Tax Return:: Changes in Tax Treatment for Working Holiday Makers Who Have Transferred to a 408 Visa

Hello, this is your tax accountant, P&C Tax Professionals.

If you’re a working holiday maker who has transferred to a 408 Pandemic event visa during the financial year, you may be facing some changes in your tax treatment depending on your circumstances. The COVID-19 pandemic has brought about a lot of uncertainty and disruption to travel plans, and many working holiday makers have found themselves stuck in Australia with their original visa expiring. As a result, the Australian government introduced the 408 pandemic visa to allow these individuals to remain in the country and work in critical sectors such as healthcare and agriculture. However, this new visa category comes with different tax rules that could impact your financial situation. In this blog post, we will discuss the changes in tax treatment for working holiday makers who have transferred to a 408 pandemic visa during the financial year and what you need to know to stay compliant with the Australian tax laws.

Your Residency for Tax Purposes

To determine your tax obligations in Australia, you will either be classified as either:

> an Australian resident or

> a foreign resident.

Your residency status is determined based on your individual circumstances. Simply obtaining or transferring to a 408 Pandemic event visa will not automatically change your tax residency status. Even if you obtain a second or subsequent 408 Pandemic visa, your tax residency will not change automatically to that of an Australian resident. There are a number of other factors which are used to determine your residency for tax purposes, therefore it is important that you regularly assess your tax residency throughout the year and take necessary action if any changes occur. (For more information on determining your tax residency status in Australia, you can access one of our previous blog posts here: https://en.pnctax.com.au/single-post/tax-return-australian-residency-tests)

Individuals Previously on a 403 Visa

If the following conditions are met, your taxation in Australia will remain the same:

> You were previously employed under the Seasonal Worker Programme (SWP), Pacific Labour Scheme (PLS), or Pacific Australia Labour Mobility (PALM) scheme on a 403 Temporary Work Visa

> You transferred to a 408 Pandemic Event Visa during the COVID-19 pandemic

> Your tax residency status did not change.

Foreign residents

For taxation purposes, the majority of individuals who arrive in Australia through the Seasonal Worker Programme (SWP) or the short-term Pacific Australia Labour Mobility (PALM) scheme are considered foreign residents.

Furthermore, if you transfer to the 408 Pandemic Event Visa, the 15% tax withheld by your employer will still be applicable.

Australian residents

Individuals who come to Australia through the Pacific Labour Scheme (PLS) and long-term PALM scheme are generally considered Australian residents for taxation purposes. This is due to their connection to Australia and their intention to make it their permanent home.

If you transfer to the 408 Pandemic Event Visa, the tax rates for Australian residents will still be applicable to you. Your employer will continue to withhold tax from your wages as usual.

Individuals previously on a 417 or 462 Visa

If you previously worked in Australia as a working holiday maker (WHM) on a 417 or 462 visa and transferred to a 408 Pandemic event visa during COVID-19, how you’re taxed will depend on the following factors:

> Your residency status as a WHM

> Whether you’re from a non-discrimination article (NDA) country

Moreover, there will:

> Be no changes in how you are taxed if you were a

- Foreign resident WHM prior to transferring to a 408 Pandemic event visa during COVID-19

- Resident WHM from an NDA country prior to transferring to a 408 Pandemic event visa during COVID-19

> Be changes in how you are taxed if you were a resident WHM from a non-NDA country before transferring to a 408 Pandemic event visa.

Foreign Resident

The majority of individuals who come to Australia on a working holiday maker (WHM) visa are considered foreign residents for tax purposes. If you transfer to the 408 Pandemic event visa from a WHM visa, the 15% WHM tax rate will still be applicable to your taxable income.

Australian Resident from an NDA Country

If you are an Australian tax resident from a non-discrimination article (NDA) country and you switched from a working holiday maker visa to a 408 Pandemic event visa, you will be subject to Australian resident tax rates.

Australian Resident not from an NDA Country

When you transition from a working holiday maker (WHM) visa to a 408 Pandemic event visa as an Australian resident WHM from a non-NDA country:

> Australian resident tax rates will be imposed on the income you generate starting from the day you transfer to a 408 Pandemic event visa until 30 June 2022

> The 15% WHM tax rate will be imposed on the income you generate from 1 July 2022, even if you continue to be on the 408 Pandemic event visa beyond this date.

As usual, your employer will still deduct tax from your pay when you receive it.

When you lodge your tax return for the 2021 and 2022 financial years, you must:

> Indicate that you have been evaluated as an Australian resident by ticking the relevant box

> Include both your WHM income and the income you earned while on the 408 Pandemic event visa as employment income

> Only report the income you earned as a WHM on a 417 or 462 visa under the WHM label.

When you lodge your tax return for the 2023 or subsequent financial years, you must:

> Indicate that you have been evaluated as an Australian resident by ticking the relevant box

> Report both your WHM income earned while on a 417 or 462 visa and the income you earned while on the 408 Pandemic event visa as employment income under the WHM label. This means that the WHM rate will continue to apply to your taxable income even if you have transferred to the 408 Pandemic event visa.

In summary, the changes in tax treatment for working holiday makers who have moved to a 408 Pandemic event visa during the financial year can have significant implications on their tax obligations. It is important for individuals to understand their residency status for tax purposes and how it impacts their tax return. Seeking professional advice from a registered tax agent or accountant can help individuals navigate the complexities of the tax system and ensure they meet their obligations. It is also crucial for employers to be aware of these changes and to correctly withhold tax from their employees’ income to avoid unnecessary penalties and fines.