New tax rates for working holiday makers
From 1 January 2017 tax rates are changing for working holiday makers who hold 417 and 462 visas. These rates are known as working holiday maker tax rates.
What you need to know
If you employ a working holiday maker who is in Australia on a 417 or 462 visa, you:
- must register with the ATO before 31 January to withold at the working holiday maker tax rate
- can visit border.gov.au/vevo to check a worker has a 417 or 462 visa using the Visa Entitlement Verification Online Service
- must withold tax at 15% on income up to $37,000 and apply foreighn resident tax rates on income over $37,000.
What happens next
The working holiday tax rates only apply to income earned from 1 January 2017.
If you currently employ working holiday makers you will need to issue two payment summaries this year:
- one for the period to 31 December 2016
- a second for any period to 30 June 2017.
Other details
- Backpackers cannot claim the tax-free-threshold regardless of their residency status and must provide a tax file number (TFN), otherwise you need to withold at the top rate of tax.
- Superannuation is still payable per normal rules.
How to register
Registering as an employer of working holiday makers can be done using the ATO’s registration tool.
Working holiday maker registration tool
Once you have registered you can start witholding at the 15% rate. It is recommended you print the confirmation screen for your records.
How to tax a working holiday maker
The 15% tax rate only applies to salary and wages paid from 1 January 2017. You must register to withold at this rate.
If you don’t register, you must use the foreign resident witholding rates which start at 32.5% for the first $37,000.
Penalties apply if you employ a working holiday maker with visa subclass 417 or 462 and you don’t register as an employer of working holiday makers.
More information
ATO “Employers of Working Holiday Makers” https://www.ato.gov.au/Business/Your-workers/Employers-of-working-holiday-makers/
Updated Tax Tables: https://www.ato.gov.au/Rates/Tax-tables/
This information has been provided by IPG Advisors for distribution to Workwise Advisory Services members.