Changes to tax residency rules for temporary working holiday makers

The tax residency rules will be changed to treat most people who are temporarily in Australia for a working holiday as non‐residents for tax purposes, regardless of how long they are here. This means they will be taxed at 32.5% from their first dollar of income.

Currently, a working holiday maker can be treated as a resident for tax purposes if they fulfil the tax residency regulations and rules.  These rules are usually considered satisfied when the individual is in Australia for more than six months. This means they are able to access resident tax treatment, including the tax‐free threshold, the low income tax offset and the lower tax rate of 19% for income above the tax free threshold up to $37,000.

This measure will apply from 1 July 2016.