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As you may know, the Australian Government has changed the income tax rates and superannuation requirements for working holiday makers, affecting their employers as well.

Backpacker Tax, what you need to do

From 1 January 2017, the working holiday maker tax rate of 15% applies from the first dollar earned. Working holiday makers cannot claim the tax-free-threshold, regardless of their residency status, and must provide a tax file number (TFN), otherwise as an employer, you need to withhold at the top rate of tax.

Working holiday makers remain entitled to superannuation if they are eligible.

What you need to do

To employ working holiday makers in Australia on a visa subclass 417 or 462, you:

• must register with the ATO to withhold at the working holiday maker tax rate before your first payment to a working holiday maker, and;
• should check your worker has a visa subclass 417 or 462 using the Visa Entitlement Verification Online service.

Register

You can register here as an employer of a working holiday maker. Once you have registered you can start withholding at the 15% rate.

Taxing

The 15% tax rate only applies to salary and wages paid from 1 January 2017. You must register to withhold at this rate. If you don’t register, you must use the foreign resident withholding 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.

Go to the ATO’s website here for more information and to register as an employer of working holiday makers, or contact us and we can help you.

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