The Governement introduced a package of 4 Bills to implement the ‘backpacker tax’ changes, it announced on 27 September 2016, that will tax working holiday makers in a particular way (most notably by imposing a 19% tax rate from the first dollar of assessable income, up to $37,000, at which point normal resident marginal tax rates will apply).
The affected taxpayers will be individuals holding a Subclass 417 (Working Holiday) visa, a Subclass 462 (Work and Holiday) visa or certain related bridging visas.
[LTN 197, 12/10/16]
The Bills and a short summary of their affect are set out below.
Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016
The bill will amend the Income Tax Rates Act 1986 to apply a 19 per cent income tax rate to assessable income derived by working holiday makers on amounts up to $37,000, with ordinary tax rates applying for taxable income exceeding this amount.
The significance of this that these taxpayers lose the ‘nil’ tax threshold (up to $18,200) which would have been available to them had they been able to become a resident in Australia but they will be spared the 32.5% rate that they would otherwise have to pay as a non-resident from the first dollar up to $87,000 (after which the 37% and then 45% rates apply to all individuals – whether resident or not.
These rates will apply to income derived on or after 1 July 2017 (Sched 3, Part 1, item 8(a)).
Treasury Laws Amendment (Working Holiday Maker Reform) Bill 2016
The Bill will amend the:
- Migration Regulations 1994 to reduce the working holiday maker visa application charge from $440 to $390;
- A New Tax System (Australian Business Number) Act 1999, Income Tax Assessment Act 1997 and Taxation Administration Act 1953 to require employers of working holiday makers to register with the Commissioner of Taxation, enabling them to withhold tax at applicable income tax rates; and
- Taxation Administration Act 1953 to:
- enable the Commissioner to disclose certain information to the Fair Work Ombudsman; and
- require the Commissioner to provide an annual report on working holiday makers, to the Treasurer, for presentation to the Parliament. The report will include statistics and information derived from the working holiday maker employer register.
Superannuation (Departing Australia Superannuation Payments Tax) Amendment Bill 2016
This Bill will amend the Superannuation (Departing Australia Superannuation Payments Tax) Act 2007 to increase the rate of the departing Australia superannuation payments tax to 95 per cent (of the relevant payment to ‘working holiday makers’).
Passenger Movement Charge Amendment Bill 2016
This Bill will amend the Passenger Movement Charge Act 1978 to increase the rate of the passenger movement charge from $55 to $60.
DATE OF EFFECT: The measures in these Bills would generally apply from 1 January 2017. The measures to change certain visa application charges and the passenger movement charge and to increase the rate of the departing Australia superannuation payments tax would generally apply from 1 July 2017.
NOTE that Shadow Treasurer Chris Bowen has announced that Labor will move that this legislative package be referred to the Senate Economics Legislative Committee for a short inquiry to report back in November 2016. He said Labor will finalise its position once it has heard from affected stakeholders and will explore how the Government’s proposed new regime compares globally.
[LTN 199, 14/10/16]