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Working Holiday Maker income

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Newbie

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Hey, please help I am confused.

In the last tax year I started on a 417 Working Holiday Visa, in September we applied for a 457 Business Sponsorship Visa which still hasn't been approved.

At what point did my 'Working Holiday Maker' income technically end? When my Bridging Visa was granted on the date of 457 application in September, or when my 417 technically expired in April? My payment summary shows that all of it was working holiday maker income 'H' which I think is incorrect.

 

Thanks,
Jess

 

1 ACCEPTED SOLUTION

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Most helpful response

Enthusiast Registered Tax Practitioner

Replies 0

Hey Jess,

 

For taxation purposes, your Bridging Visa A (BVA) will take the treatment of the previous held visa, because that's the only certainty we have. We cannot predict your visa will be granted at the time you've incurred income on a BVA, so we go by what is known in fact (the WHV).

For this reason, you will be taxed in accordance with parts 3 and 4 of schedule 7 of the Income Tax Rates Act 1986, which states that taxable income between $0 - $37000 should be taxed at 15%.

 

As a separate matter, you will have met the 183 Day Test as per s. 6(1) of the Income Tax Assessment Act 1936 for having stayed in Australia for at least 183 days, and showing intent to settle. The only benefit you can derive from this whilst on WHV or BVA is that you may be eligible for tax offsets (tax credits). This is dependent on your total taxable income and personal circumstances.

 

If you 457 visa was granted in September, during tax preparation we will separate WHM or BVA income from 457 visa income, and calculate the total tax liability.

 

The tax-free threshold will be reduced by the WHV/BVA income. Hypothetically, if you would have earned $10000 on BVA, and $40000 on 457 (total taxable income of $50000), then:

$10000 x 15% = $1500 backpacker tax

($18200 - $10000) x 0 % = $0 tax-free threshold

($37000 - $18200) x 19% = $3572 resident tax bracket 1

($50000 - $37000) x 32.5% = $4225 resident tax bracket 2

 

We add all together:

$1500 + $0 + $3572 + $4225 = $9297 tax liability

 

Depending on country of origin, you may be liable for the Medicare Levy of 2% of taxable income, but you will also be eligible for the Low Income Tax Offset (LITO), which is a tax credit of $445 for taxable income up to $37000, and reduced for those with higher income as follows:

$445 - ([$50000 - $37000] x 1.5%) = $250

$50000 x 2% = $1000 Medicare Levy (ML)
$9297 + $1000 (ML) - $250 (LITO) = $10047 tax liability.

 

This amount is then compared to Pay As You Go (PAYG) tax withheld by the employer to determine tax debt or tax refund.

 

2 REPLIES 2
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Most helpful response

Enthusiast Registered Tax Practitioner

Replies 0

Hey Jess,

 

For taxation purposes, your Bridging Visa A (BVA) will take the treatment of the previous held visa, because that's the only certainty we have. We cannot predict your visa will be granted at the time you've incurred income on a BVA, so we go by what is known in fact (the WHV).

For this reason, you will be taxed in accordance with parts 3 and 4 of schedule 7 of the Income Tax Rates Act 1986, which states that taxable income between $0 - $37000 should be taxed at 15%.

 

As a separate matter, you will have met the 183 Day Test as per s. 6(1) of the Income Tax Assessment Act 1936 for having stayed in Australia for at least 183 days, and showing intent to settle. The only benefit you can derive from this whilst on WHV or BVA is that you may be eligible for tax offsets (tax credits). This is dependent on your total taxable income and personal circumstances.

 

If you 457 visa was granted in September, during tax preparation we will separate WHM or BVA income from 457 visa income, and calculate the total tax liability.

 

The tax-free threshold will be reduced by the WHV/BVA income. Hypothetically, if you would have earned $10000 on BVA, and $40000 on 457 (total taxable income of $50000), then:

$10000 x 15% = $1500 backpacker tax

($18200 - $10000) x 0 % = $0 tax-free threshold

($37000 - $18200) x 19% = $3572 resident tax bracket 1

($50000 - $37000) x 32.5% = $4225 resident tax bracket 2

 

We add all together:

$1500 + $0 + $3572 + $4225 = $9297 tax liability

 

Depending on country of origin, you may be liable for the Medicare Levy of 2% of taxable income, but you will also be eligible for the Low Income Tax Offset (LITO), which is a tax credit of $445 for taxable income up to $37000, and reduced for those with higher income as follows:

$445 - ([$50000 - $37000] x 1.5%) = $250

$50000 x 2% = $1000 Medicare Levy (ML)
$9297 + $1000 (ML) - $250 (LITO) = $10047 tax liability.

 

This amount is then compared to Pay As You Go (PAYG) tax withheld by the employer to determine tax debt or tax refund.

 

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I'm new

Replies 0

Hi Jess,

 

The other poster has given you a ton of great information but I just need to correct one point.

 

Your income will be taxed at the 15% WHM rate until the date your 417 visa expired. In this instance, bridging visa income can only be taxed at the WHM rate if your most recent visa is a WHM visa and you're applying for another one. 

 

For example, if you were on a WHM visa (either 417 or 462) and you applied for a second WHM visa but you were on a bridging visa between the end of your first WHM visa and the start of your second, the bridging visa income would be taxed at 15%. 

 

If, like you, you were on a WHM visa and applied for anything other than a 417 or 462 visa, the bridging visa income (after the WHM visa has expired) would be taxed at the applicable resident or non-resident rate.

 

I hope that helps.