Backpacking around Australia and picking up casual employment has been a very popular way for young people to see Australia. Casual employment, especially in the hospitality sector and in seasonal farm work, has helped many people fund their holiday “down under”.
After considerable political debate, a new tax regime for people working in Australia while on a Working Holiday (417) or Work and Holiday (462) visa was introduced from 1 January 2017.
Previously people on these visas were considered to be temporary residents for Australian Tax Purposes and so were eligible to earn the first $18,200 tax free and then be taxed at 19% on the next $18,800. This meant that many people who worked while on holidays in Australia never paid tax.
From 1 January 2017 a flat tax rate of 15% will apply to the first $37,000 earned by non-residents working in Australia on 417 or 462 visas. Thereafter the ordinary rates will apply.
At the end of each financial year (30 June) a tax return will be required to be lodged and the ATO will work out how much tax should have been paid. If too much tax has been paid the ATO will issue a refund. If not enough tax has been paid, they will send a bill.
From a business perspective
If this is an issue for your business, the ATO deadline has expired for you to register to withhold at the working holiday maker tax rate. If you missed the registration deadline, please contact us. You will need to withhold at the foreign resident rate of 32.5%. If you already have “backpackers” working for you, you may have to issue two payment summaries with different rates.