Employing Working Holiday Makers

Working Holiday Makers (WHMs) are foreign residents who are working in Australia under one of the following types of visas:

• working holiday makers visa (subclass 417)

• work and holiday makers visa (subclass 462)

• COVID-19 pandemic event 408 visa.

If you employ WHMs, there are some important points you need to remember:

• For Single Touch Payroll (STP) reporting it is mandatory to report the country that issued the passport on which the WHM entered Australia. This informs the ATO if the WHM may qualify for Australian tax residency due to any applicable tax treaties with the WHMs country of origin and therefore if the WHM may be eligible for a tax refund at the end of a financial year. To facilitate this, the relevant country must be selected in the Passport Country field on the Payee Entry > View Candidate Details screen.

• Your business can only withheld tax from payee’s earnings at WHM rates if your business is registered to employ WHM (for more information, see Employer registration for working holiday makers | Australian Taxation Office (ato.gov.au)). If you are not registered to employ WHMs but need to onboard a payee who is working under an applicable WHM visa, the payee should still be configured with a tax status of Working Holiday Maker but the Registered WHM Employer field must be unchecked on the Payee Entry > PAYG Tax Details screen. This will result in the payee being taxed at the foreign resident tax rate (tax scale 3) instead of at WHM rates, which is the ATO’s requirement. This will also allow the correct tax treatment code to be reported to the ATO in Single Touch Payroll reports.

• Irrespective of whether your business is registered to employ WHMs, you cannot withhold tax from WHM’s earnings at WHM rates unless a tax file number (TFN) has been provided. If a TFN is not provided, tax will automatically be withheld at foreign resident no TFN rate (tax scale 4b) instead of at WHM rates, which is the ATO’s requirement.

• WHMs can only be employed as direct employees and not as sole traders/contractors. Therefore, the payee type, as defined in the Payee Type field in the header of the Payee Entry screen must be set to Individual Non Business as opposed to Labour Hire.

• If a payee's visa status changes during a financial year such that they are no longer working under a WHM visa, the payee must be paid under a new Payee record from the start of the period during which the payee is no longer classed as a WHM. This is because the ATO require earnings and tax withholding to be reported separately for the part of the financial year that the payee is classified as a WHM versus the part of the financial during which the payee is no longer classified as a WHM.