Working Holiday Makers (Backpackers) Tax Rates

Working holiday makers are subject to a specific tax scale, without the benefit of a tax free threshold. The first step tax scale, currently up to $45,000, is 15%.

By definition, working holiday makers are the holders visa subclasses 417 and 462 which are both temporary visas under the immigration rules.

The rates also apply for a holder of a COVID-19 pandemic event 408 visa from 1 July 2022.

Working holiday makers are taxed on a progressive tax scale without the benefit of a tax-free threshold.

Working holiday-makers tax rates 2021-2022-2023

Taxable IncomeTax Payable
0 to $45,00015%
$45,001 to $120,000$6,750 plus 32.5% of income $41,000
$120,001 to $180,000$31,125 plus 37% of income over $120,000
$180,000 and over$53,325 plus 45% of income over $180,000

Prior to 1 January 2017 WHMs were taxed according to the residency rules enabling them to be taxed as residents for tax purposes with full access to the tax free threshold.

Departing superannuation payments are also taxed, increased to 65% from 1 July 2017. See Departing Australia tax on superannuation payments

The Tax Office has detailed rules and tax obligations for working holiday makers here.

Tax tables and calculator tools for calculating the correct amount of tax are published by the Tax Office here: Schedule 15 – Tax table for working holiday makers

Legal Challenge to Backpacker Tax

[3 November 2021] In a decision in Addy v Commissioner of Taxation [2021] HCA 34, the High Court found that the ‘backpacker tax’ is not in accordance with Australia’s treaty obligations with the United Kingdom.

The taxpayer in this case was considered to be entitled to the more lenient tax scale as a resident, instead of the backpacker tax rates.

The Tax Commissioner has released opinion that this will apply only if the following conditions are met:

  1. The taxpayer is a national of a country participating in the working holiday visa program with which Australia has a tax treaty, and which treaty includes a non discriminatory article (NDA).
    This will only apply to nationals of Chile, Finland, Germany (from 1 July 2017), Israel (from 1 July 2020), Japan, Norway, Turkey, and the UK.
  2. The taxpayer is the holder of the holder of a working holiday visa (Subclasses 417 or 462, or associated bridging visa)
  3. The taxpayer is deemed to be a resident of Australia for tax purposes.

For this latter condition, the Commissioner is of the view that most holders of working holiday visa holders will not be residents of Australia. This is because they come to Australia for the purposes of a holiday. The circumstances of the taxpayer in the Addy decision were considered “unusual”.

The Tax Office is advising employers to continue to use the Backpackers tax rate scale in all cases, unless they receive notice to do otherwise from the Tax Office.

That would only be when the employee has made application and been approved by the ATO for a PAYG tax variation based on the limited exceptional circumstances delineated by the High Court decision.


New Residency Ruling Issued 2023

In June 2023 the ATO has finalized its ruling on residency tests for individuals.

Taxation Ruling TR 2023/1 replaces three older rulings, and incorporates case law from the Harding, Pike, and Addy cases.

The new Ruling emphasises that as well as the facts of a case, intention, motivation and life circumstances are all to be taken into account when determining residency.

The Ruling contains a number of Examples, a number of which refer to Temporary Residents and Backpackers.

Taxation Ruling TR 2023/1 Income tax: residency tests for individuals issued 7 June 2023
Source: Taxation Ruling TR 2023/1 Income tax: residency tests for individuals

Backpackers’ higher tax rates than residents

The Working Holiday Makers (Backpackers) Tax rules imposes a higher rate of tax on 417 visa holders than that paid by other Australian residents.

Under current the backpacker tax scale, income on the first slice of income up to $45,000 is taxed at the rate of 15%.

Until 30 June 2020, the first slice was $37,000. This compares to other resident taxpayers (i.e. non visa holders) who have the benefit of a tax-free threshold.

The backpacker tax scale has applied since 1 January 2017

See further: British waitress wins High Court discrimination battle over Australia’s ‘backpacker tax’ – ABC

[6 August 2020] Commissioner wins on appeal: The Full Federal Court has allowed an appeal by the Tax Office and reversed an October 2019 decision which found that the backpacker tax is in conflict with Australia’s treaty obligations.

Working Holiday Makers’ Tax Rates 2018-19, 2019-20

Taxable IncomeTax Payable
0 to $37,00015%
$37,001 to $90,000$5,550 plus 32.5% of income over$37,000
$90,001 to $180,000$22,775 plus 37% of income over $90,000
$180,000 and over$56,075 plus 45% of income over $180,000

Working Holiday Makers’ Tax Rates 2017-18

Taxable IncomeTax Payable
0 to $37,00015%
$37,001 to $87,000$5,550 plus 32.5% of income over $37,000
$87,001 to $180,000$21,800 plus 37% of income over $87,000
$180,000 and over$56,210 plus 45% of income over $180,000

This page was last modified 2023-06-07