Backpacker tax: Government backs down. The Federal Government has responded to pressure and dropped its plan to introduce a 32.5% tax on backpacker workers. Instead, working holidaymakers will be taxed at a lower rate of 19%, starting January 1, 2017. They will still be charged from the first dollar earned.
Under the original $540 million proposal in the May 2015 budget, non-residents with working visas such as working holidaymakers were going to be subjected to a 32.5 cent in the dollar tax rate between income levels of zero and $80,000 from January 1.
This compared with a zero tax rate between $0 and $18,200 for residents, 19 cents for income between $18,201 and $37,000 and ordinary marginal rates above that.
The government had expected to recoup $500 million from the higher tax rate. It will now increase the passenger levy by $5 to cover the change. The passenger levy – or passenger movement charge – is currently $55 and will therefore increase to $60. The new rate will apply from July 1, 2017. The government will also increase the tax on working holiday makers’ superannuation payments when they leave Australia to 95%.
The government will also reduce the visa application charge for working holiday makers by $50 to $390. It will also be making some changes to the 417/462 visas to improve the supply of working holiday makers and to improve its attractiveness, as a visa, for people to come on holiday to Australia. This will include two things – the first is to extend the age of eligibility from 30 to 35, and to change the same employer test to say that someone can work for the same employer for 12 months, but no more than six months in the one location.
The tourism sector will get a boost to market jobs to backpackers, with $10 million promised to Tourism Australia to promote the nation to potential working holiday makers. And it is understood legislation will be required to enact the new tax arrangements, therefore the changes still require passage through Parliament.
To generate more accurate data and boost integrity of the scheme by preventing exploitation of working holiday makers, their employers will be required to undertake a once-off registration with the ATO. Employers who do not register will be required to withhold tax at the 32.5% rate. Working holiday makers will be made aware of registered employers via the publication of a list on the ABN Lookup.
Member, Lindisfarne, Tasmania, writes:
Backpacker tax: What an administrative disaster, changing the rate of tax during a tax year.
Farmers will have to issue a Payment Summary for work done up to 31 December 2016, taxed at one rate and a separate one taxed at a higher rate. The ATO will have to write hundreds of lines of code to handle that subtle difference. The Personal tax return will have to be redesigned to capture the dates.
All tax return software writers will have to write hundreds of lines of code… All payroll bureaux ditto.
Tax agents will have longer interview times.