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Re: Tax income from a WHV to a Partner Visa

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Newbie

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Hi, i previously held a WHV and I paid 15% of tax up to 37000 $. From the 1st of March I am on a bridging visa A for a Partner visa 820/801. According to ATO website, I am now a resident for tax purposes; but my employer still continue to pay me with 15% of tax.
Who is right?
Thanks
Ps: even on my previous WHV i think that i should have been considered as resident for tax purposes cause i stayed for more than 6months in only one city, planning to live in permanently.
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ATO Certified

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Replies 10

Hi @Grazy86,

 

Welcome to our Community!

 

Generally, your employer will withhold the required amount of tax based on the information you provide in a TFN declaration form when you first start work with them. Your employer will withhold tax at the same rate until you notify them of any changes to your circumstances. You can notify them by completing a Withholding declaration and if you're considered a resident of Australia for tax purposes, select Yes at Q5 'Are you a resident for tax purposes'.

 

You can find more information about working out your tax residency status for tax purposes on our website, or if you'd like to speak with an operator you can phone us on 13 28 61 between 8am - 6pm, Monday to Friday.

 

Thanks, JodieH.

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Best answer

ATO Certified

Community Support

Replies 10

Hi @Grazy86,

 

Welcome to our Community!

 

Generally, your employer will withhold the required amount of tax based on the information you provide in a TFN declaration form when you first start work with them. Your employer will withhold tax at the same rate until you notify them of any changes to your circumstances. You can notify them by completing a Withholding declaration and if you're considered a resident of Australia for tax purposes, select Yes at Q5 'Are you a resident for tax purposes'.

 

You can find more information about working out your tax residency status for tax purposes on our website, or if you'd like to speak with an operator you can phone us on 13 28 61 between 8am - 6pm, Monday to Friday.

 

Thanks, JodieH.

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Newbie

Replies 1

Hi JodieH,

thanks for your reply! Smiley Happy

The point is that I am not sure if, on a bridging visa, I should be considered as a resident already (as seems according to ATO website), or still foreign resident as I was on my previous WHV.

I can't call right now, I will try asap

Grazia

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Taxicorn

Replies 0

Hopefully you have this sorted out. I believe that you may be considered as a resident for tax purposes from the moment you took steps to become one:

 

See the following:

 

Resident of Australia due to change in behaviour:

https://www.ato.gov.au/individuals/ind/resident-for-tax-if-whm-/?=redirected

 

Kate from this example:

https://www.ato.gov.au/Individuals/International-tax-for-individuals/In-detail/Residency/Examples-of...

 

Third example from are you a resident for tax purposes:

https://www.ato.gov.au/Individuals/International-tax-for-individuals/Work-out-your-tax-residency/

 

 

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Newbie

Replies 7

Hi there.  I have a client with the same situation only differnce is she has applied for an Employer Visa.  She was audited for her 2017 return and the ATO said that her bridging visa was connected to her WHV (even though it clearly states that it is linked to her Employer Sponsored visa application that is in progress). 

 

I now have another client in the same situation and contacted the Early Engagement Team who advised the bridging visa relates to the Employer Sponsored Visa but the ATO auditor does not agree.  I have been advised by the auditor to now lodge Private Binding Ruling Requests. 

 

Seems one part of the ATO starts the bridging visa at the end of the old visa not the beginning of the new visa but another part of ATO does not agree.  The ATO auditor will be auditing all WHV returns and applying the WH rates to employment covering the briging visa.

 

the ATO needs to sort this out ASAP!

 

by the way this has nothing at all to do with residency...

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Enthusiast Registered Tax Practitioner

Replies 6

As I've always understood the matter, we cannot assume the visa will be granted until it is granted, and we must assess the situation on the facts available at the time it occurs. So if a Bridging Visa is held, it means the only visa we know certain is the previously held visa. Under this reasoning, a taxpayer on a Bridging Visa, who previously held a 417 or 462 subclass visa (Working Holiday Maker) should continue to be taxed as a Working Holiday Maker, in accordance to part 3 and 4 of Schedule 7 of the Income Tax Rates Act 1986.

 

The residency matter is a separate matter. So a taxpayer can be a resident for tax purposes and a Working Holiday Maker. The 'backpacker tax' from the Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016, effective 01 January 2017, overrides tax-free threshold and other residency for tax purposes tax rates, because the backpacker is no longer eligible for the tax-free threshold. The first dollar of taxable income is taxed at 15% up until $37000.

 

Residency for tax purposes can be met in accordance with TR 98/17 or s. 6(1) of the Income Tax Assessment Act 1936, and could give the backpacker access to tax offsets, such as the Low Income Tax Offset (LITO) or Zone Tax Offsets.

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Initiate

Replies 5

This must be the only correct interpretation. I have a nunmber of clients I explain this to, then they they go to the ATO (in person or call) and the staff assist them to lodge to the contrary. 

 

The words of the  Income Tax Rates Act 1986 No. 107, 1986 speak for themselves:

 

 

3A  Working holiday makers and working holiday taxable income

             (1)  An individual is a working holiday maker at a particular time if the individual holds at that time:

                     (a)  a Subclass 417 (Working Holiday) visa; or

                     (b)  a Subclass 462 (Work and Holiday) visa; or

                     (c)  a bridging visa permitting the individual to work in Australia if:

                              (i)  the bridging visa was granted under the Migration Act 1958 in relation to an application for a visa of a kind described in paragraph (a) or (b); and

                             (ii)  the Minister administering that Act is still to make a decision in relation to the application; and

                            (iii)  the most recent visa, other than a bridging visa, granted under that Act to the individual was a visa of a kind described in paragraph (a) or (b).

 

The key word here are "or", namely subpara (c)(i) "and/or" which means that the subpara (ii) and (iiI) are to be construed in isolation from subpara (i). In conclusion, if you are on 417 or 462 visa, you apply for another visa and you are granted a brdiging visa, you will still be taxed under the 15% on the first $37,000 and then as residents for tax purposes.

 

It also follows, the tax residency here is a separate issue. While the tax residency does not impact on the rate of tax of 15% on the first 37,000, it can bring about some benefits in the form of 

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Initiate

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...in the form of tax offsets available if certain income levels are present

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Taxicorn

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@SAFRATA 

 

Very interesting interpretation, I like it.

 

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Enthusiast Registered Tax Practitioner

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Yes, the way ATO processes backpacker tax is another matter. ATO has automated default processing in place, and as a tax practitioner we believe there are triggers in the backpacker tax return that commonly cause a foreign tax resident assessment.

I’ve been informed by a number of ATO officers how they’ve been trained to assess tax residency, and they merely assess it on Department of Home Affairs data matching of visa and date of entry/departure into or out of Australia. They cannot be reasoned with over the phone when directed to TR 98/17 or s 6(1) of ITAA 1936, and force us to formally object the matter. Needless to say this unnecessarily causes a lot of extra work.

Many backpackers are also assessed as a normal foreign tax resident and taxed 32.5% when the return is clearly marked type H income and has the A4 Adjustment. Such a simple error has appeared to be a time consuming a dreadful task to fix, with ongoing delays on ATO side, repeatedly having to escalate the matter, and then receiving an unchanged NOAA once finally assessed.

I guess there is still a lot of room for improvement on assessing this backpacker tax.