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Money and Tax

Money

Money... an important factor in every backpacker's life, although it's more to do with the lack of it and finding ways to get more of it than worrying about the technicalities that come with it.

However, the legalities and necessary administration that goes hand in hand with earning and banking money are unavoidable. Having said that, it only takes a day or two to get set up with an Australian bank account and a Tax File Number (TFN). Once you've got those, you're ready to start earning.

The currency in Australia is the Australian dollar. You can get notes in 5s, 10s, 20s, 50s and 100s, all of which are waterproof! Coins are available in 5, 10, 20, and 50 cents and 1 dollar and 2 dollar coins. 1 and 2 cent coins were discontinued in 1991.

Generally speaking, Australia is good value for money if visiting from the UK. Accommodation is of good value and quality and travel is also pretty reasonable.

Banking in Australia

This is a list of the mains banks in Australia and the ones with the most coverage nationwide. Unlike British bank accounts, Australian banks charge a small monthly fee for the priviledge of having an account with them. This is usually no more than A$5. When choosing an account it is best to opt for one that allows unlimited withdrawals from cash machines and one which you can access online. Remember to read all the charges, particularly relating to withdrawing money from other cash machines.

If you want to transfer money from your UK bank account to your Australian bank account you will probably be charged by both banks.

These are the smaller banks which offer cheaper rates but the national coverage is quite poor and you will probably be charged for withdrawing from other ATMs:

Tax File Number and Paying Tax

If you are visiting Australia on a working holiday visa you will need to apply for a Tax File Number (TFN) before you start working.

You can either:

  • Visit your local Australian Tax Office to complete the form there
  • Or you can now apply online here.

You have to be in Australia at the time of application. You will also need your passport with working holiday visa and an address to which your TFN can be sent. If you do not have permanent accommodation at the time of applying, here is a list of free poste restante addresses you can use in the capital cities.

You will also be asked if you are a resident for tax purposes, if you are a backpacker on a working holiday visa then the answer for most cases will be no – you are classed as a non-resident.

Once you have applied, it can take up to 28 days to receive your TFN. If you have started work within this time you must tell your employer or agency as soon as you have received your TFN in order to avoid paying the highest rate of tax.

With the TFN you will pay 29% on the first $21,600 you earn, with the tax rate rising to a maximum of 47% once you earn over $70,000.

For More details visit: www.ato.gov.au

Superannuation

Superannuation is basically a retirement savings fund, which is similar to the UK’s National Insurance scheme. If you earn over $450 per month, your employer will then pay 9% of your earnings into a superannuation fund. There are several different funds, so you could end up with more than one if you temp with more than one agency. For this reason, it is a good idea to keep a note of each one.

Temporary residents and travellers on a working holiday visa can reclaim the money once they have left Australia. This can be done online here, and you will need your Tax File Number, passport number and superannuation details in order to apply. The money you reclaim will be subject to tax.

For more details visit: www.ato.gov.au/super/

Tax Return / Tax Back

Once you have finished working in Australia, you should fill out a tax return before leaving the country. Many people don’t do this but it is recommended. By filling out this tax return form you will find out if you are eligible for a tax refund. To be able to complete a tax return you will need to request payment summaries from each employer, or each agency once you have finished work there.

If you have supplied your Tax File Number to your employers, it is likely you have paid the correct amount of tax and therefore will not be eligible for a return or refund. Tax returns need to be filled out at the end of the Australian tax year (30th June) before the 31st October and before you return home.

You will hear many stories about people receiving their tax back after they’ve finished working in Australia. There are tax back companies all over the Australia aimed at the working holiday makers, guaranteeing to reclaim your tax for you. What they don’t tell you is that the way they get this money is by entering false information on your behalf and is therefore illegal. If your case is investigated by the ATO (Australian Tax Office) you will be held responsible and you may have to pay back the 'tax' money and a fine on top of that.

However, many Working Holiday Makers still go down this road and come out on top, so it really is a risk that you have to decide whether you’ll take or not.

If you don't get a tax return company to do this for you, it is a fairly straight-forward process to fill in the tax return. It can all be done online here and click on '2007 tax return software' 'Download 2007 tax return program'. If you get stuck answering the questions you can call or you can visit your local Tax Office.