Could the Australian working holiday dream be dwindling away? Is the Australian government putting a stranglehold on what working holiday makers can and can’t do. Last week it was that wwoofing and other voluntary work would no longer count towards the second working holiday visa and now there’s a huge tax hike to be effective from Jan 1 2016. What’s next?
How will the working holiday tax hike affect you? It’s no drop in the ocean, its 32.5% of your pay!
Good News
If you’re on a working holiday visa at the moment don’t worry you will have the tax free threshold.( providing you entered aus before Dec 31 2014)
If you enter Australia before Dec 31 2015 and work that financial year ( until Jun 30) you will also have the tax free threshold.
The legislation hasn’t passed yet and we don’t have all the details so it may not be as bad as it seems
( Tax free threshold means you will get a refund off all tax you paid on income under $18,200)
Bad News
Anyone on a working holiday visa who enters Australia after Jan 1 2016 will effectively have to pay 32.5% tax on every dollar earned down under. Ouch!
Food For thought
From Jan 1 2016 if you work in Australia you will be taxed 32.5% and if you work in New Zealand as a working holiday maker you will be taxed 0%. Could the times be a changing! The average backpacker tax refund in Australia is $2600, if your unsure where you stand try the free tax refund calculator.
How will the Australian fruit picking industry be affected?
If this legislation goes through it will be much harder for fruit picking industry to source working holiday makers to fulfil harvest labour requirements.
Working holiday makers find it hard enough to find specified work at the moment. Specified work includes fruit picking, farm work, pearling along with other “less desirable jobs”. The main incentive to complete 88 days of “specified work” in a regional area is to qualify for the second year visa. (This second year visa is only available to 417 visa holders, 462 working holiday visa holders aren’t eligible.)
Most second year visa holders will obtain their 88 day from more than 1 employer. The fruit picking experience is seen as a time to experience Australia, save money for the next journey around our beautiful country.
How many working holiday makers do fruit picking each year?
Approximately 41,000 second year visas were granted from work specified work completed in agricultural, fishing and forestry sectors during the 2013-14 financial year. During that period there were 113,384 462 and 417 Working Holiday visa holders in the country. One thing to note is that many working holiday makers will also try getting a fruit picking job or not complete the entire 88 days which means their could have been anything from 50,000+ working holiday visa holders that participated in fruit picking work across Australia.
Roughly 20% of all working holiday visa holders in Australia are on a second year visa, which means that have done rural / specified work.
What will a 32.5% tax do to take home money?
Imagine your current income now divided by 3, the Australian taxation office takes one third and you get to keep two thirds! Does that motivate you to work? Are you still incentivised to go travelling out to rural Australia to get that 2nd year visa to have 1/3 of your current pay and second year visas pay taken by the ATO. We would love to hear your thoughts so please comment below or share your story.
To give you a picture here’s the minimum wage legislation. Part/Full time workers are subjected to different minimum wages under the horticultural award 2010 (pastoral award minimums very similar as well). Full/Part time $16.37 per hour, Casual $21.08 per hour. Most working holiday makers are employed on a casual basis which means this may attract the higher hourly rate but they may work less hours each week.)
At a 32.5% tax rate means you will be taking home $14.22 per hour as opposed to $21.08 – worlds apart.
It will also be interesting to see if there’s any changes to claiming super refunds. ( Average refund $3,350)
The Government Has Spoken
The government has said they will make $540 million over four years by implementing this tax scheme. I hope they’ve factored in a massive drop off in working holiday makers visiting Australia.
A Solution – Why is the government doing this?
Is the government really providing a solution? And if so what is it for? To raise more revenue from those who barely have anything to their name? Or is this a big attempt to actually fix the ” Working Holiday Slaving Away” explotation problem? If it is the later how is it really helping?
The big losers will be the Australian image and local tourism operators. Working holiday makers will start going to Canada and New Zealand or simply visit Australia as tourists on short trips. The money the government is taxing working holiday makers would have been pumped back into local tourism and rural communities, this will have flow on effects for sure! Now farmers may be forced to employ less motivated individuals as opposed to keen hungry backpackers looking to get their 88 days. Could this affect local business?
We are hanging on to the Australian image here and milking it for what its worth. The sunshine, beaches, warm weather and the occasional shrimp on the barbie, everyone loves Australia. Her beauty will be here but the cultural we have created over the past 200 years are we at risk of losing our image to the world? Taxing people who have next to none and will spend it locally anyway? I can’t wait to hear why the government is doing this as it really could be a new beginning for a culturally inferior Australia.
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We’ve included a free tool below to get a tax refund estimation if you’re unsure of what you’re due this year
