Backpacker Tax – New rules for temporary working holiday makers and their employers

New legislation has been introduced to change the tax rates for temporary working holiday makers, more commonly known as the backpacker tax. Employees who hold either the Working Holiday Visa (subclass 417)  or the Work and Holiday Visa (subclass 462) are classified as working holiday makers.

From 1 January 2017, working holiday makers will be taxed at 15 cents for every dollar earned up to $37,000. Tax rates on income after this amount are as per Australian tax residents.

Furthermore, from 1 July 2017, working holiday makers will have their Departing Australia Superannuation Payment taxed at 65% (previously 38%).

 So what steps do employers of working holiday makers need to take?

• Register online with the Australian Taxation Office by 31 January 2017. This will allow employers to withhold tax on the income of working holiday makers at the new rate of 15%. Employers who do not register will be required to withhold tax at a rate of 32.5% and may be penalised. Please click here to get registered
• Use the online tool Visa Entitlement Verification Online (VEVO) to check their employee’s visa status. Click here to access the tool
• Two 2017 payment summaries must be issued for working holiday makers due to the change in tax rates occurring mid-financial-year. One for the period 1 July 2016 to 31 December 2016 and the other for the period 1 January 2017 to 30 June 2017.

Please do not hesitate to contact our office should you require assistance with the above process.

Posted 27.1.17

The information we are providing to you is purely factual in nature and does not take into account all of your personal objectives, situations or needs.  The information is objectively ascertainable and, therefore, does not constitute as financial product advice.  If you require personal advice you should consult an appropriately licenced person or authorised financial advisor, such as HQB Financial Solutions Pty Ltd.