Tax with Money Matchmaker®

Australian tax as a backpacker

Written by

Shaun McGowan

Here's what you need to know about Australian tax as a backpacker

As a backpacker, it can be difficult to know where you stand in terms of residency.

You’re not exactly a tourist. So does that make you a resident? And more importantly, will you have to pay tax like a resident?

Well, it’s entirely possible.

There are a few things you must know about how Australia determines residency. Basically, it depends on the length of time you’re visiting, what type of visa you have, and your intentions there.

Australian backpacking as a resident

When you started dreaming up this backpacking trip to Australia, you probably never expected to be counted as a resident. And least of all by the Australian Taxation Office (ATO).

But when it comes to tax laws here, there’s more than meets the eye.

First, let’s cover the most obvious terms of residency

  • You’re actually a born-and-bred Australian
  • You moved to Australia and now call this land your home

In those cases, you should definitely expect to file taxes as an Australian for tax purposes.

But there’s another unexpected way you might need to claim residency. And that’s if you’ve been in Australia for more than half of the tax year.

If you’ve been here for more than six months and are earning income in Australia, you are considered a resident for tax purposes.

There are only two exceptions

  • You’re an overseas student
  • You maintain a home elsewhere and have no intentions of moving to Australia

And here’s another important fact that many backpackers overlook.

Regardless of HOW you file your taxes in Australia, you WILL have to file.

Just because it feels like vacation doesn’t mean it is one. The government always gets its money.

Do backpackers need an Australian visa?

Unless you are a resident of New Zealand (or Australia), you will need a visa to enter Australia. This visa can span anywhere from three to 12 months.

The most common visa for backpackers is the Visitor Visa. With this visa type, you can choose a three, six or 12-month trip.

But you should know…

The clock doesn’t start when you arrive in Australia. It actually starts from the day your visa is issued.

If you’re here on a Visitor Visa and don’t earn any income within Australia, you won’t have to pay taxes.

A Working Holiday Visa is another visa type that’s common among backpackers. If, like most of us, you can’t afford to spend three to six months without income, this allows you to work while you backpack your way through Australia. It actually gives you a full year to legally work in Australia. And you can even leave Australia and return during this 12-month period.

The Working Holiday Visa is perfect for backpackers who want to split their time between Australia and New Zealand.

And if you find that 12 months isn’t enough, you can apply for a Working Holiday Visa Extension. This could grant you an additional year to work and study in Australia.

Caravan loan calculator with Money Matchmaker

Can you claim the tax-free threshold as a backpacker?

Actually, the only way to claim the tax-free threshold as a backpacker is to become an Australian resident for tax purposes.

And you might be surprised to learn that you can do this on a visa.

Because you can stay in Australia on a work visa with an extension, the entire span of time could encompass the better part of two years.

And if you have intentions to live and make connections in Australia, you could become a resident for tax purposes.

If this is the case for you, you will be eligible for the tax-free threshold. It seems appealing to earn $18,200 in tax-free income.

But there’s one caveat.

If you’re earning income from your home country while you’re in Australia, you’ll also owe the Australian government taxes on that income as a resident. If you remain a foreign resident, you won’t have to pay those taxes on your foreign income, but you also won’t be able to claim the tax-free threshold.

Superannuation for backpackers

Here’s some great news about working in Australia.

Whether you’re a resident or not, your employer will have to pay into your superannuation fund.

Superannuation is Australia’s version of a pension fund. And it’s mandatory for employers to contribute.

You can claim your super after leaving Australia if you have been here on an eligible temporary resident visa and have left after the visa expired.

Conclusion

Don’t make the mistake of thinking you won’t be responsible for taxes during your backpacking trip to Australia. If you’re making money in this country, you will be taxed.

The rules vary based on your residency and intentions here, so get clear on that before you file. Click here to learn more about the tests you can use to determine whether or not you’re an Australian resident for tax purposes.

And if you have any questions about your income tax liability while you’re here, consult a tax professional to discuss your individual case.

About Money.com.au

Money.com.au want to make managing money easy and fun! By giving Australians simple tools so they can make the best decisions they can about their money.

We understand that the world of finance is complex, and offer free, extensive guides on Personal Loans, Car Loans and Business Loans, along with tools like our Budget Planning Spreadsheet to help you better manage and understand personal finance.

About the Author

Shaun McGowan from money.com.au

Shaun

McGowan

Shaun McGowan

Shaun is the founder of Money.com.au and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.

Address

Money Pty Ltd,
Suite 3, Level 2,
1 Taylor Street,
Moorabbin, VIC, 3189 Australia

Company

Money Pty Ltd trading as Money
ABN: 42 626 094 773
ACL: 528698
AFCA: 83955

© Copyright 2021 Money Ltd.



Disclaimer

Money Pty Ltd (trading as Money.com.au) provides information about credit products and is authorised to do so as the holder of Australian Credit Licence 528698. Money.com.au does not compare every Lender in Australia. We are not a broker or credit provider and when we provide information via this website, we are not providing you with a recommendation or suggestion about a particular credit product. When you apply for a credit product via the Money.com.au website, you are not applying with us, you are applying directly with a Lender Partner. Before entering into any credit product from one of our Lender Partners, you should confirm the rates and product information with the Lender. All information on this website is general advice only and does not take into account your objectives, financial situation or needs. You should consider whether this advice is right for you and we encourage you to seek independent financial advice.