Changing/Correcting Working Holiday Maker tax details
A working holiday maker (WHM) is a foreign resident working in Australia on a Visa subclass 417 (Working Holiday) or 462 (Work and Holiday) only. As an employer, you need to register with the ATO to pay WHMs, if you do not, your employee will be taxed at a higher rate. Once registered, you will need to let CloudPayroll know by going to Setup > Organisation > Defaults, tick the Registered for Working Holiday Makers tick box, and save the page. If you have not registered to pay WHMs and do not tick this box, the employee will be taxed at higher rates. For more information on the Working Holiday Maker program, please click here.
If you have been paying a WHM under incorrect tax rates, this correction needs to be completed as follows as Working Holiday Makers are taxed at a different rate to a Australian Resident or Foreign Resident. The employees tax details must be updated and the Single Touch Payroll (STP) reporting corrected.
Changing from Australian/Foreign Resident to Working Holiday Maker (WHM), or WHM to an Australian/Foreign Resident
Note: If you are
registered for Working Holidays Makers, please see above to ensure you have noted this in CloudPayroll.
- Create a new employee profile in CloudPayroll by going to People > View > click on the current employee > Termination Pay > Reinstate Person > Create new employment record. Note: This will duplicate the employees current profile, you will need to make sure to update their tax details in their new profile.
- Take note of the leave balances in the incorrect employee profile. This is important as the leave balances will be deleted once the employee is terminated in the next step.
- If this correction spans over multiple financial years, you will need to enter one payroll per financial year.
- Open a one-off payroll and add both the new profile and the old one in.
- Terminate the incorrect employees profile, it will ask for for the last working day and the termination reason. The termination reason will be Change of Tax Treatment. Leave adjustments will automatically pull through to the timesheet, zeroing them out, we recommend deleting them as the following correction will change them..
- Reverse all earnings paid so far by entering a negative against pay element paid, this needs to be done for every payment type the employee has received (leave, overtime, allowances, penalties).. For example, 200 hours of T1 has been paid in this incorrect profile, you would enter -200 hours to reverse this out. Note: If the employee has had a rate change within this time frame, ensure you reverse out the correct hours against the applicable pay rate.
- To ensure everything has been reversed out correctly, go to People > View > click on the current employee > Pay History > Tax History. Check the dates at top of the page are correct (over one financial year), the total at the bottom should all equal zero (for taxable, non-taxable, super and PAYG).
- In their new and correct profile, enter their hours in, as reversed in the correct profile.
- Ensure the amount of super being reversed in the incorrect profile, has been entered in the correct profile (the 2 super figures should cancel each other out). If CloudPayroll manage your super, you will need to contact us to make sure the super in the new profile is not paid.
- For both profiles, you will need to override the PAYG. The incorrect profile will have a negative amount of the total super paid so far, for example -$2,145, the correct profile will have the same amount, but as a positive $2,145. Any tax due to the employee will need to either be processed in the next payroll, or the employee can manage it when they do their tax return.
- If this is for a prior financial year, please contact CloudPayroll to back date this payroll and confirm it on your behalf.
- The last step will be to transfer the leave balances over to the new employment record. To do this, take the balances from step 2 and go to People > View People > employees new profile > Leave > Opening Balances > and click Add to add the employees leave balances back in.
An example of this correction in the payroll, is as follows. In this instance, it was only the last fortnightly payroll that had been processed incorrectly, and the employee was due a tax refund which was paid to the employee during this correction process. It is always good to be careful when it comes to the PAYG, but if the employee is due a refund, you can process it during the correction (ensuring its paid to the employee once the payroll has been confirmed). Otherwise everything else in the amount column should cancel each other out when comparing the incorrect profile, and the correct profile.
Changing from Working Holiday Maker to Australian Resident for tax purposes
Note: These steps are for when an employee becomes an Australian resident, and their prior earnings reported as a WHM are correct.
- Create a new employee profile in CloudPayroll by going to People > View > click on the current employee > Termination Pay > Reinstate person > Create new employment record. Note: This will duplicate the employees current profile, you will need to make sure to update their tax details in their new profile.
- Take note of the WHMs leave balances. This is important as the leave balances will be deleted once the employee is terminated.
- Terminate the WHM profile in either your next payroll, or in a one-off. Enter their termination date (last working date as a WHM) and termination reason (Change of Tax Treatment).
- Transfer the leave balances over to the new employment record. To do this, take the balances from step 2 and go to People > View People > employees new profile > Leave > Opening Balances > and click Add to add the employees leave balances back in.
Moving forward, you will pay the employee via the new employee profile, with the updated tax details.
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