Since the 2015 Federal Budget announcements, there has been a significant amount of uncertainty surrounding proposed changes to the tax obligations of temporary working holiday makers, labelled the ‘backpackers tax’. This has caused considerable concern to industries such as the Hospitality and Agribusiness sectors that rely on seasonal workers.
After a long 18 months there is now clarity around the tax and superannuation treatment for temporary working holiday makers after the Greens agreed to a deal to support the Coalition’s preferred 15% backpackers tax rate in exchange for significant concessions from the Government.
Working holiday makers on 417 and 462 visas will no longer be classified as residents for tax purposes from 1 January 2017 and employers will be required to withhold income tax at the normal foreign resident withholding tax rates of 32.5% from the first dollar unless the employer registers as a working holiday maker employer with the ATO.
Businesses who register as a working holiday maker employer with the ATO can then apply a withholding rate of 15% to the first $37,000 of income of a working holiday maker on a 417 or 462 visa. Income over $37,000 will be subject to normal foreign resident withholding rates.
To register as a holiday maker employer the business must have a pay as you go withholding (PAYGW) registration and have an Australian business number (ABN) or a withholding payer number. Registrations and tax table rates can be accessed via the ATO website.
If businesses do not register with the ATO, they must withhold 32.5% tax on all income and may be issued with a penalty for failing to register.
The certainty is good news for those who employ staff on working holiday maker visas, especially as we hit the holiday season and peak times for those in the hospitality and agribusiness sectors.
If you require assistance registering for the working holiday makers register or would like to discuss the impact these changes have on your business please contact your usual Hanrick Curran advisor or alternatively, John Kotzur on 07 3218 3900.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.