AccountRight Plus, Premier and Enterprise, Australia only
From 1 January 2017, a new tax was introduced for working holiday makers who are in Australia on a 417 or 462 visa. This is sometimes referred to as the 'backpacker tax'.
Here's Oi Yee, one of our AccountRight experts, explaining the ins and outs of this new tax.
To assign the new tax tables to working holiday makers:
- Load the tax tables: After installing AccountRight v19.14, go to the Setup menu and choose Load Tax Tables.
- Assign the new tax tables: In the working holiday maker’s card, select the Working Holiday Maker tax table, or if no tax file number has been provided by the employee, select No Tax File Number Working Holiday Maker.
Assigning one of these new tax tables ensures:
- the correct tax is withheld from the employee’s pay, and
- the Gross Wages field on their payment summary will show the H income code.
After starting your 2018 payroll year
Once you've closed your 2017 payroll year and before procesing pays in July, you'll need to load the tax tables again (Setup menu > Load Tax Tables).
To check that the correct tax tables are loaded, go the Setup menu > General Payroll Information. The Tax Table Revision Date should be 01/07/2017.
If you employed a working holiday maker before and after 1 January 2017, the ATO requires you to issue them two payment summaries for this financial year.
- One payment summary will cover the period 1/07/2016-31/12/2016, and the Gross Wages field will show the S income code beside it.
- The other payment summary will cover the period 1/01/2017-30/06/2017, and the Gross Wages field will show the H income code.
For AccountRight to issue two payment summaries for an employee with the applicable income code for gross wages, you would have set up a second employee card in January 2017 before the first pay run of the year.
- One employee card will be for the period 1/07/2016-31/12/2016. This card requires the applicable tax table assigned to their card, based on the employee’s Tax File Number declaration.
- The other employee card will be for 1 January 2017 onwards. This card requires the applicable Working Holiday Maker tax table assigned (available in AccountRight v19.14 and later).
With the two cards set up, you can use AccountRight v19.14 to prepare your payment summaries.
You might need expert help
If you've paid working holiday makers from 1 January 2017 and any of the following apply to you, you'll need to speak to your accounting or tax advisor about the implications for your business:
- You weren't aware of the new working holiday maker tax.
- You paid a working holiday maker between July - December 2016 and you haven't set up a second employee card for them.
- You're not sure if you've withheld the right amount of tax from working holiday makers.
If you don't register for the working holiday maker tax, you'll need to use the applicable Foreign Resident tax table for working holiday makers. If you're not sure which tax table to use, check with the ATO.
If you withhold 15% for working holiday makers without registering, you may be penalised by the ATO.
You must withhold 47% from payments to working holiday makers if:
- They have not provided you with their tax file number (TFN),
- have not claimed an exemption from quoting their TFN, or
- have not advised that they have applied for a TFN.