Change of Tax Rates for Working Holiday Makers from 1 January 2017

Published: Thursday, 22 December 2016 at 12:00:00 AM

Change of Tax Rates for Working Holiday Makers from 1 January 2017

At the 2016 federal election, the Turnbull government committed to deliver a Working Holiday Maker Reform package.  As part of the reform package, a bill was put before parliament in relation to tax arrangements for working holiday makers which received royal assent on 2 December 2016.

From 1 January 2017 the tax to be withheld from payments has changed for working holiday makers who are working in Australia and hold one of the following visas:

a)      Working holiday makers visa (subclass 417), or

b)     Work and holiday makers visa (subclass 462), or

c)      Bridging visa permitting the individual to work in Australia if:

  1.  the bridging visa was granted under the Migration Act 1958 in relation to an application for a visa of a kind  described in paragraph (a) or (b); and
  2.  the Minister administering that Act is still to make a decision in relation to the application; and
  3.  the most recent visa, other than a bridging visa, granted under that Act to the individual was a visa of a kind described in paragraph (a) or (b).

Working holiday makers will be taxed at 15 per cent on earnings up to $37,000 and they will no longer be entitled to claim the tax free threshold.

Employers of working holiday makers will be required to register with the Australian Taxation Office to be able to withhold tax at the new rates.  Registration with the Australian Taxation Office needs to be made by 31 January 2017.  Employers who do not register will be required to withhold tax at the foreign resident rates.

The Australian Taxation Office is yet to finalise how to report the 2016-17 earnings and tax withheld for working holiday makers paid on either side of the 1 January 2017 change over.  It is expected that an Individual Non-Business PAYG Payment Summary will need to be issued for earnings to 31 December 2016 and another issued for earnings from 1 January 2017.

IT Vision will not be issuing a new tax table patch for this change.

If you are impacted by these changes, please contact the IT Vision Support Team to discuss your options.

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