Question:
How do I create a tax scale for the recently introduced “Backpacker Tax”?
Solution:
Create a new PAYG Tax Scale with percentages for the new backpacker levels.
The Issue
In December 2016 the Australian Government finalised the re-categorisation of foreign visitors on working holiday visas (“backpackers”) for PAYG withholding purposes, from parity with “Residents” (Tax Code Tax Free threshold Claimed) to a special category of “Non Residents” (Tax Codes Non Resident and Flat).
From 1 January 2017 visitors on working holiday visas will be subject to the following PAYGW scales for annual incomes of:
· $1 – $37,000 – 15% (“backpacker tax”)
· $37,001 + – 32.5% (normal Non-Resident tax)
Non-Residents who do not possess a “working holiday visa” are subject to the Non-Resident tax rate for all income.
Please note that these levels are subject to change and users should consult with their Accountants on prevailing definitions of non-resident, working holiday visa, rates and thresholds.
Reckon Payroll Premier does not have a specialised backpacker tax scale.
Workaround
Create a 2 new PAYG Tax Scales (flat rates), one to be used for incomes less than $711pw ($37,000pa) and one for incomes above $711 and up to $1673 pw ($87,000).
1. Lists > PAYG Tax Scales > Tax Scales button > New
2. Enter a Last Upate –1/1/2017;
3. Enter a Description – eg: Working Holiday Maker 15%
4. Enter the following in the Thresholds:
(Refer to ATO for exact levels)
Threshold Multiplier Subtract
1 0.1500 0 0000
5. Create a second PAYG Tax Scale named – Working Holiday Maker 32.5% and enter the thresholds (Refer to ATO for exact levels)
Threshold Multiplier Subtract
1 0.3250 0 124.65
(124.65 is the difference in tax on a weekly basis for 711pw (37,000 pa) calculated at 15% and 32.5%)
Ensure you terminate the employee at 31st December 2016 and create a new employee from the 1st of January 2017 with the new tax scale.
