Do Backpackers Pay Tax in Australia?

Lily Kerley

January 17th, 2024

fiber_manual_record

5 minute read

If you’re on a gap year or are travelling to Australia as a working holidaymaker, you will be required to pay tax on any income you earn while here. 

• How do working holidaymakers pay tax in Australia?
• How much tax do backpackers pay in Australia?
• How to set up a tax file number in Australia?
• What if I don't have an Australian address when applying for a tax file number?
• Which visa do working holidaymakers need in Australia?
• Further Australian tax advice for backpackers

How do working holidaymakers pay tax in Australia?

Generally, Australian employers will withhold a certain percentage of your pay to go towards tax. Your employer will pay this withheld income to the Government. This withholding is often referred to as a Pay As You Go (PAYG) system, and means you don't have to do anything until tax time.

Under the commonplace PAYG system, backpackers will not have to pay a lump sum of their income during the end of the financial year for tax. Working holidaymakers getting taxed through a PAYG system may still be required to lodge a tax return to declare any work-related purchases and get some of that money back.

You may notice that the money you’re getting paid at the end of each week, fortnight or month is lower than what you expected. This is often because tax is taken out of your wage, so your pay will probably be less than your hourly rate multiplied by hours worked.

Please note that PAYG often applies to casual, part-time or full-time contracts, however, contractors and freelancers may be required to put aside money for and pay their own taxes. 

How much tax do backpackers pay in Australia?

In Australia, if you’re working for a registered working holidaymaker employer, you will be withheld 15% of your pay for the first $45 000 you earn. In the unlikely event that your earnings exceed this threshold, you will be taxed more according to this tax table for working holidaymakers.

If you are working for a business or person that is not registered as a working holidaymaker employer, you may be withheld different rates of tax. In this case, you will be withheld a foreign resident tax rate, which varies and can be determined with this tax table.

Before you begin work, ask your employer whether they’re registered to employ working holidaymakers or not, so you can determine your tax rate prior to entering an employment contract.

Please note, that if you haven’t provided your employer with a tax file number within 28 days of initial employment, 45% of your pay will be withheld until you do so.

How to set up a tax file number in Australia 

If you’re on a gap year or a working holiday in Australia, you will need a tax file number (TFN) to work. Any legitimate employer will ask you for this series of digits, and basically, it provides the Tax Office with a unique identification code for you which is necessary when it comes to lodging your tax return. Most employers won’t actually hire you without a TFN, so we highly recommend getting one as you start looking for work! 

It’s super easy to get a TFN and should be pretty instantaneous. Apply for a TFN online through the Australian Tax Office website.

What if I don't have an Australian address when applying for a tax file number?

If you've just arrived in Australia and don't have permanent lodgings, or are preemptively organising your TFN before you get here, don't worry. You can put in the address of whichever hostel, lodgings or hotel you are staying at, provided that you will be there while you get your feet in Australia.

If you're getting your TFN before you arrive, make sure you are booked into whichever hostel or lodgings you plan on staying at before providing that address. Also, let the hostel know that you've put them down with the Australian Tax Office (ATO), as a courtesy. However, make sure you take note of the address, as you may need to reconfirm it when it comes to tax time.

Similarly, be aware that if you opt into paper mail, it will be delivered to the hostel, and you may miss important notices. So, always opt for paperless email communication when you can!

Which visa do working holidaymakers need in Australia?

Currently working holidaymakers on the 417 Working Holiday and 462 Work and Holiday (backpackers) visas are permitted to work, and subsequently must pay tax on their income. 

If you’re not planning on working while in Australia, you will probably be looking at a Visitor Visa (600) or an eVisitor Visa (651). The most accurate way to determine which visa is right for you is to check with the Australian Government citizenship and immigration website.

Backpacker tax advice Australia

Are you still confused or worried about the nitty-gritty as you find and undertake work in Australia? The Australian Tax Office website is a great resource for reading about tax requirements and rights for working holidaymakers. Or, if you prefer something a little more digestible and face-to-face, E-tax has an easy and inexpensive backpacker-focussed service for tax advice and returns.

Find out more about superannuation and working in Australia with our handy guides to make your gap year stress-free! 

All information, advice or pricing provided by East Coast Tours and our affiliates, or through any of our team, is subject to change. East Coast Tours articles and products are provided online for general information purposes only and are intended as guides. Any advice interpreted from information on the website (including but not limited to financial, immigration, employment and tax information) is not specialist advice and does not constitute legal, tax or other professional instruction. East Coast Tours does not guarantee that any information provided is up-to-date or accurate. Please obtain professional or governmental advice before actioning any advice, including but not limited to tax, immigration, employment, travel restrictions and finances.