In handing down Australia’s latest Federal budget the Treasurer, Mr Hockey announced proposed changes to the tax residency rules for overseas individuals temporarily working in Australia.

Individuals who are temporarily in Australia for a working holiday will be treated as a non-resident for tax purposes.  The proposed changes will apply from 1 July 2016 and will ensure the 183 day rule (which would normally apply to treat an individual as a resident when they have been in Australia for 6 months) will not be applicable.

This means that the individual can no longer access various Australian resident tax concessions, such as:

  • lower tax rates
  • the tax-free threshold
  • the low income tax offset.

Instead, a flat rate of 32.5% will apply on all income under $80,000 (based on the rates for the year ended 30 June 2015).

The announcement has left many questions unanswered for overseas individuals. What is considered a working holiday? Will the rules apply to individual’s holding a temporary resident visa?

We will know more once draft legislation is released. If you would like to find out more about how the proposed changes may impact your business or yourself, or would like us to provide further information once draft legislation has been announced, please contact Murray Howlett or Kylee Smith on (07) 3023 1300.