Seasonal workers, are they tax residents due to Coronavirus

Seasonal workers, are they tax residents due to Coronavirus? If you’re a seasonal worker who has been stuck in Australia due to closed borders or difficulty getting flights home, you may be getting worried that you’ll be considered a tax resident of Australia.

Don’t fret, to clear up the confusion around the seasonal workers program, the ATO has issued a clarification indicating that under certain circumstances, seasonal workers stuck in Australia will not be considered to be an Australian tax resident and do not need to lodge a tax return, this is even if they have transferred to a different visa class.

Due to the COVID-19 pandemic and closed borders, many seasonal workers who were a part of the seasonal work program (SWP) have been stuck in Australia since their visa ended. With uncertainty of tax consequences stemming from their visa status, many workers as well as employers are rightly confused as to the tax obligations they have.

In short, the seasonal workers program allowed employers in the agriculture sector and selected locations to access a pool of reliable returning workforce when there is not enough local Labour to meet seasonal demand. Originally, workers under the SWP were considered to be non-residents of Australia for tax purposes, unless they stay in Australia after they finish working on the program. This is where the confusion comes in, as these workers have now been made to stay in Australia involuntarily due to closed borders and difficulty getting flights home.

To clear up the confusion, the ATO has issued a clarification for these seasonal workers. If you are a worker that has been participating in the SWP and continue to do so, and were previously on a Temporary Work (International Relations) subclass 403 visa and are now on a different temporary visa, the ATO is currently attempting to make arrangements to ensure that previous taxation arrangements remain.

This includes those seasonal workers who were previously on a subclass 403 visa and have subsequently moved to either a Bridging visa E, Temporary Activity (subclass 408), or AGEE – COVID-19 Pandemic event visa (subclass 408 visa).

According to the ATO, you will not need to lodge a tax return if:

• you’re a foreign resident;
• the only income you earn in Australia is from SWP (including salary, wages, commission, bonuses or allowances), or bank interest from an Australian bank; and
• your SWP approved employers withheld 15% tax on your behalf.

The ATO further notes that those seasonal workers in Australian on a subclass 403 visa, a subclass 408 visa or a Bridging visa E to participate in the SWP are unlikely to a resident of Australia for tax purposes and that a change of visa from one class to a different temporary visa will not of itself change the residency status of the worker.

Example (as provided by the ATO):

Iven, a resident of Papua New Guinea (PNG), came to Australia on a subclass 403 visa to pick fruit and nuts under the seasonal worker permit (SWP). Iven planned to be in Australia from the end of January to the end of July.

Because of COVID-19, Iven could not travel back to PNG. Iven got a subclass 408 visa to stay in Australia and continues working in the SWP. Iven’s home and family are in PNG and he plans to return there as soon as he can travel.

Iven continues to pick fruit and nuts in Australia. His approved employers continue to withhold 15% tax from his salary. Iven does not need to lodge a tax return in the 2019-20 or 2020-21 financial years for this income.

For qualifying seasonal workers that have already lodged their 2019-20 tax return, the ATO says they will not need to do anything as arrangements are being made to ensure that the tax obligations remain the same for SWP workers that have moved to new temporary visas.

For those workers that have recently lodged their 2019-20 tax return, the ATO will issue a notice of assessment once they’ve completed the arrangements. If you’re one of those workers that lodged early and have already received a notice of assessment, the ATO will contact you once the arrangements are complete.

Seasonal workers, are they tax residents due to Coronavirus? Not sure what to do?

If you’re not sure whether you qualify under these arrangements, come and speak to us. Residency is a complex area and we can make sure you’re not paying extra tax. If you think you do qualify under the arrangements and have not received a call from the ATO, we can help contact the ATO on your behalf.

Hunter Partners are Accountants, Tax Agents and Financial Planners. We can assist you with all aspect of your accounting, tax and financial planning requirements, call Hunter Partners on (07) 4723-1223.