Smash­ing ur­ban myths for back­pack­ers seek­ing re­fund

Port Douglas & Mossman Gazette - - ENTERTAINMENT -

THERE are a num­ber of ur­ban myths that ex­ist within the back­pack­ing com­mu­nity in Aus­tralia when it comes to tax­a­tion, and in par­tic­u­lar tax re­funds.

The most com­mon of th­ese is back­pack­ers are en­ti­tled to a full re­fund of their tax paid at the end of the year.

Alas, the real world is not such a kind and giv­ing place.

The first thing back­pack­ers and tem­po­rary work­ers need to as­cer­tain is whether they are Aus­tralian res­i­dents for tax pur­poses.

This test of residency is dif­fer­ent from tests ap­plied by other agen­cies such as the Im­mi­gra­tion De­part­ment and is not de­ter­mined by a per­son’s na­tion­al­ity.

If a per­son is clas­si­fied as an Aus­tralian res­i­dent, they are sub­ject to an ini­tial tax-free amount of in­come, fol­lowed by grad­u­ated tax scales rang­ing from 15-45 per cent, de­pend­ing upon the amount of in­come earned, whilst non-res­i­dents do not en­joy any tax-free in­come, and are taxed at rates begin­ning at 29 per cent.

There are a num­ber of tests for residency which are ap­plied by the tax of­fice and th­ese can be gen­er­ally sum­ma­rized us­ing the fol­low­ing sce­nar­ios: 1) If you are an overseas stu­dent en­rolled in a course at an Aus­tralian institution that is more than six months long, then you are gen­er­ally clas­si­fied as a res­i­dent. 2) If you are vis­it­ing Aus­tralia for more than six months and for most of that time work in the one job and live at the same place, then you are gen­er­ally clas­si­fied as a res­i­dent. 3) If you are hol­i­day­ing in Aus­tralia or are vis­it­ing for less than six months then you are gen­er­ally clas­si­fied as a non-res­i­dent. Ac­cord­ingly, a “back­packer” who trav­els around Aus­tralia, and sup­ple­ments their travel costs with short-term em­ploy­ment will be gen­er­ally clas­si­fied as a non-res­i­dent, and there­fore sub­ject to tax at 29 per cent, with lit­tle prospect of a tax re­fund.

Con­versely, a per­son on a work­ing hol­i­day visa who works long-term for one or two em­ploy­ers dur­ing the year, while main­tain­ing a place of ac­com­mo­da­tion dur­ing that time will be clas­si­fied as a res­i­dent, and likely re­ceive a tax re­fund.

The sil­ver lin­ing for non-res­i­dent back­pack­ers is that they are able to ac­cess their su­per­an­nu­a­tion monies paid by their em­ploy­ers once they leave Aus­tralia and their travel visa has ex­pired or been can­celled.

For more in­for­ma­tion visit your lo­cal tax pro­fes­sional.

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