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From 1 January 2017, tax rates will change for working holiday makers who are in Australia on a 417 or 462 visa (the 'backpacker tax').

Under this new tax scale, you should withhold 15% from every dollar earned by a working holiday maker up to $37,000 with foreign resident tax rates applying from $37,001. See the ATO for more details.

Registering with the ATO

You must register by 31 January 2017 to use this rate and avoid penalties. As long as you register in time, you can still use the new withholding tax rate of 15% from January 2017. Register from the ATO website

How to withhold the working holiday maker tax

You can use the Approved withholding variation function in MYOB Essentials to withhold the correct percentage.

Setting a withholding variation
  1. Go to the Employees screen (Payroll > Employees) and click the name of a working holiday maker.
  2. Go to the Tax tab.
  3. Check the box for Approved withholding variation, and enter the correct percentage to withhold (i.e., 15% for working holiday makers earning $0-37,000).
  4. Click Save.

 Repeat these steps for each working holiday maker you employ. When you're finished, you're ready to do a payrun.

Important: Until MYOB Essentials' tax tables are updated, you should manually record your working holiday makers' gross earnings to see when they cross the $37,000 threshold. After crossing $37,000, foreign resident tax rates apply.

  FAQs


What happens if I don't register for the working holiday maker tax?

If you don't register for the working holiday maker tax, you must withhold the foreign resident tax rate of 32.5% for working holiday makers. Follow the steps in Setting a withholding variation to set this rate.

If you withhold 15% for working holiday makers without registering, you may be penalised by the ATO.

How do I handle payment summaries if I already employ working holiday makers in 2016?

If you already employ working holiday makers in 2016 who will be paid with the new tax rate in 2017, you need to issue two payment summaries with different rates:

  • July 1 - December 31 2016
  • January 1 - June 30 2017 
What if a working holiday maker hasn't provided their tax file number (TFN)?

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.
 
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