What to Know About Your Working Holiday Visa Tax Return

Let’s face it. Nobody wants to think about tax when they are jetting off for an exciting working holiday or backpacking trip. But, it’s pretty likely that you will have to fulfill some tax obligations — no matter where you choose for your destination. By doing your homework on the local tax system when you arrive for your backpacker adventure, you can potentially save yourself a lot of hassle down the line.

Spend less time worrying about your working holiday visa tax return, and more time enjoying the beautiful country around you!

Boning up on your tax rights can also be worth your while financially. In fact, thousands of backpackers around the world are entitled to claim significant tax refunds each year. And yet, the reality is that tax can be a confusing and daunting subject for many working.

After all, it’s hard enough to come to terms with tax jargon in your own country, without having to tackle foreign tax law! So, with that in mind, we’ve created the ultimate tax guide for backpackers and working holidaymakers.

Check out the FAQ below to discover how to file your working holiday tax return, what you can expect in terms of a tax refund, why your tax record matters, and more! Let’s get into it.

FAQs about getting a working holiday visa tax return

1. Do backpackers get tax back?

Yes! Thousands of backpackers are entitled to claim tax refunds every single year. And, if you’re thinking "it won’t be worth my while to claim my working holiday tax refund", think again.

Working holiday tax refunds are usually substantial. In fact, the average tax refund an Australian backpacker receives is AU$2600. Meanwhile, a working holidaymaker in Canada claims an average of $998 back. And a backpacker in New Zealand can, on average, expect to claim back $550.

Do you really want to leave that kind of money behind after your working holiday?

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2. What are the legal requirements of filing a working holiday visa tax return?

Unsurprisingly, tax law varies widely from country-to-country. So backpackers will encounter differing tax obligations depending on the destination they choose for their working holiday.

For example, every working holidaymaker who has earned income in Australia and Canada is legally required to file a tax return. Meanwhile, backpackers in New Zealand are only legally obliged to file a personal tax return under certain circumstances.

For instance, if you have overseas income, or arrived part way through a tax year (the tax year runs from 1 April to 31 March in New Zealand), you are required to file a return. In other words, most backpackers will need to file a return in their first year on a working holiday visa in New Zealand.

Sure, the prospect of filling out tricky tax paperwork may sound like a drag. But the good news is that, by filing your tax return you can claim your tax refund!

3. Are there benefits of claiming tax back when leaving New Zealand or Australia?

The major benefits of claiming tax back when leaving Australia, New Zealand, and Canada is, y’know, $1000 or more coming right back to you. That’s HUGE to a backpacker! Plus, filing your working holiday visa tax return will also ensure that your tax record is clear, meaning that you can more easily apply for visa extensions and continue to find employment in the country you’re working in.

4. Do I need a clear record with the relevant tax authorities?

Many backpackers ask “what happens if I don’t file a tax return?” By not filing a tax return, your tax record will not be considered clear. That means you may be hit with fines or penalties from the tax office. What’s worse, if you intend to return to your working holiday country in the future, by not filing a tax return you may jeopardize your chances of securing a second visa or permanent residency.

Claiming tax back when leaving New Zealand or Australia will only benefit you.

5. What are the barriers to receiving a working holiday visa tax return?

It’s common for working holiday visa holders to encounter complications when they apply for their tax refund. For starters, tax forms can be incredibly tricky. Many backpackers are confused about what they have to do and which forms they are required to file.

What’s more, many backpackers also find it difficult to retrieve their refund after they have returned home from their working holiday. This is because many tax offices do not transfer money outside their own country.

But filing a tax return does not have to be a stressful experience. In fact, there are many tax agents who can help you with your tax obligations. Take Taxback.com for example. Their tax team will handle all of the paperwork for you, ensure you are availing of every expense and relief you’re entitled to, and secure your maximum legal tax refund.

They will even transfer your refund straight to your bank account, which is very convenient if you have returned home after your working holiday. Taxback.com offer tax filing and refund services in 12 countries around the world – including the US, Canada, Australia, New Zealand, the UK, Germany and more. You can learn more about their services here.

6. Should I use a tax service? Do I need it?

No, you don’t have to use a tax agent. You can always file your tax return directly with the tax office yourself. The main advantage of using a tax agent is that you can have peace of mind while they file your taxes compliantly and secure your tax refund.

If you file your working holiday tax return with a tax service like Taxback.com, you can rest assured that you will be in full compliance with the tax office. Companies like these offer a secure online service, so you won’t need to worry about any confusing or complicated forms. Instead, their experienced tax teams will take care of all of the grunt work and secure your maximum legal tax refund for you.

7. I earned income in my home country before going to Canada on a working holiday visa. Am I entitled to any tax credits?

If you worked in your home country in the same year that you came to Canada, you might not be entitled to claim personal tax credits. It all depends on what’s known as the “90% rule”.

This rule basically means that if you earned more than 10% (net) of your income outside Canada, you can't avail of the personal tax credits. However, if you earned 90% or more of the income within Canada, then you can claim the credits.

The form where you provide this information is called the TD1 form. It is your employer's responsibility to provide you with this form once starting a new employment. If you have more than one employer, it is essential that you only claim tax credits for one of your employments.

Filling out the TD1 form correctly can be the difference between receiving a large tax refund or owing the CRA (Canadian Revenue Agency) a tax bill at the end of the year.

8. I don’t intend to retire in Australia. Do I have to contribute to the Superannuation pension scheme?

Superannuation is a system for employees in Australia to collect enough funds to replace their income in retirement.

It’s likely that you will have to contribute to a “super” fund during your trip. However, when you leave Australia, you can reclaim your superannuation as a Departing Australia Superannuation Payment (DASP).

Superannuation refunds can be a hefty sum. The average DASP is $1,908 with Taxback.com.

It may be easier to get tax back on your Australia working holiday visa by using a tax agent.

9. I am starting a US university course as an international student in September. Do I have any tax filing obligations?

Yes! Every non-resident international student in the US has a tax filing requirement. In short, if you earn an income while in the US, you will be required to file a tax return. Meanwhile, if you did not earn an income, you should file a Form 8843.

If you need help with your tax forms, be sure to check out Sprintax. Sprintax is the only online Federal and State tax preparation software for non-residents in the US. Their software will guide you through the tax prep process, help you to claim your maximum legal tax refund, and keep you 100% compliant with the IRS. You can learn more about Sprintax here.

10. What is a tax year?

The term “tax year” means the calendar year for which income taxes are withheld. It’s important to note that a tax year can often differ from a traditional calendar year. For example, in New Zealand, the tax year starts on 1 April and ends on 31 March.

Meanwhile, in Australia the financial year runs from 1 July to 30 June, and in Canada, the tax year matches the traditional calendar — 1st January - 31st December.

Backpackers can apply for tax refunds after the tax year ends.

11. When do I have to file a tax return?

The tax filing deadline varies greatly from country-to-country:

• The Australian tax deadline is 31 October
• April 15 is the last day to file in the US 
• The New Zealand tax deadline is 7 July 
• And the deadline for filing in Canada is 30 April

Common tax scenarios for working holidaymakers

1. I spent five months in New Zealand on a working holiday. Will I be considered a resident or non-resident for tax purposes in New Zealand?

It is very important to properly determine your tax residency status when you’re in New Zealand on a working holiday.

New Zealand tax residents are taxed on “worldwide income” — income from New Zealand as well as from other countries. If you are a New Zealand tax resident, you will generally be entitled to a foreign tax credit for any foreign tax paid.

In short, you will be considered a tax resident in New Zealand if you've been in New Zealand for more than 183 days in any 12-month period OR you have a “permanent place of abode” in New Zealand.

It's important to note that the 183 days don't have to be consecutive. For example, if you come to New Zealand for 10 days in April and then return for 20 days in September of the same year, it will be counted as 30 days.

2. I have claimed a refund of my Australian Superannuation. Can I return to Australia on a visa in the future?

Many working holidaymakers are entitled to claim significant DASP refunds after they leave Australia and their visa has expired. However, it’s important to note that claiming a DASP does not affect your ability to apply for Australian visas in the future.

In other words, if you have received your DASP, you will be entitled to return to Australia to work provided you have successfully secured an appropriate visa.

3. I filed my Canadian tax return before I left Canada. However, I never received it since they don’t mail them outside Canada, and I can’t have it forwarded because my local banks do not accept Canadian cheques! What should I do?

In this scenario, your best option is to file an amended tax return. Taxback.com can help you with this. They will handle all of the tricky tax paperwork and transfer your refund straight to your Australian bank account so you won’t need to worry about cashing any cheques!

4. I’m a non-resident attending University in the USA and receiving a scholarship. Do I have to file a tax return with the IRS?

Every non-resident international student in the US is legally obliged to file tax documents. If you are receiving a scholarship, this can potentially have implications for the type of tax documents you will be required to file.

For example, if your scholarship covers your tuition only and you do not earn any other income while in the US, you must file a Form 8843.

Meanwhile, if your scholarship covers other expenses which are not directly related to your tuition — such as housing, food or travel allowance — you must file a Federal tax return.

No matter if you have to file a Form 8843, a Federal tax return or a State tax return, Sprintax can help you! Sprintax has been specifically designed for non-residents in the US to ensure they are fully compliant with IRS tax rules.

Ready to file for your backpacker tax return?

Don’t let your backpacker tax return go uncollected!

Thinking of heading abroad on a backpacking adventure? Don’t let tax put you off! Granted, filing season can be annoying when it comes around. But look on the bright side — you could always get a tax agent to handle your return for you! And a tax refund can be a great boost to your bank balance just when you need it most.

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This article was written with help from Taxback.com. Taxback specializes in tax services for working holidaymakers. If you have any questions about tax and your working holiday, you can Chat Live with the Taxback.com team anytime.