Working Holiday Maker Witholding Reforms
On 2 December 2016 the government introduced changes to the taxation of working holiday makers (WHMS).
What does this mean for you and your business?
If you employ individuals living in Australia on Working Holiday visa 417 or Working and Holiday visa 462 then these changes are going to affect you. Employers of Working Holiday Makers that withhold tax from the Working Holiday Maker’s salary are required to register with the commissioner by the time they are first required to withhold any amount from that employee. Therefore, if you’re thinking of employing someone on a Working Holiday visa, then you are required to register with the ATO before employing them. If you already have Working Holiday Makers employed within your business, then you would have been required to be registered by 31 January 2017 to avoid being penalised.
How do I register to ensure that I am not penalised?
Firstly, it must be noted that you need to be registered for Pay As You Go Withholding (PAYGW) and have an Australian Business Number (ABN). The next step is to add Working Holiday Maker Withholding to you current PAGYW registration. To do so the ATO provide an online registration tool which can be found here.
What do I do once I’m registered?
Once registered, you will be required to apply a 15 percent withholding rate to the first $37,000 of a working Holiday Maker's Income. Income greater than $37,001 will attract normal foreign resident withholding rates.
If you fail to register, then you will be required to apply a 32.5% withholding rate to the first $37,000 of the Working Holiday Makers income. Income greater than $37,001 with attract normal foreign resident withholding rates. It’s important to note that failing to register will result in penalties.
The ATO makes available tax tables and instructions for your reference to calculate withholding amounts. The tax tables and instructions can be found at here.
If you require further information or assistance with the registration process, please do not hesitate to contact us at Matthews Steer Accountants & Advisors on (03) 9325 6300.