Australia imposes taxes on working holiday earnings

15 May, 2015

The Australian treasury has removed working holiday makers from a tax-free earnings threshold in the latest budget this week, raising concerns for the English language and travel industries, while increased visa charges have also been announced by the Department of Immigration and Border Protection (DIBP).


The new tax arrangements mean that from July working holiday visa holders will pay a 32.5 per cent rate of tax from the first dollar earned in employment.

Reacting to the changes, Sue Blundell, Executive Director of English Australia, told StudyTravel Magazine, “The tax changes are not due to come into effect until 1 July 2016, so we won’t see any immediate impact, in fact we may see an increase in 2016 in anticipation of the changes.”  

Blundell explained the new tax regime could be a double-edged sword for the Elicos sector. “It is expected that the changes will reduce the overall number of visa applicants. But whilst it may mean that visitors have less money to spend on activities like language learning, it may also mean that improving language skills may be more of a priority to enable visitors to get higher paid jobs.”

She revealed that the working holiday sector was already showing signs of decline: overall working holiday visa issuance was down by seven per cent in 2014, while Elicos working holiday visa holder numbers declined by 17 per cent, she said.

Students on working holiday visas accounted for 15 per cent of international students at Elicos schools in 2013, according to the last annual data report from English Australia.  

The wider tourism industry has been critical of the announcement. “Ripping more than half a billion dollars from the visitor economy with a new ‘backpacker tax’ is simply ridiculous,” said Margy Osmond, Chief Executive Officer of the Tourism & Transport Forum. “Taxing working holiday makers from the first dollar they earn, instead of giving them equal treatment with other resident taxpayers, is a backward step and will damage Australia’s international reputation.”

The new visa application charges announced by DIBP, also applicable from July 1 this year, will see student visa charges increase in line with inflation (2.3 per cent) from AUS$535 to AUS$550, while the working holiday visa fee will increase by five per cent to AUS$440.

A summary of the new charges can be accessed here.

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