless you have a Medicare Entitlement Statement that shows you were not entitled to Medicare benefits.

 

I'd suggest checking through your tax return and making sure that all of the data is keyed correctly so that the estimate provided is as accurate as possible. If it is still anticipating a debt, then this may mean that your employer has not taxed you correctly in the last financial year.

 

I hope this is helpful, but please let me know if you have any other questions.

 

Thanks,

 

Rachael B.