Jump to content

You're currently viewing the forum as a Guest
register-now-button_orig.png
and join in with discussions   
ask migration questions
message other members


..and much much more!

TooEasy

Going from 417 to 457 increased tax by 50%

    Recommended Posts

    Hi all

    I just had my 457 approved a few weeks ago (was on 417). Great news, BUT...

    I was so gutted to see on my last payslip (Jul 14th) that I've gone from paying $1,370 in tax to $2,535! That's $1,165 more tax or a 48% increase—enough to pay my monthly rental cost twice over!

    I understand it might just be the way the cookie crumbles, but can anyone with more experience than me with the Aussie tax system confirm that it sounds normal to be paying so much more tax on a 457? It works out around 25% of my monthly salary is tax.

    Is there anything to be done? Will becoming a permanent resident help?

    Any advice hugely appreciated!
    TooEasy 

    Share this post


    Link to post
    Share on other sites
    Moneycorp

    Moneycorp

    No it's not normal. That's assuming you're on the same salary as before, of course.

    Why not ask your employer to explain the difference?

    Share this post


    Link to post
    Share on other sites

    Hey mate,

    It may be that you were undertaxed on your WHV or it maybe due to a YTD timing catch-up.  I don't know if they are still around but were you using a tax intermediary to get a LAFA etc.?  I thought they had closed the loopholes on that for WHVs a few years ago.  That is all I can think of. 

    WHVs are tax non-resident and pay 15% tax on the first $37k (I think it is $37k) before moving onto the higher non-resident rates.  Non resident tax rates are higher than resident tax rates.

    On a 457, you will be tax resident and will pay per the normal scale.  25% as an average rate is cheap btw - welcome to the real world.  Presuming your numbers are monthly, $2,535 tax per month is 25% of your Gross so your Gross is $10,140 pm or $121,680 pa.  Based on that salary, I work out that you should be paying closer to 29% tax, $2924pm (before any deductions and ignoring PHI/ Additional Medicare levies) see below (pasted a bit scewy).  They are last years rates but don't think they have changed.  There are calculators on the ATO site is you want to check it.

     

    Taxable Income              121,680
           
    2016-2017    
                   -        18,200 0%                        -  
         18,201      37,000 19%                 3,572
         37,001      87,000 33%              16,250
         87,001    121,680 37%              12,831
       121,681    180,001 45%                        -  
           
    Medicare levy 2.0%                 2,434
           
           
           
           
    Total tax/Levy                35,086
    Tax rate     28.8%

     

    • Like 1

    Share this post


    Link to post
    Share on other sites

    Hi Collie

    Thanks for the advice.

    Quote

    It may be that you were undertaxed on your WHV or it maybe due to a YTD timing catch-up.  I don't know if they are still around but were you using a tax intermediary to get a LAFA etc.?  I thought they had closed the loopholes on that for WHVs a few years ago.  That is all I can think of.

    I'm not sure what is meant by a 'LAFA' but my tax is done through the company I work for.

    Quote

    WHVs are tax non-resident and pay 15% tax on the first $37k before moving onto the higher non-resident rates.  Non resident tax rates are higher than resident tax rates.

    You said WHV is non-resident but the ATO website says you are a resident (for tax purposes) if you're here for 6+ months. Since I've been here for over a year and this is my second full time job I would be considered a resident for tax purposes.

    Anyway, I think the tax I'm paying now is correct. My confusion is why it went up from last month when I was on a 417 (but still a resident for tax purposes).

    Share this post


    Link to post
    Share on other sites

    Ok - LAFA stands for Living Away from home allowance.  It was a loophole used by temp residents and backpackers for years to legally avoid tax.  They tightened up the rules on it some time ago.  Pretty much only available to politicians in Canberra now.

    I'm not sure you are not interpreting the ATO site correctly.  I'm pretty sure that most people on 417 visa are non resident for tax purposes.  You seem to fall into the example they have on their site which is a change of behaviour, in which case you would be non resident when on your 417 and resident on your 457

    https://www.ato.gov.au/Individuals/Ind/Residency---working-holiday-or-visit/

    If my assumed numbers are correct, your company may be deducting too little tax although it may be a timing issue.  Worth an email or a chat with payroll for an explanation.  You don't want a big tax bill at the end of the year.

    • Like 1

    Share this post


    Link to post
    Share on other sites

    If you want to PM me with how much your pay is I can check the calculation for you. There's no reason for the tax to have gone up because of the change of visa (if on a low pay it would have gone down, in all other cases it would be the same). We are in a new tax year but most rates haven't changed.

    • Like 1

    Chartered Accountant (England & Wales); Registered Tax Agent & Fellow of The Tax Institute (Australia)

    Share this post


    Link to post
    Share on other sites
    18 hours ago, Ken said:

    If you want to PM me with how much your pay is I can check the calculation for you. There's no reason for the tax to have gone up because of the change of visa (if on a low pay it would have gone down, in all other cases it would be the same). We are in a new tax year but most rates haven't changed.

    Hey Ken,

    It is already in a calculator based above on the numbers he posted.

    His tax should have went down (on the same salary) as his tax residence will have changed from non-resident (backpacker) to resident.

    I think it is a probably a timing thing relating to FY16-17 tax year as the rules only changed through the year (1 Jan - bizarre).  Either that or he is in for a large bill when he does his return for FY16-17. 

    Without knowing the full details, it is hard to advise.

     

     

    • Like 1

    Share this post


    Link to post
    Share on other sites
    21 hours ago, Collie said:

    I'm not sure you are not interpreting the ATO site correctly.  I'm pretty sure that most people on 417 visa are non resident for tax purposes.  You seem to fall into the example they have on their site which is a change of behaviour, in which case you would be non resident when on your 417 and resident on your 457

    On the website it says I'm a resident for tax purposes if I'm "visiting Australia, working and living in the one location and have taken steps to make Australia your home." It goes on to say that if I "live in Australia for more than six months in an Australian income tax year" then I'm also a resident for tax purposes. I have had no intention to return home. I don't have a home in any other country.

    20 hours ago, Ken said:

    If you want to PM me with how much your pay is I can check the calculation for you.

    My base salary, less super, is $109,589.04. The calculation Collie did was based on my salary including super so would be a little off.

    20 hours ago, Ken said:

    There's no reason for the tax to have gone up because of the change of visa (if on a low pay it would have gone down, in all other cases it would be the same). We are in a new tax year but most rates haven't changed.

    According to my payslips, my salary nor taxable income hasn't changed. It's just that the amount of tax paid changed drastically. I've run the numbers on the paycalculator website, and if I was a non-resident before then I would have been paying MORE tax, not less. So, still no explanation for the increase.

    2 hours ago, Collie said:

    I think it is a probably a timing thing relating to FY16-17 tax year as the rules only changed through the year (1 Jan - bizarre).  Either that or he is in for a large bill when he does his return for FY16-17.

    When you say a "timing thing" what exactly might that mean? At my previous job, our finance controller split my group certificates at Dec 31st. However, I only started at my current job in May this year, so I've only had two full payslips so far (one either side of the FY).

    I've already done an estimation of tax owed for FY16/17 and I'm owed money.

    Share this post


    Link to post
    Share on other sites
    1 hour ago, TooEasy said:

    I have had no intention to return home. I don't have a home in any other country.

    FYI - Both the 417 and 457 visas are temporary visas with no automatic right to PR or citizenship.

    I'm pretty sure the ATO would differ to your interpretation of their rules.  The vast vast majority of people on 417 visas are in the special backpacker non-resident tax category (regardless of your intentions).  This can later change to tax resident based on a change in circumstances but you would be tax non-resident while on the 417 visa.  Look, I'm only a CPA so check with the ATO directly, they have a chat function on their website and you can do so annonymously.

    The timing thing relates to what schedule and allowances the payroll team applied to you, they may have allowed for a YTD catchup of allowances.  It will all wash through on your FY17 tax return anyway but you could ask them if you really wanted to know.

    On the salary you have declared, I calculate that you should be paying tax/levies of $2,531pm (27.7%) which is pretty close to what you said was deducted  This excludes any additional medicare levies for not having private health insurance (PHI).  If you are single, earn >$90k ($180k for family) and do not have PHI you will be charged an addtional medicare levy (think it is 1%).

    If you are single, it may be worth taking out some PHI, the premium may not be too different to the addtional tax you would otherwise pay.

    Hope this was of some help.

    • Like 1

    Share this post


    Link to post
    Share on other sites
    5 hours ago, TooEasy said:

    My base salary, less super, is $109,589.04.

    In that case $2,535 is the correct monthly tax deduction for this year and your net pay is $6,597.42

    I've looked in to what happened with the WHV for you and weirdly it looks as if the $1,370 was the correct deduction (based on you only having worked for them a couple of months). Most taxes in Australia do not take into account the year to date, they just assume you earn the same amount every pay period for the whole year however the WHV system has a year to date component.

    While your total pay from an employer in a tax year is less than $37,000 your monthly tax (on your salary) would be $1,370 - so in your case (if you were still taxed as a WHV holder) that's for the first 4 months of the year.

    Once your total pay goes over $37,000 but is still under $87,000 your monthly tax deduction increases to $2,968 - so in your case that's for the next 5 months of the year.

    Once your total pay goes over $87,000 but is still under $180,000 your monthly tax deduction increases again - this time to $3,379 - in your case that would be for the final 3 months of the year.

     

    As a normal employee your total tax deductions are: 12 x $2,535 = $30,420

    As a WHV holder they would be: 4 x $1,370 + 5 x $2,968 + 3 x $3,379 = $30,457

     

    Note that in both case these are only the deductions that your employer is required to make they are not the actual amounts of tax you have to pay. Your actual tax bill is calculated at the end of the year when your tax return is submitted and the amount that your employer has already deducted is offset against that. Most people get a tax refund but you can be landed with more to pay.

    • Like 2

    Chartered Accountant (England & Wales); Registered Tax Agent & Fellow of The Tax Institute (Australia)

    Share this post


    Link to post
    Share on other sites

    Good reply, Ken.

     

    So the $1,370 is on a month 1 basis, $109,589/12*15%.  His employer assumes that he had no other income in that TY. 15% being the WHV non resident tax rate for the first $37k

    I've learnt something - thanks

     

    • Like 1

    Share this post


    Link to post
    Share on other sites

    Ken & Collie, thanks so much.

    I finally understand. It would've taken me ages to figure that out!

    Share this post


    Link to post
    Share on other sites
    14 hours ago, Collie said:

    I've learnt something - thanks

     

    Me too. I was aware that the new rules for taxing WHV holders had come in but as I don't have any clients who employ WHV holders I hadn't bothered to look into the detail of how they worked until now. Quite eye opening. While all the publicity has been about WHV holders having more tax deducted, it's only those on low pay that applies to (since they now get taxed from the first dollar earned). Because WHV holders can only be with one employer for a maximum 6 months and each employer will start from scratch (on what you've called a month 1 basis) any higher paid WHV holders out there will end up with less tax being deducted.


    Chartered Accountant (England & Wales); Registered Tax Agent & Fellow of The Tax Institute (Australia)

    Share this post


    Link to post
    Share on other sites

    What was weird was that they brought it in on 1 Jan, instead of in line with the tax year.  Admin nightmare.

    Bad policy also IMO.  Whatever WHVs earn here they generally spend here in the local economy and more in the rural economies as they backpack around Australia.  As an ex backpacker, I can't remember many leaving Australia with too much money, it went on travel, tours, booze etc.

     

    2 hours ago, Ken said:

    Because WHV holders can only be with one employer for a maximum 6 months and each employer will start from scratch (on what you've called a month 1 basis) any higher paid WHV holders out there will end up with less tax being deducted.

    And a tax bill at the end of the year - good luck to the ATO in chasing that.  Law of unintended consequences from a bad policy decision.

    Are you an accountant in practice Ken? or a tax agent?  Thinking of setting up my own business in that line (I'm CIMA and CPA) here in Perth.  My history is more corporate Mgmt Reporting, FP&A, Decision Support type stuff in Fin Services in Sydney but not much of a Fin Services market in Perth and finding it hard to break into other industries in a very competitive market. 

    Share this post


    Link to post
    Share on other sites

    Create an account or sign in to comment

    You need to be a member in order to leave a comment

    Create an account

    Sign up for a new account in our community. It's easy!

    Register a new account

    Sign in

    Already have an account? Sign in here.

    Sign In Now


    • Similar Content

      • By ausj
        Hi everyone,
         
        I have a couple of questions regarding visas that maybe people can shed some light on. I am Australian and my boyfriend is British, we currently live in the UK and are moving to Aus this year.
         
        I’ve read on here about registering the relationship as de-facto… does doing so waive the requirement of 12 months living together? The reason I ask is that my boyfriend and I have only been living together for 3 months so far in the UK. (We’ve been in a relationship for 16 months). During this time I have been transferring him money for half of the mortgage and bills but my name isn’t actually on them. We also both transfer an amount each month to a separate account we call the ‘Fun Fund’ which we use for shared expenses (groceries, restaurants, holidays etc) but it’s only in his name. I do have my own bank/credit card statements with our address on it.

        We are planning to move to Australia this year however there will be a few months where we will not be living together. This is due to my UK visa expiring and me having to leave the country and him not being able to leave his job just yet. We will go on holiday together during this time but won’t actually be living together for about 3 months until he can move. Even though we're not apart by choice I’m guessing this doesn’t look good on an application. So what I’m wondering is, when we are living together in Australia, have a joint bank account, insurance etc. and register as de-facto, do we have grounds to apply even without 12 straight months of cohabitation? We are looking at the possibility of him entering on a working holiday visa then applying for the partnership visa shortly after. Is it correct that we could apply at any time and be put on a bridging visa enabling him to work until it’s decided?

          We are also looking into the option of him transferring with the company he works for (a large well-known company with offices in Aus). Is there a separate visa to transfer in the same company or would he need to apply for a 457? His qualifications/experience is in marketing, account management, sales and E-retail management.
          He is also a rugby referee here in the UK and is hoping to do the same in Aus. Could he work this second weekend job on a 457 or can he only work for the company who has sponsored him? Thank you!
      • By Cerberus1
        The Courier Mail is reporting that the Australian Tax Office (ATO) will be analyzing the records of up to twenty million migrants (past and present) to ensure they are not ripping off Australians and are paying their fare share of tax.
        The financial and personal details of visa holders who have come and gone from Australia will be audited over the next three years to enforce income tax and superannuation requirements.
        The massive blowtorch, which includes migration agents who help get migrants to Australia, also aims to identify potential fraudsters rorting foreign investment rules.
        While the ATO has put migrants in the crosshairs previously, it has not been at this mammoth scale.
        It comes as the ATO is launching a targeted and well-resourced crackdown on the black economy, which benefits some workers but duds Australia of revenue.
        The latest information sweep is extensive and will include the address history visa applicants and their sponsors; all their arrivals and departures in Australia and details of their education provider if they are on a student visa.
        A spokeswoman for Revenue Minister Kelly O’Dwyer said the operation could recoup cash for the taxpayer and ensure eligible migrants receives their superannuation before they left the country.
        “The ATO has a responsibility to protect the public revenue and to maintain community confidence in the integrity of the tax system,’’ she said.
        “The data-matching program does this by detecting, dealing with and deterring those that are not meeting their obligations.
        “It also enables enforcement activity and recovery of taxation revenue – without undertaking this data matching program and subsequent compliance activity there are no assurances that a wider risk to revenue does not exist.
        “The data also supports the ATO to administer aspects of Australia’s foreign investment laws and reunite seasonal workers with their superannuation entitlements under the Labour Mobility Assistance Program.”
        The ATO said, “It is estimated that records of 20 million individuals will be obtained over the course of the three year period.
        “These records will be electronically matched with ATO data holdings to identify noncompliance with obligations under taxation and superannuation laws.
        “The objectives of this data matching program are to maintain currency of our knowledge of taxation and superannuation risks within the visa holders, visa sponsors and migration agents populations (and) test the accuracy and strengths of our existing risk detection models ... and identify areas for improvement in our models, treatment systems and practices.”
        Source: https://aumigforu.ms/2D1sKkm
      • By Gemsallen
        Hi, been living in Australia for years and now dual bristish and Australian citizen. I’ve sold my UK property and wondered if anyone has done the same and how that effected their Australian tax return? Do you have to pay capacitor gains tax? How does it work? 
      • By sunshinedawn

        Is there anyway that we can apply for residency while we're on a 457 visa. We've just recently arrived here and have been told we can apply for it. Is this true?
      • By Cerberus1

        2018 will see the implementation of Temporary Skill Shortage Visas, changes to the Occupation Lists, plans to introduce mandatory provisional visas before permanent residency and changes to Parent and Partner Visas. 
         
        The  Temporary Work (Skilled) Visa (subclass 457) will be replaced with Temporary Skill Shortage (TSS) visa
        From March 2018, the current 457 visa program will be abolished and replaced with the completely new Temporary Skill Shortage (TSS) visa.
        The TSS visa will be comprised of a Short-Term stream allowing stays of up to two years, and a Medium-Term stream allowing stays of up to four years.
        The Short-Term stream visa is renewable only once.  The STSOL occupation list will apply for Short-Term Stream applicants.
        The Medium-Stream visa holders may renew their visas onshore and may apply for permanent residence pathway after working for three years in Australia. The MLTSSL occupation list will apply for Medium-Stream visa applicants. This stream is relatively similar to the current 457 visa.
        Tighter Regulations for both streams:
        Increased Work Experience Requirements Higher English Language Levels Requirements Mandatory Labour Market Testing Set Australian Market Salary Rates Additional Character, Anti-Discrimination and Training Requirements More information: https://www.homeaffairs.gov.au/WorkinginAustralia/Documents/abolition-replacement-457.pdf
         Discuss Temporary Skilled Visas on our forum
         
        Changes to Occupation lists in 2018

        A number of changes were made to the Medium and Long-term Strategic Skills List (MLTSSL) and the Short-term Skilled Occupation List (STSOL) in April 2017 and again in July 2017.
        CHECK IF YOUR OCCUPATION IS IN THE MEDIUM AND LONG-TERM STRATEGIC SKILLS LIST (MLTSSL) HERE
        Though the Medium and Long-Term Strategic Skill List (MLTSSL) is likely to remain the same, the STSOL which is a list of occupations nominated for temporary and short-term visas is likely to see some changes.
        Some of the occupations flagged for removal from the Short-term Skilled Occupation List are Accommodation and Hospitality manager, Hair or Beauty Salon Manager, Recruitment Consultant and Building Associate..
        University Tutor, Psychotherapist, Property Manager, Real Estate Agent and Real Estate Representative may be added to the list.
        It is also likely that Skilled Occupations List will include Airline Pilots in 2018 to address the shortage of pilots in Australia. Following lobbying from the peak body for regional airlines, it has been reported that the Skilled Occupations List will be revised to allow foreign pilots to come to the country on a two-year work visa.
        Discuss Skilled Visas on our forum
         
        Plans to introduce mandatory provisional visas before permanent residency in Australia and reducing the number of visas from 99 to 10
        The Government undertook public consultation to transform Australia’s visa system in 2017.
        The Australian government discussed plans to introduce mandatory provisional visas where migrants may need to spend a certain period of time before they are granted permanent residency and also to reduce the number of visas from 99 to 10 to simplify the process.
        The Department received 255 submissions and approximately 184 representatives of industry, academia, community and government participated in roundtables across the country, with an additional 60 industry representatives participating in immigration reform workshops.
        In December 2017, the department in a consultation summary said while approximately 55% opposed a provisional period, among those who supported the principle of provisional residence, a provisional period of a minimum of two years was most popular.  
        88% of the submissions supported visa simplification with suggestions that importance be given to transparency around decision making, reduced processing times and a system that was easier to understand and navigate.  
        The department though has not set a timeline for its implementation and says, ‘This is a long-term programme of improvement to the way we deliver our services. There is no immediate impact for visa applicants or holders. The first step will be broad consultation with the market on the design and build of a new visa processing platform.’
        We are likely to hear more about these plans in 2018.
         Discuss Visas, Residency & Citizenship on our forum
         
        Temporary sponsored parent visa

         
        In the 2017-18 federal budget, a new temporary sponsored parent visa was announced - to be available from November 2017. However, the new visa which will allow migrants’ parents to stay in the country for extended periods has been delayed.
        The Bill enabling the new visa to come into effect has not yet been approved by the Senate.
        Here are the six must know facts about the new long stay visa for parents:
        3-year-visa will cost $5000, a 5-year-visa will cost $10,000 and a 10-year-visa will cost $20,000, with the opportunity of a single renewal for another five years at the same price. 15,000 people each year will be granted this long stay parent visa. Children/Sponsors will be required to pay for their parents' private health insurance. The children will also need to act as financial guarantor on any extra healthcare costs their parents rack up in Australia. Those on the new visa will not be allowed to work, however, the government hopes they will take on family roles which would see “reduced pressure on childcare facilities.” Those sponsoring their parents for the new visa need to be Australian citizens or permanent residents, or “eligible New Zealand citizens”. The visa-holders would not be allowed to reapply beyond the 10 years and would have no pathway to permanent residency.  Discuss Parent Visas on our forum
         
        Partner Visa

        Proposed changes to Partner Visa were expected in 2017 but it has been deferred to 2018. 
        This is because the Migration Amendment (Family Violence and Other Measures) Bill 2016(Cth) (“the Bill”) is still before the Senate and has not been enacted.
        If the Bill is enacted, it will establish a sponsorship framework for partner visas, placing more focus on the assessment of sponsors.
        In particular:
        The sponsorship assessment would be separated from the visa application process Sponsors would need to be approved before visa applications are made Legal obligations would be imposed on approved sponsors If sponsors fail to meet their obligations, sanctions may be imposed In certain circumstances sponsors can be barred from sponsorship The new regulations propose partner visa sponsorship applications would need to be lodged under stricter criteria and approved before the overseas partner visa application could be lodged.
        The new two-step process is expected to delay the lodgement of the overseas partner application and require the overseas partner to have a valid visa until a visa application for the overseas partner can be lodged.
         Discuss Partner Visas on our forum
         
    ×