From January 1, 2017, a new lower tax rate will apply to working holiday visa holders in Australia. Here we take a look at the potential implications for Australian businesses.
The New Rules for Working Holiday Makers
Since the 2015-16 budget, working holiday makers (WHMs) have had to pay tax of 32.5 percent on every dollar they earn. Following these changes, applications for working visas dropped to their lowest levels for five years, so the government has opted to reduce the amount of tax WHMs will have to pay.
From January 1, 2017, working holiday visa holders will have to pay tax of 19 percent on earnings of up to $37,000. Ordinary marginal tax rates will apply to earnings over this amount.
The application charge for working holiday visas will also be reduced from $440 to $390.
When a WHM leaves Australia, the tax on their superannuation payments will rise to 95 percent, to make sure superannuation is being used for its intended purpose of supporting Australian citizens in retirement.
The Passenger Movement Charge will increase by $5 from July 1, 2017.
New Requirements for Your Business
From January 1, 2017, all businesses wanting to employ WHMs will have to register with the Australian Tax Office. Only one registration per employer is required; you do not have to register for each WHM you employ. Businesses wishing to register will have to prove that they:
- Have a genuine business need to employ WHMs
- Agree to comply with the Fair Work Act 2009
- Will check that the correct working visas are held by all WHMs they employ.
Businesses who fail to register and still employ WHMs could be penalised $3,600 by the ATO. They will also have to withhold tax for WHMs at the current rate of 32.5 percent.
A list of registered employers will be published on the ABN Lookup, so working holiday visa holders will be able to see which employers can offer them the lower tax rate.
Which Businesses Will Be Affected?
WHMs are predominantly employed in the agriculture, tourism, hospitality and construction industries in Australia. There are around 145,000 WHMs in the country at any one time, taking on seasonal and temporary jobs that are not being filled by Australian workers.
Businesses in these industries have raised concerns that even at the new lower rate, WHMs are being charged more tax in Australia than in some other countries, making Australia a less attractive choice for working holidays. If levels of WHMs fall, it could affect harvests in rural areas and have a negative impact on regional economies.
Businesses with premises in more than one region will benefit from greater flexibility under the new rules, as it will now be possible to employ WHMs for 12 months continuously, provided they only spend up to six months working in each region.
Other Potential Changes
There may be an influx of more experienced workers as the government is planning to raise the age limit for working holiday visas from 30 to 35.
While most employers of WHMs see the new rules as a fair compromise, some have expressed concerns that the new registration requirements and having to pay superannuation to WHMs will cause additional workloads and administration costs to businesses employing working holiday visa holders.