Australia is a popular place for backpackers and it’s easy to see why. It is home to some beautiful places, lively cities and great weather. It is also however, an expensive place. Unlike South-East Asia or Latin America where you can save beforehand and live cheaply while on your travels, Backpacking in Australia often means working as you go in order to support yourself. The good news is that the working holiday visa is easy to get and allows you stay in the country for a full year (which can be extended to two years if you do three months farm work). On top of this, wages are fairly high and many backpackers save enough money to spend some time traveling in Asia after their time in Australia.

This is about to change however, with incoming modifications to Australia’s tax laws. Those working in Australia are about to find themselves struggling to support themselves on their trip as their wages drop dramatically.

I believe that everyone currently on the working holiday visa, and those who are considering backpacking in Australia in the new future need to be aware of these changes and so I have written this guide outlining the situation and what it means for backpackers.

The Situation Today

People who are in Australia on the working holiday visa are currently treated as residents in tax terms, meaning their income is taxed at the same rate as Australians and other residents. If you earn under $18,200 a year, you are taxed nothing (you are taxed but can claim the money back) thanks to the personal allowance scheme. If you earn between $18,200 and $37,000 you will be taxed at 19%.

Jobs are fairly easy to find here, but on the working holiday visa your visa conditions (and the fact that you are likely to move around) mean that it is unlikely you will find professional work and instead will likely be working in restaurants and pubs. This means that you will likely be paid close to minimum wage. It is possible to find a job that pays a good few dollars higher, especially if you have experience working in a skilled job such as a chef for example, however I am yet to meet someone (or have any luck myself) who has been able to use their degree on this visa and earn significantly more.

Minimum wage is $17.29 an hour and if you are lucky enough to find a full time job (40 hours a week) you will earn $691 per week or $2766 per month. Currently you will be taxed at a rate of 19% and so will take home around $2241 every month or $560 per week.

The cost of living here is actually better than in much of Europe if you are earning Australian dollars. In Perth (where I live) you can get a room in a shared house for around $250 and get by on around $70 a week in food terms. Public transport is cheap (thanks to being largely still nationalised) and covers the big cities fairly well meaning your commute won’t hit your pocket too hard. All in all you will have about (number) $240 to either spend or save each week (scaling up to $960 a month).

Of course all these numbers are variable and some will work more or less hours, be paid more or less and will spend different amounts on rent and living costs. This does give you a rough idea however, of what you will be looking at earning/spending as a backpacker here.

It is also important to note that as you plan to travel as well as work, you may well have long periods of time where you are unemployed while you travel to see the amazing things Australia has to offer or look for work in the city you have just arrived in. You may also do three months farm work in order to get your second year visa. These jobs often don’t pay well (often by the amount picked when working in farming) and you may get accommodation provided instead of full pay rates. This means your income will be lower and you might well qualify for the 0% tax rate as your total yearly income drops below $18,200.

The Changes

The law will reclassify people on the working holiday visa as non-residents and as such their tax obligations will rise significantly. Their income tax rate will rise to 32.5% regardless of income level.

This means that a third of your income will be taxed! and on minimum wage your weekly earnings will drop from $560 (assuming the 19% tax rate – it would be $691 if you qualify for the 0% rate) to $484.

When you factor in the cost of living, based on the example above, your weekly budget for seeing friends, enjoying life, seeing the country (as, you know, that’s why you came in the first place), and saving will be just $164 (or $656 a month). To put that in perspective a pint of beer will cost you around $10-15, a meal at a restaurant at least $30-40, and a packet of 20 cigarettes costs around $20. You will also have other expenses such as power and water bills, and the expensive phone and internet bills.

When will these Changes Happen and who will be Affected?

These tax changes were announced in the budget last year and the implementation date is this July (2016). This means that anyone who has arrived in Australia since last July (as well as those on and going for the second year visa) would be affected. Apart from the backpackers (who obviously can’t vote), the only other group that has been vocally against the tax changes are the farmers who rely on working holiday labour to get their harvest in. This means there has been little opposition to the bill and as it in no way affects them, most Australians are probably unaware of it. The bill is particularly frustrating when you consider that around 600 of the biggest companies in Australia (almost half of the top 1,500 surveyed) pay no tax here.

If you are planning to come to Australia on the working holiday visa, you need to be aware of these changes and understand that it will be harder to travel around the country and take time off to see all the special places that exist here. Yes, you will still be able to support yourself and you will most likely make friends and have a good time, however, working for a few weeks before driving off to visit remote national parks and rocking up in a new city to find work will be less financially feasible.

Those who are already here need to be aware of the changes so that they can make sensible decisions about whether to apply for the second year visa (and do the required farm work), and whether they need to save more now before the changes come into effect. If nothing else they need to know so that they don’t get a nasty shock when one July’s paycheck is much lower than June’s.