If you’re working in Australia, you will have to pay tax on your income there.
In most cases a traveller on a Working Holiday visa is treated as a non-resident, which means that you will be taxed at a higher rate than an Australian resident and have to pay tax on every dollar you earn (as opposed to Australian residents that are entitled to a $6000 tax-free threshold).
As a non-resident you will be taxed at a rate of 29% on the first $30,000 you earn, with the tax rate rising to a maximum of 45% once you earn over $150,000.
In some cases if you spend most of your time in one location and establish ties with Australia (such as renting a flat and having your name on the lease, getting an Australian drivers licence and joing local clubs and generally living a lifestyle that is closer to a regular Australian resident rather than a traveller), then you may be able to be taxed as a resident. Being classed as a resident by the Australian Taxation Office can mean that you pay around half as much tax as a non-resident.
Even though most travellers on a Working Holiday visa are taxed as non-residents there are some cases where you may be classed as a resident, which can save you thousands of dollars a year in tax. If you think your travel and work patterns in Australia allow you to be classed as a resident then it is a good idea to see a good tax accountant when you need to submit your tax return.
Residents don’t pay tax on the first $6000 they earn and they only pay 15% on what they earn between $6001 and $30,000. This means that if you earn $30,000 in one year you would pay $8700 tax if you are classed as a non-resident but only $3,600 if you are classed as a resident. See www.ato.gov.au/individuals/content.asp?doc=/content/64131.htm and www.ato.gov.au/individuals/content.asp?doc=/content/36280.htm for more information about what is required to be taxed as a resident.
You will need to get a Tax File Number to avoid paying a higher tax rate than you need to. You’ll need to quote this number when applying for work. If you have a Working Holiday Visa and an Australian address you can apply for a Tax File Number online at the Australian Taxation Office’s website (www.ato.gov.au).
At the end of the Australian tax year (30 June) and before you return home, you will need to complete a tax return. In Australia this is much more complex than in the UK and many travellers get an accountant or tax agent to do this for them. An accountant will charge around $120 for this service, but they are familiar with Australian tax law and will often be able to get you a better refund than you could get yourself.