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Backpackers Tax: Businesses need to register if they have any 417 or 462 workers

By 20 December 2016No Comments

Last month, Pendragon reported on the ‘Working Holiday Rip Off’, with people working on a 417 ‘Working Holiday Visa’ and a 462 ‘Work and Holiday Visa’ encountering what has been dubbed the ‘backpacker tax’.

shutterstock_408104194From the 1st of January 2017, any working holiday makers will be prevented from accessing the AUD$18 200 tax-free threshold, which is available to Australian citizens, permanent residents and even persons working under a skilled work visa, such as a 457. Originally, the ‘backpacker tax’ would have seen those on a working holiday visa paying 32.5% tax, however this has since been reduced to 15%. Therefore, 15% of every dollar which is earned by a person on a 417 or 462 visa will be tax, up until AUD$37000, from which point foreign resident tax rates of 32.5% will apply.

In a bulletin for small business owners, the ATO has informed companies employing those on working holiday visas need to register with the ATO before January 31st in order to withhold the tax at the backpacker rate. However, for companies which fail to register, the tax will be withheld at the rate of 32.5% for each employee on a working holiday visa, with further penalties for the companies likely to apply.

For businesses which employ working holiday makers, two separate payment summaries will need to be issued, each reflecting the different rates, with the first issued for the period until December 31st, 2016 and the second for any period from January 1st 2017.

Further, from July 1st 2017, departing Australia superannuation payments which are made to those who worked under a 417 or a 462 Visa will be taxed at 65%. If a working holiday maker has left Australia, and their visa is cancelled or expired, and they make an application for departing Australia superannuation payments prior to July 1st, they will only be taxed at the current rate of 38%. This super contribution is the biggest rip off to those on the 417 and 462 visa, as it’s essentially just a tax which is going straight to the government.

Confused??? If you are in the white collar industry in particularly ITC, Marketing, Engineering you may want to look at outsourcing the payroll for the 417 and 462 visa holders or even look at the options to move the 417 and 462 workers over to 457 visas to make life easier…

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Purnima Kabra