Set up tax for working holiday makers and backpackers

If you employ working holiday makers, you'll need to split out their employment record to include working holiday maker's tax (also known as backpacker tax) in their employment record from 1 January 2017.

Enter a new employee record with an updated status

Add a working holiday maker into Xero using the add the employee process. When you are filling out the details under the Taxes tab, Under Residency Status, select Working Holiday Maker. Then click Save Only.

Setting Residency Status means the higher tax rate will apply for the first pay run where the employee's earnings have exceeded $37000. This means the first pay period where earnings pass $37000 still calculate at 15%, but the next pay run the employee is included in will apply the higher rate.

If your employee has a Working Holiday Maker status, their payment summary will display their income status type as 'H'. Payment summaries for other employee types will display as 'S'.

You can now post a pay run for the employee.

Working Holiday Makers active prior to 31 December 2016

  • If you employ a working holiday maker, you must report their earnings on separate payment summaries before and after 1 January 2017. You'll also need to register as working holiday maker employer (ATO website).
  • To separate payment summaries for a working holiday maker, use the terminate process in Xero to complete their employee record up to 31 December 2016. Then add the employee back into Xero with an updated status as a working holiday maker from 1 January 2017.
  • You may need to process a tax adjustment for these employees to accurately set their withholding variation.