Aupair Hosting and Tax Implications: Do Host Families Need to Withhold Taxes for Hosting Aupairs? 

• October 19, 2023

The rules on whether Host Families need to withhold taxes for hosting Aupairs have always been a grey area. If you’re currently struggling to decide whether hosting an Aupair is considered hiring an ‘employee’ rather than a ‘contractor,’ just know that you are not alone. A lot of families are not sure what to do as well.

In a statement we previously released, we encouraged families to treat the Aupair program as a Cultural Exchange, not as a means of employing young individuals in order to pay for cheap labour. However, the fact that the program is unregulated, the ATO might still collect taxes from Host Families.

We recently saw a thread in a private Facebook group discussing the complexity of tax implications of hosting Aupairs  and we wanted to know if you share the same concerns by asking you a few questions.

What does your Aupair do for your family?

Since every family has a unique situation, we’ll give you a few examples and let us know if you fit the following descriptions:

A. You’re a Melbourne family with a German background, hosts a German Aupair, you’re flexible with hours and time off, never signed a contract, your Aupair teaches the kids German, you take her on holidays, and you completely, without question, consider it a cultural exchange. However, you also have a family handbook that stipulates what tasks you specifically want your Aupair to do exclusively for your family, you have the right to suspend or dismiss your Aupair, give her annual leave, and pocket money is calculated based on hours worked not completion of the job – all of which are considered by the ATO as a form of ‘employment.

B. You ‘hired’ an Aupair based on full-time employment, You expect the person to follow procedures that you gave, require 30-40% of their time to work for your family, and you withhold tax and pay super. You also give them annual and sick leave, you don’t allow them to obtain other jobs. 

C. In your household, your Aupairs’ “hours” were flexible and pocket money was given regardless of hours. They are free to do as they please when the kids are not around. You had agreed on certain expectations to be done weekly and it was up to the Aupair to do them in whichever way they planned. You agreed that as long as you and the Aupair are both happy and they respect your house rules like being a housemate, they can stay. You treat them like a cousin or older sibling. 

D. Same as the above situation example, but either you or your partner are at work, studying, or on parental leave which means the Aupair doesn’t have the sole care for the kids, the children are in full-time school or childcare, and you give your Aupair a time to travel and study English. 

What does your situation tell the ATO?

The situation of every family seems to hover around the four examples we listed above. Notice that if you use the terms paid leave, grounds for dismissal, contract or terms of service. The ATO will more likely consider you as an employer, not someone who is there to participate in the cultural exchange. It seems to come down to how you answer the ATO’s question or how you brief them on your situation when you apply for a private ruling. The odds may also likely be in your favour if your situation falls under the letters C and D, as we gave above.

We agree that the rules are stuffing over families and most have no choice but to wait until the legislation changes. The government really needs to create a proper Aupair visa with accurate and clear conditions stipulated. However, if you want to lean on the safer side, we recommend that you consult with an accountant who can help you apply for a private ruling and create a proper briefing of your situation. 

There are families who chose to withhold tax because more than it being a pain in the butt, they still see it worthy of the flexibility an Aupairs offers and find it better than risking the possibility of paying a huge fine.

What are your concerns regarding the ATO regulations for Aupairs? Feel free to share with us in the comments below.

For families needing help in finding an Aupair, send us an email at support@99aupairs.com and we’ll help you through the recruitment process.

https://support-99aupairs.zohobookings.com/#/customer/assessmentcall

Do I have to pay taxes as an Aupair?

The short answer is, it depends! It depends on your Visa status and your country of origin. Read up for the full story. It gets kinda interesting. 

In a recent landmark court case, Addy vs. ATO, the Australian Taxation Office (ATO) issued a decision impact statement that could have a significant impact on working holiday visa holders in Australia. This decision, which centers around the so-called “backpacker tax,” has far-reaching implications for certain working holiday visa holders who are also Australian tax residents. It allows them to take advantage of the $18,200 tax-free threshold. But who exactly qualifies for this favorable tax treatment? Let’s delve into the details.

Addy vs. ATO – A Brief Overview

In the Addy case, the High Court of Australia scrutinized the Backpacker Tax, a tax scheme that had previously applied to all working holiday visa holders at a flat tax rate of 15% on earnings up to $37,000. However, the court’s ruling led to a change in the tax landscape, as the Backpacker Tax was deemed unconstitutional when applied to Australian resident nationals.

Working Holiday Visa Holders Eligible for Tax-Free Threshold

The ATO’s decision impact statement clarifies that the ruling in the Addy case applies to working holiday visa holders who meet specific criteria. To benefit from the $18,200 tax-free threshold, a working holiday visa holder must be:

• An Australian tax resident.

• A national of one of the following countries:

  • Chile

  • Finland

  • Germany (from 1 July 2017)

  • Israel (from 1 July 2020)

  • Japan

  • Norway

  • Turkey

  • the United Kingdom (UK)

If you meet these criteria, you can now enjoy a more favorable tax treatment, putting extra money in your pocket during your working holiday in Australia.

Tax-Free Threshold: What Does It Mean?

The $18,200 tax-free threshold is a significant advantage for working holiday visa holders. This means that you can earn up to $18,200 in Australia without paying any income tax. Any income earned above this threshold is subject to standard tax rates. This change not only eases the financial burden on working holiday visa holders but also encourages them to contribute to the Australian economy.

How to Apply for the Tax Benefit

To benefit from this tax break, you need to ensure that you meet the eligibility criteria mentioned above. Be sure to maintain accurate records of your income and residency status. It’s also advisable to seek professional tax advice to ensure compliance with Australian tax laws.

For further details, you can refer to the ATO’s official document, available at link. You can also read more about the ATO’s decision impact statement on the Addy case in this source.

Conclusion

The Addy vs. ATO case has brought good news to working holiday visa holders from specific countries, allowing them to benefit from the $18,200 tax-free threshold. This change offers financial relief and encourages these individuals to explore Australia while contributing to its economy. If you meet the eligibility criteria, make sure to take advantage of this favorable tax treatment and seek professional guidance if needed. It’s a win-win situation for both working holiday visa holders and the Australian economy.

Keen to be an Aupair and be supported throughout your journey. Apply here.