Working holiday makers are temporary visitors to Australia who hold a Working Holiday visa (subclass 417) or Work and Holiday visa (subclass 462).
A special tax rate applies when you employ a working holiday maker – this is sometimes referred to as the ‘backpacker tax’. However, working holiday makers are entitled to the same superannuation benefits as other employees.
To employ a working holiday maker in Australia on a visa subclass 417 or 462, you must:
- register with us as an employer of working holiday makers to withhold tax at the working holiday maker tax rate, before making your first payment to them
- check your worker’s visa status using the Visa Entitlement Verification OnlineExternal Link service.
Penalties may apply if you fail to register.
You should not employ, or pay someone for work, if they don’t have permission to work in Australia.
On this page:
- Employer registration for working holiday makers
- Working holiday makers – International tax for individuals
- Am I entitled to super?
- Super information for temporary residents leaving Australia
The Tax file number declarationform asks workers to declare if they’re a working holiday maker, Australian resident, or foreign resident for tax purposes.
You should apply PAYG withholding tax according to how your employees complete their declaration form.
If a worker identifies themselves as an Australian resident for tax purposes, but our records indicate they’re a working holiday maker, we’ll notify both the employer and worker of their working holiday maker status and advise the employer to apply the relevant tax rate.
- Registered employers
- Unregistered employers
- Employing working holiday makers as contractors
- Payment summaries
If you’re registered with us as an employer of working holiday makers, you should apply the working holiday maker tax rate of 15% from the first dollar your working holiday maker earns up to $37,000. The tax rates change for amounts above this.
Use the tax table for working holiday makers to calculate the tax on all payments made to working holiday makers, including:
- salary and wages
- termination payments
- unused leave
- back payments, commissions, bonuses and similar payments
- payments to actors and entertainers.
Working holiday makers can’t claim the tax-free threshold and must provide their tax file number (TFN). If they don’t, you need to withhold tax at the top rate (see Individual income tax rates).
If you’re not registered with us as an employer of working holiday makers, you must withhold tax at 32.5% from every dollar earned up to $90,000. For income over $90,000 you need to apply foreign resident withholding rates.
Penalties may apply if you employ someone with a visa subclass 417 or 462 but don’t register as an employer of working holiday makers.
Working holiday makers are entitled to superannuation. If they’re eligible and paid $450 or more before tax in a calendar month, the employer has to pay super on top of their wages. Working holiday makers can apply to have this super paid back to them (after it’s taxed) as a Departing Australia superannuation payment (DASP) when they leave Australia.
Make sure you understand the differences between employees and contractors for tax and super purposes. Penalties and charges could apply if you incorrectly treat an employee as a contractor.
If your arrangement with your working holiday maker means they’re an employee, you must tax your employees using the working holiday maker tax rate even if they provide you with an ABN.
Unless you report using Single Touch Payroll, you are required to give a payment summary to every working holiday maker you employ.
All payments to a working holiday maker must be shown in the gross income section of the payment summary and identified using H in the gross payment type box.
If your payment summary doesn’t have this box, then put the letter H next to the income earned by the working holiday maker. This is to help your worker to prepare their income tax return.
If an employee, who has been a working holiday maker, advises you they are no longer on a working holiday visa, you need to withhold tax at a different rate and provide two payment summaries for the financial year:
- one payment summary while they worked using visa subclass 417 or 462
- one payment summary for the period they were not.
Please ensure the employment dates that you put on the payment summary are accurate.
This decision relates to whether a working holiday maker was required to pay tax at the minimum 15% tax rate applying to working holiday maker income or at the rates that otherwise apply more generally to Australian residents (which incorporate the tax-free threshold).
On 26 November 2019 we appealed to the Full Federal Court against the Federal Court’s decision in the matter of Addy v Commissioner of TaxationExternal Link. The decision only potentially impacts working holiday makers who are a resident of Australia for tax purposes and are from Chile, Finland, Germany, Japan, Norway, Turkey, and United Kingdom.
What does this mean?
Your obligations when hiring working holiday makers have not changed.
You should continue to apply the working holiday maker tax rate to workers who tick the box on the Tax file number declaration form stating they are a working holiday maker.
If your employees question you in regard to the taxation of their payments in response to the Addy v Commissioner of Taxation decision you should refer them to our website (ato.gov.au/WHM) for updates on the appeal and how this decision may affect them.
- Are you an Australian resident for tax purposes if you come for a working holiday or visit? – Information for your workers
What you need to do as an employer of working holiday makers (backpackers) holding a Working Holiday visa (subclass 417) or Work and Holiday visa (subclass 462).