PAYG
Working holiday maker
A working holiday maker is a person on a Working Holiday (417) or Work and Holiday (462) visa, taxed under special rates, whose employer must register with the ATO.
A working holiday maker is a visitor to Australia on a Working Holiday visa (subclass 417) or a Work and Holiday visa (subclass 462). These visas allow young people from eligible countries to holiday in Australia while working for a limited time to fund their travel. The term has a particular meaning for tax, because working holiday makers are subject to a dedicated set of tax rules that differ from those applying to ordinary residents and to other foreign residents.
For most working holiday makers, income earned in Australia is taxed at a special set of rates rather than the normal resident rates, and there is generally no tax-free threshold. The rates, and the income bands to which they apply, are set by legislation and can change, so the current figures should be checked on the ATO website. The ATO also has rules for working holiday makers who are Australian residents for tax purposes, in which case ordinary resident rates may apply, depending on the facts.
Employers who hire working holiday makers need to register with the ATO as a working holiday maker employer before they make the first payment. Registration is free and is done through ATO online services. Without registration, an employer cannot use the working holiday maker withholding rates and may have to withhold at the higher foreign resident rates instead. The employer must also apply the correct tax scale on each payment, based on the details in the worker's TFN declaration.
Super is a separate matter. Working holiday makers are generally entitled to super guarantee contributions from their employers on the same basis as other employees, subject to the usual rules about earnings and employment. When a working holiday maker departs Australia, they may be able to claim their super as a departing Australia superannuation payment, which is taxed at a specific rate. Workers should ask their fund for details and check ato.gov.au for the current rate and rules.
GST does not apply to wages, so there is no direct link between working holiday maker status and GST. However, an employer who hires such workers should record their wages correctly in the payroll system, report them through Single Touch Payroll and include the withheld amounts in the BAS at the W1 and W2 labels. A working holiday maker who earns income through self-employment would need an ABN and would follow the usual GST registration rules based on turnover.
A common mistake is for an employer to treat a backpacker as an ordinary foreign resident, or to ignore the registration requirement altogether. The result is either too much tax being withheld or, worse, a compliance issue with the ATO. Another mistake is to assume that all temporary visa holders have working holiday maker status. It depends on the visa subclass.
This is only general information, so check the current rates and requirements with the ATO or a registered tax professional.
Worked example
A farm owner hires a 25-year-old backpacker on a 417 visa for fruit picking at $1,500 per week. Before the first payday, the owner registers as a working holiday maker employer through ATO online services. Each week the owner applies the working holiday maker withholding scale to the $1,500, pays the net amount to the worker, pays super on top at the rate currently set by law, and reports the payment through Single Touch Payroll.
Practical tips
- Register as a working holiday maker employer with the ATO before the first payment, because the correct withholding rates depend on it.
- Collect a completed TFN declaration from each worker and check the visa subclass, as only 417 and 462 visa holders are working holiday makers.
- Remind workers that super may be claimable when they leave Australia, and that they should check the current rules with their fund or the ATO.