Employing working holiday makers

With international students and tourism set to resume (fingers crossed!), employers will once again be able to draw on a pool of ready workers. With so many industries facing critical shortages of staff – this is going to be very important for a lot of employers.

This has been in the news too – due to a recent decision by the High Court in the matter of Addy v Commissioner of Taxation. So what do employers need to know and do?

In a word – nothing.

The court case does mean some changes but employers don’t need to do anything about it. You still need to withhold 15% of their pay for the taxman. UNLESS, you receive a pay as you go variation notice from the ATO.

So what is Addy v Commissioner of Taxation?

If a working holiday maker meets the conditions below – they may get taxed at exactly the same rate as any Australian citizen – rather than at 15%. All the employee needs to do is to lodge a tax return for the relevant year.

You can read more about it HERE: Employers of working holiday makers.

To meet the criteria for this they need to satisfy two conditions.

1. They have to have a working holiday visa.

2. They need to meet the bar to be considered an Australian resident for tax purposes.

This means they have to pass the so called “resides test”. In other words that your work and living arrangements show that you intend to make Australia your home. They also have to have been in Australia for more than 183 days and can prove that they intend to be here permanently or at least over the long term.

You can read more about his HERE: Are you an Australian resident if you come for a working holiday or visit?

3. But they also have to be from from either Chile, Finland, Germany (for 2018 and later income years), Israel (for 2021 and later income years), Japan, Norway, Turkey or United Kingdom.

I won’t bother going into all the reasons for this. But basically, Australia has tax treaties with some nations about tax jurisdictions. It’s designed to avoid people getting taxed twice over the same income. The High Court decided that because Australia has non-discrimination article in the particular tax treaties we have with these particular nations – then the tax was discriminatory for some working holiday makers from those nations.

You can read more about this HERE: Taxation of Australian resident WHMs from NDA countries.

So what does the employer have to do?

First off – you need to register as an employer of working holiday makers (there is information on this on the “Employers of working holiday makers” mentioned above).

Make sure you do this because penalties may apply if you employ someone with a visa subclass 417 or 462, but don’t register as an employer of WHMs.

You can check out the visa status yourself HERE: Check visa details and conditions.

Then you need to find out the relevant tax tables (for all payments) for working holiday makers. Which you can find HERE: Schedule 15 – Tax table for working holiday makers.

The Australian Tax Office will let you know if the employee is eligible for a lesser tax rate by issuing a PAYG variation notice to you.

Your new employee will have to submit a tax file number declaration form to you. Part of the form asks them if they are WHM. They can get this form HERE: Tax file number declaration.

Keep in mind that working holiday makers are treated exactly the same as everybody else with regards to superannuation. If they leave Australia they can claim back the super that has been paid into a super fund on their behalf by completing a Departing Australia superannuation payment (DASP) form when they leave Australia.

They can find out information about his HERE: Departing Australia superannuation payment.

If your employee would like some information about working holiday makers – direct them to HERE: Working holiday makers.

Also HERE: Taxation of Australian resident WHMs from NDA countries.

If you have any questions about all of this – give us a call on 1300 268 800!