Working holiday changes from Jan 2017
Do you employ working holiday makers in your business?
From 1 January 2017, the ATO has enacted changes to apply a 15% flat rate of tax on the first $37,000 of income earned by working holiday makers. The balance of the income will be taxed at the ordinary rates applied to resident tax payers.
The industries that will be the most effected by these changes are the hospitality, tourism and agricultural industries. These industries have lobbied hard to bring the initial 2016 Australian Government budget proposal of 32.5% down to 15%.
The concern the industries had was that working holiday makers would look to other countries with lower rates of withholding to travel to, leaving a skill shortage in Australia. There are also concerns that the changes will lead to more cash in hand work due to the additional burdens placed on employers.
What are my obligations?
As an employer, it would be wise to verify the visa sub-class of each employee to ensure that the correct tax rate is applied. Student visas are not effected by the changes and most students will be deemed tax residents under the general tests.
As an employer of working holiday makers, you are required to register with the Australian Taxation Office ("ATO") to notify them that you employ staff on 417 and 462 visa sub-classes.
If you do not register with the ATO, you will be required to withhold tax at a rate of 32.5% on the first $37,000 of income earned by the working holiday maker.
If a working holiday maker has worked for your business prior to 1 January 2017, a separate PAYG summary should be issued for this period.
For more information please visit the following ATO link or contact Impala Accountants.