Employer doesn't understand 417 income tax

[palmtrees]

Hi everyone,

Just looking for some advice and hoping someone can help me with income tax while on a 417 visa in Australia and how it works. 

I understand there is information online but it can be quite unclear so I wanted to see if someone can help me- I have started working for a company and get paid monthly. I received my first pay last Friday, but I was taxed more than expected. 

My understanding is the income tax for people on WHVs changed in Jan 2017, and we are now taxed 15% on every dollar earned, until we have earned $37,000 total and then the income tax increases to around 32%. The payroll at work said my tax was higher than expected because they put me down as a 'resident for tax purposes' and overlooked what I had actually written on the tax declaration form.

They are now telling me I should in fact be taxed more than I have been already, as they said the 417 tax is split throughout the year so are saying because they will eventually be paying me over $37000 total, my tax is not 15%. I was under the understanding that it isn't worked this way, and it is a flat rate 15% tax UNTIL you have earned $37,000?

Please could someone help clear this up for me? I'm quite sure I am right however payroll are now ignoring my emails after saying it will be set up how they have suggested (which I believe is incorrect). And it's a few hundred dollars different for me so can't really afford to wait until next tax year end to claim it all back 

 

Thanks 

 

NB: I have called ATO as my employer wanted an exemption letter (I'm sure this isn't necessary as it's not an exemption- it's how the tax works?!) but the ATO said they can't supply this and that they cannot help anymore as it's personal tax advice

Edited July 19, 2017 by palmtrees

[NicF]

Your payroll department are correct.  You will be taxed each pay based on what your total projected earnings for the year are.  You don't just pay tax at a particular rate until you have earned a certain amount and then pay more tax after that, otherwise people would earn different amounts at different times during the year.

You may find that if you don't work for the full tax year that you end up paying more tax than you needed to but this will be refunded by the ATO after you submit a tax return.

[palmtrees]

Hi NicF,

Thanks for your reply. What makes me so confused is prior to this- in my previous employment I was always taxed 15%, as is my partner who is on more money per year than me, and he is also on a 417.

When I looked at the ATO website, they have an example:

'Gorge is on a 417 Working Holiday visa and has started work for Paul's Pickles. As Paul is a registered employer of working holiday makers, 15% tax will be withheld from Gorge's pay.

Gorge earned $500 in the first week and had $75 tax withheld.'

Going from the above example from the ATO website, and other information I've seen, it seems to suggest that the tax is supposed to be 15% flat rate, until you have physically earned $37000.

Please let me know where/how I'm going wrong- this is seriously confusing me!

Thanks

 

[palmtrees]

Also when I put my monthly salary amount into the ATO tax withheld calculator, it also comes up with the amount of tax to pay each month as exactly 15% of my monthly salary 

[NicF]

5 minutes ago, palmtrees said:

Hi NicF,

Thanks for your reply. What makes me so confused is prior to this- in my previous employment I was always taxed 15%, as is my partner who is on more money per year than me, and he is also on a 417.

When I looked at the ATO website, they have an example:

'Gorge is on a 417 Working Holiday visa and has started work for Paul's Pickles. As Paul is a registered employer of working holiday makers, 15% tax will be withheld from Gorge's pay.

Gorge earned $500 in the first week and had $75 tax withheld.'

Going from the above example from the ATO website, and other information I've seen, it seems to suggest that the tax is supposed to be 15% flat rate, until you have physically earned $37000.

Please let me know where/how I'm going wrong- this is seriously confusing me!

Thanks

 

In this example Gorge will only earn $26,000 for the year and therefore is only going to be paying the 15% tax rate for the full year anyway.

[palmtrees]

Ok thanks I understand that now.

The only question I have left is how come my partner always gets taxed 15%? And in my previous roles I did also get taxed 15%, but this new role is different?

 

[NicF]

Having looked further at the ATO site for working holiday payments I still think your employer is correct and I have no idea why your partner is paying less tax.  

Edited July 20, 2017 by NicF

[Collie]

There is a thread on a similar line in the temp visa section, worth having a look at it.

If your employer has set you up as tax resident on the payroll system - this is incorrect.

Some employers will use a month 1 basis and will tax you at 15% until you reach $37k and then bump you up (your method and how your gf is probably being taxed)

Other employers will use your expected annual earnings/12 and per the schedule (Normal method for tax residents - i.e if you earn <$18,200 in July you still have tax deducted)

It may depend on what payroll system they have.  Neither method is wrong or illegal.  At the end of the day, it is a cashflow issue and will all balance up at the end of the year when you do your tax return.

As you are on a WHV, you can only work there for 6 months, is it worth rocking the boat over it?  Think of it as forced savings for your travels.  Think you may have to suck it up.

 

[palmtrees]

Hi all,

Thanks for the advice. Unfortunately I have worked all of my budgets on the amount I'd take home with 15% tax (as I've always been taxed before) so it's difficult to work with around a $400 shortfall each month right now. I know it will go up eventually, but for now I'd prefer it to be 15% and not have to wait until next July.

Luckily I got more info from the ATO, they advised it is correct to tax at 15% UNTIL $37000 has been earned, and my payroll are changing it over. It is a little backwards but I am starting to understand it more now.

Thanks everyone for your help