Santa delivers a 32.5% to 15% tax cut for Working Holiday Makers
The Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016 was passed a few days ago, giving many working holiday makers an early Christmas present – a tax cut from 32.5% to 15%!
If you are an employer impacted by this change please visit the ATO website to get more information and the relevant ATO registration form. With the new tax rate applying from 1 January 2017, it’s important to act quickly to make sure that your payroll team has the tax changes ready to kick-in by the deadline.
The change mostly impacts participants in the Government’s ‘Working Holiday Maker Program’. Thousands of young adults from eligible partner countries take advantage of the program to engage in short-term employment to support themselves while they holiday in Australia. In recent years, this arrangement has become an important part of Australia’s $43.4 billion tourism industry and a key source of labour, particularly in the agriculture, horticulture, tourism and hospitality sectors.
This new Working Holiday Maker legislation includes the following stipulations:
- a tax rate of 15% on the income of the affected sub-class visa holders up to $37,000 and then ordinary marginal tax rates for income exceeding $37,000;
- employers of the affected sub-class visa holders must register with the Australian Taxation Office (ATO), otherwise the working holiday maker will continue to be taxed at 32.5%;
- income earned by the affected employee will be taxed in accordance with the old scales up to and including 31 December 2016 with the current PAYG Payment Summary and TFN Declaration relating to this period; and
- from 1 January 2017 the new tax rates will apply as well as the introduction of a new PAYG Payment Summary and a new TFN Declaration by the end of the 2016-17 financial year.
It is important to note that the definition of a working holiday maker for the purposes of this law is an individual that holds:
- a Subclass 417 (Working Holiday) visa; or
- a Subclass 462 (Work and Holiday) visa; or
- a bridging visa permitting the individual to work in Australia under one of the previous visas mentioned.
Making any change at this time of the year can be hard, so ADP is working with our clients to make the transition as quick and easy as possible.
Written by: Angela Lehmann, ADP, Legislative Manager