Important Legislation Update from the ATO
Working holiday makers holding a visa subclass 417 or 462 that allows them to work while in Australia, are now under a different tax rate.
From 1 January 2017, the working holiday maker tax rate of 15% applies from the first dollar earned. They cannot claim the tax-free-threshold regardless of their residency status and must provide a tax file number (TFN), otherwise 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 us to withhold at the working holiday maker tax rate before your first payment to a working holiday maker
- should check your worker has a visa subclass 417 or 462 using the Visa Entitlement Verification OnlineExternal Link service.
Penalties may apply if you fail to register by 31/1/17.
How to register
Registering as an employer of working holiday makers is quick and easy using the registration tool.
Use the registration tool to add working holiday maker withholding to your current PAYGW registration.
Once you have registered you can start withholding at the 15% rate, print the confirmation screen for your records or if I do your payroll, you need to tell me which employees are under this 15% rate.
Any pays done after Jan 1st, need to be fixed. The ATO has designated that two PAYG Summaries apply for this financial year for working holiday makers. One applies to 31/12/16 and the next from 1/1/17 to 30/6/17. You therefore need to have two employee records in Xero for these holiday makers.
Please let me know as soon as you’ve registered and which of your employees come under this new legislation, so I can make the necessary preparations in Xero.
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 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.