Currently, a working holiday maker can be treated as a resident for tax purposes if they satisfy the tax residency rules, typically that they are in Australia for more than six months (unless it can be established that the person's usual place of abode is outside Australia and that there is no intention to take up residence in Australia). This means they are able to access the tax-free threshold, the low income tax offset and the lower tax rate of 19% for income above the tax-free threshold up to $37,000.

The government will change the tax residency rules from 1 July 2016 (i.e., the 2017 income year) to treat most people who are temporarily in Australia for a working holiday as non-residents for tax purposes, regardless of how long they are here. This means they will be taxed at 32.5% from their first dollar of income (up to $80,000).