Holiday worker. Backpacker. Overseas worker. However you define them, if you hire overseas holiday makers, there are tax rules and rates, employer obligations and visa checks you’ll need to get signed off before you hire.
When you hire people from overseas, the process is a little different from hiring Australian citizens and permanent residents. You can hire a non-citizen who already is in Australia with a visa, such as an international student or working holiday visa holder, or you can sponsor a skilled worker who lives overseas for a work visa on a permanent or temporary basis.
If you hire someone who holds the subclass 417 Working Holiday Visa or Subclass 462 Work and Holiday Visa, there are certain employer and tax obligations that apply.
If you plan to hire working holiday makers at the 15% tax rate, you need to register before you make your first payment to them, and also be registered for pay as you go (PAYG) withholding.
When you register, you’ll need to provide your ABN, entity type and contact details. The ATO can issue penalties for failing to register. A tax agent will help you register and guide you through the process.
You can cancel your registration at any time.
You’ll need to confirm that your holiday worker has a valid visa by using the Visa Entitlement Verification Online (VEVO) service. Your tax agent can do this for you and will verify the details of your potential employee.
Once you register, you must withhold 15% from every dollar your working holiday maker earns up to $37,000. The tax rates change for amounts above this. If you haven’t registered, you’ll need to set aside 32.5% tax for income earned up to $90,000 and use the foreign resident tax rates.
Working holiday makers income tax rates for 2018–19
|Taxable income||Tax rate||Value|
|$0 – $37,000||15% on each $1 up to $37,000||0.15|
|$37,001 – $90,000||32.5% on each $1 over $37,000 to $90,000||0.325|
|$90,001 – $180,000||37% on each $1 over $90,000 to $180,000||0.37|
|$180,001 and over||45% on each $1 over $180,000||0.45|
Foreign resident tax rates 2019–20
|Taxable Income||Tax on this income|
|0 – $90,000||32.5c for each $1|
|$90,001 – $180,000||$29,250 plus 37c for each $1 over $90,000|
|$180,001 and over||$62,550 plus 45c for each $1 over $180,000|
You’ll need to pay working holiday-makers their superannuation if they’re eligible and earn $450 or more per calendar month.
The employee can claim that super back less any relevant taxes when they leave Australia by filling out a ‘Departing Australian Superannuation Payment (DASP) form when they leave Australia.
Tax File Number (TFN)
Your holiday worker will need to have their tax File Number. When you complete your Pay-As-You-Go, you’ll need to set aside the correct amount of tax for them. Working holiday-makers can’t claim the tax-free threshold. If they don’t provide their TFN, you’ll need to withhold the top marginal tax rate.