Employer Insights

Backtrack on Backpacker Tax

Manda MillingPosted by Manda
min read

The Australian Federal Treasurer, Scott Morrison, announced on 27 September 2016, that the Australian government would scrap the proposed 32.5% flat tax rate on income earned by foreign working-holidaymakers in Australia. The new measures follow a deal negotiated through the National Party leader, Barnaby Joyce, and has been overwhelmingly welcomed by regional Australian stakeholders who rely heavily on itinerant and seasonal workers under the Working Holiday Visa (WHV) program. 

The Federal government offered further incentive by: funding a $10 million advertising campaign targeting overseas workers, reducing the visa application charge by $50 (to $390), and allowing WHV holders to work for up to 12 months with the same employer in certain circumstances. The Treasurer indicated that the negotiated deal would be funded by changes to the Departing Australia Superannuation Payment (DASP) scheme, and a wholesale increase to Departure tax under the Passenger Movement Charge Collection Act 1978. 

A comprehensive summary of the proposed changes is as follows: 

1. WHV holders to be taxed a flat 19 per cent on earnings up to $37,000 (and ordinary tax brackets thereafter) from 1 January 2017; 

2. Employers of working-holidaymakers will need to register with the Australian Taxation Office (ATO) in order to withhold at the 19% tax rate, otherwise withholding must be at 32.5% (although the difference may be claimed back by the visa holder through the tax system); 

3. Reduction of the WHV application charge from $440 to $390 from 1 July 2017; 

4. Employers with premises in different regions can employ a WHV holder for up to 12 months, (i.e. up to six months in each region); 

5. Federal government to provide additional $10 million to Tourism Australia to support a global youth-targeted advertising campaign; 6. Additional $10 million in government funding to the ATO and the Fair Work Ombudsman to establish an employer register, and assist with compliance and anti-exploitation programs; 

7. A universal $5 Increase (to $60) to the Passenger Movement Charge paid by persons departing Australia from 1 July 2017; and, 

8. An increase in the rate of tax on the Departing Australia Superannuation Payment (DASP) for working holiday makers to 95 per cent, effective 1 July 2017. Bipartisan support for the new measures will be necessary in the current Federal Government parliamentary sitting, if the first tranche of changes are to be implemented by calendar year 2017. Stay tuned for any further developments….