The new Working Holiday Maker / Backpacker Tax

There has been quite a bit of media coverage on the proposed ‘ backpacker tax ’, formally known as the ‘working holiday maker reform’ since the 2016 budget was introduced. Now that the backpacker tax has received royal assent what are the legislated changes and how will it affect your business?

The main industries likely to be affected include agriculture, farming, construction, hospitality and domestic services, especially when there is a need to hire staff for a short period of time.

If you employ working holiday makers that hold a visa subclass 417 or 462 you will be required to:

• Register with the ATO by 31 January 2017 to withhold tax at the new rate of 15%
• Withhold tax for working holiday makers at 15% from 1 January 2017
• At financial year end you will need to issue two different payment summaries
  -One for income earned for the period 1 July 2016 to 31 December 2016
  -One for income earned for the period 1 January 2017 to 30 June 2017
• If you do not register as an employer of working holiday makers by 31 January 2017
  -You must withhold tax at a rate of 32.5%
  –You may be liable for administrative penalties by the ATO

Working holiday makers

 Working holiday makers on a visa subclass 417 or 462 will be taxed at the same rate on:

• all Australian source income not just employment income and
• their tax residency status will not affect the tax rate

You can use ATO’s registration tool to add working holiday maker withholding to your current PAYG registration. Alternatively, if you require tailored advice to see if the backpacker tax affects you and/or your business, call Optima Partners at 0862672200.

Andrea Allen – OP Accountant