Summary

From 1 January 2017, working holiday makers in Australia are to be taxed under certain tax rules based on the amount of income previously earned in a tax year as a working holiday maker. These new taxation rules are subject to employer registration with the Australian Tax Office.

PayGlobal has added a new tax rate code (W - Working holiday maker), in order to be able to tax these employees correctly.

Working Holiday Maker Definition

A working holiday maker is an individual holding one of the following temporary visas:

• subclass 417 (Working Holiday) visa; or
• subclass 462 (Work and Holiday) visa; or
• under certain circumstances, a bridging visa permitting the individual to work in Australia

Classification of an employee as Working Holiday Maker for taxation purposes

The following processes are to be followed in order to correctly tax an employee as a working holiday maker:

1. Ensure that the correct working holiday maker visa is entered into the Visas form. A working holiday maker visa is identified by its subtype, which must be "Working holiday maker".
2. On the employee form, employee visa grid, attach the applicable visa to the employee with the correct effective start and end dates.

   Important: These dates are important for determining the working holiday maker earnings when calculating the percentage rate to tax during Process Pay.

3. Change the employee's tax rate code to W - Working holiday maker.

Determining the Gross Earnings as a Working Holiday Maker during Process Pay

The gross income previously earned as a working holiday maker is necessary to calculate the previous earnings for a working holiday maker in order for PayGlobal to choose the correct percentage tax rate for this type of employee during Process Pay.

This gross income could come from two sources :

1. Previous income from current employer - any closed pay gross earnings the payment date of which falls within the effective start and end dates of a working holiday maker visa attached to the employee.
2. Previous income from other employers - the ATO has mandated that this income must be ignored for the purposes of calculating the percentage tax rate. Employers only have an obligation to withhold based on their own year-to-date payments made to the working holiday maker. These employees can apply for an upwards withholding variation with any of their employers, to withhold additional amounts to help them cover their end of year tax liability.

Changing to a Working Holiday Maker Tax Rate Code

Ensure that the employee has a working holiday maker visa, the effective dates of which cover the current date and any pays that will be processed under this tax rate code. Failing to do this will prevent the employee record from being saved. See Employee Visas - Details.

Change the tax rate code to W - Working holiday maker.

Save the employee record.

Changing a Working Holiday Maker to another Tax Rate Code

Simply change the tax rate code on the employee form, tax tab.