Employers given extended deadline to administer new backpacker tax rates

The ATO hosted a teleconference with a peak representative body for the horticultural industry in early January to provide guidance on administering the new “backpacker” tax regime, which is effective from January 1. Employers given extended deadline to administer new backpacker tax rates

Information subsequently distributed to the representative body’s membership included that employers who are currently employing working holiday makers (those on a 417, 462 or bridging visa) will need to issue two payment summaries (with different rates) for the 2016-17 income year — one for the period July 1 to December 31, 2016, and a second for the period January 1 to June 30, 2017.

Advice provided to employers in the horticultural sector was that they may need to “terminate” their backpacker workforce on their payroll system and reinstate them under a new record — adding that some payroll software may require that the new tax rate will have to be applied as a manual override of the default tax rate.

The warning for employers in effectively administering the new backpacker tax requirements is that issues may arise regarding the annual summary provided to the ATO, and that a prudent step may be to seek the advice of their payroll software provider.

Employers are required to withhold at a rate of 15% up to $37,000, and beyond this the foreign resident tax rate applies. They are also required to be registered with the ATO (register here) by the now-extended deadline of January 31 to be able to withhold at the working holiday maker rate. However, those growers who won’t have working holiday workers until later in the year can register their business then.

When an employer registers, they will not receive acknowledgement as yet, but the ATO said that it will eventually include this information in the business entity’s profile. In the meantime, employers can telephone the ATO to confirm registration if necessary (or indeed take a screenshot of the transaction, just for the records).

Employers who cannot register online due to remoteness connectivity issues are advised that they can register with the ATO by calling 13 28 66.

Regarding new employees, the advice from the ATO to agricultural businesses is that when employees apply for a TFN they will receive a note from the ATO that, where applicable, they are a working holiday maker and will be advised to inform their employer.

The ATO further informed the employer group that the PAYG summary form issued to employees will eventually display an “Indicator H” to show that the employee is a working holiday maker.

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