Private ruling: Registration and taxation of au pair
Date of advice: 8 June 2018
Published: September 2018
Ruling period: Year ended 30 June 2018 | Year ended 30 June 2019 | Year ended 30 June 2020 | Year ended 30 June 2021 | Year ended 30 June 2022
Date scheme commenced: 1 May 2018

Ruling: Q1: Are you required to register as an employer of a working holiday maker and withhold 15% tax on pocket money paid to a live in au pair? | A1: No

Relevant facts and circumstances: You are intending to host an au pair. You intend to invite the au pair to stay with you to experience the Australian culture and lifestyle. You intend that the au pair will share your home and the intimacy of your family life. There are no Agencies or external parties involved in finding the au pair. There are no legal or employment contracts. The placement of the au pair is not a vocational placement. You are seeking an individual from overseas as you see benefit to your children’s education to interact with a person from another culture. The au pair will be able to travel within Australia, practise English, explore and participate in activities that would broaden their experience in Australia. The au pair will contribute to household duties, including helping with child minding and light household chores. You have one child aged X and one due late 2018. You and your spouse are employed. Your spouse spends 95% of their time in the home as they study. A small amount of pocket money will be paid to the au pair to assist with their personal outings and travel expenses. You expect this arrangement to be an ongoing one.

Relevant legislative provisions: Income Tax Rates Act 1986 Section 3A | Income Tax Assessment Act 1997 Section 6-5

Reasons for decision: Summary: From 1 January 2017, employers of working holiday makers are required to withhold tax from amounts they pay to their workers under the pay-as-you-go (PAYG) system. The amended legislation requires employers of working holiday makers to register with the Commissioner, which will allow such employers to withhold tax at income tax rates applying to working holiday makers. A working holiday maker is an individual who holds a Subclass 417 (Working Holiday) visa, a subclass 462 (Work and Holiday) visa or certain related bridging visas which are issued by the Department of Home Affairs (previously known as the Department of Immigration and Border Protection). The visas allow young adults aged 18 to 30 from eligible partner countries to work in Australia while having an extended holiday. Work in Australia must not be the main purpose of the visa holder's visit. An employer needs to register with the ATO before employing a working holiday maker. Once registered, an employer will be able to withhold a flat rate of 15% up to $37,000 in total payments made to each individual working holiday maker within an income year. Where total payments exceed $37,000, different rates apply. | Detailed Reasoning - Employer/employee: The expression ‘employee’ is not defined in income tax legislation. Therefore, it has its ordinary meaning. The Tax Office provides guidance to assist in determining whether an arrangement constitutes an employment arrangement in Taxation Ruling TR 2005/16 Income tax: Pay As You Go withholding from payments to employees. TR 2005/16 explains that the relationship between an employer and employee is a contractual one, and is often referred to as a contract of service; an employee contracts to provide their labour. The ruling provides key indicators that should be considered when determining whether an individual is an employee: an individual is more likely to be an employee if these indicators tend to suggest that this is the nature of the arrangement upon consideration: ● the degree of control exercised by the person for whom the work is done ● the obligation to work ● the hours of work ● the mode of remuneration ● the provision and maintenance of equipment ● any provision for leave ● the power to delegate, and ● the deduction of income tax. You have stated that your au pair: ● is a family member for a certain time period; ● is here as part of a cultural exchange and is given regular opportunities to explore your part of Australia; ● is providing your family the opportunity to learn about alternative cultures; ● is living with you as a family member, sharing in household chores and ● assists with the childcare on a flexible basis. You have invited your au pair into your home under a domestic arrangement, principally to benefit both parties from a cultural exchange. An incidental element of the arrangement is that the au pair will supplement the care you and your spouse and other family members provide to your child; however, you are not reliant on your au pair to provide full-time care or to carry out domestic duties around your home as a domestic worker. You will encourage your au pair to travel around Australia while they are living with you and you give them an amount of money to assist them to do this. There is no relationship between the amount of money you provide your au pair and the extent and magnitude of any service they provide. It is clear from your circumstances that no employer/employee relationship exists and you do not need to register as an employer of a foreign worker.