The Working Holiday Maker program allows young adults (18 to 30) from eligible partner countries to work in Australia while having an extended holiday. Anybody can hire a working holiday maker, especially where there is a need for labour for a short period of time. Agriculture, hospitality, construction and domestic services often use working holiday makers, or backpackers, to meet this demand. The Working Holiday Maker program includes the Working Holiday (subclass 417) and Work and Holiday (subclass 462) visas.
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.
Employer registration has been extended to 31 January
If you are employing working holiday makers, you will not be penalised as long as you register by 31 January 2017. You can still use the new withholding tax rate of 15% from 1 January 2017.
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 need to:
- register with the ATO to withhold at the working holiday maker tax rate before your first payment to a working holiday maker;
- check that your worker has a visa subclass 417 or 462 using the Visa Entitlement Verification Online service.
How to register
Before you register as an employer of working holiday makers you must be registered for pay as you go (PAYG) withholding or a withholder payer number. Registering as an employer of working holiday makers is then quick and easy via the ATO’s registration tool.
How to tax a working holiday maker
Once you are registered, a withholding rate of 15% applies to the first $37,000 of a working holiday maker’s income. The 15% tax rate only applies to salary and wages paid from 1 January 2017.
If you don’t register, you must use the foreign resident withholding rates which start at 32.5% for the first $87,000.
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.
Further help:
For further information on the tax and bookkeeping requirements for working holiday makers, please contact a Marsh & Partners advisor on 07 3023 4800 or at mail@marshpartners.com.au.
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