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From 1 January 2017, tax rates changed for working holiday makers (WHM) who are in Australia on a 417 or 462 visa. This is sometimes referred to as the 'backpacker tax'.
If you’ve registered with the ATO to employ working holiday makers, Essentials has a new tax table you can assign to these workers - Working holiday maker (visa subclasses 417 or 462). Learn about how to manage your employees' tax details.
Assigning this new tax table 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.
If you’ve registered with the ATO and have been correctly taxing your working holiday makers using a withholding variation, you can uncheck the Approved withholding variation box after you assign the Working holiday maker (visa subclasses 417 or 462) tax table. This will ensure your working holiday maker is correctly taxed in future pay runs.
What if a working holiday maker started work prior to 1 January 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 01/07/2016 - 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 Essentials to issue two payment summaries for a working holiday maker, they'll need two employee profiles.
- One employee profile will be for the period 1/07/2016-31/12/2016. This profile requires the applicable tax table based on the employee’s Tax File Number declaration.
- The other employee profile will be for 1 January 2017 onwards. This profile requires the table Working Holiday Maker (visa subclasses 417 or 462) assigned.
With those two employee profiles set up, you can use Essentials 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 profile for them.
- You're not sure if you've withheld the right amount of tax from working holiday makers.
What happens if I don't register for the working holiday maker tax?
If you don't register as an employer of working holiday makers, 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.
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.