The use of an Au Pair in the home is growing rapidly in Australia as it offers an affordable, flexible and beneficial alternative to more traditional and/or paid child care arrangements. You may be a family which enjoys the use and company of an Au Pair in your household, or you might be familiar with the concept and are considering engaging an Au Pair in the future to assist with child care, particularly if you have full time work outside of the home.
There are many factors to weigh up when considering child care options for your children, and it is understandable that one of the first considerations to come to mind is not be the operation of Australian employment tax laws and the tax implications of engaging an Au Pair. It is however critical that both Australian tax and employment laws are considered. If engaging an Au Pair becomes your chosen method of child care, depending on the circumstances, it is possible you may find that you have become an employer, who is required to report your Au Pair’s taxable income, and pay tax on their wages.
Employers of working holiday visa holders, who are entitled to work under their visas, are generally required to withhold tax from the wages they pay to them, under the national Pay-As-You-Go (“PAYG”) tax system. As an Au Pair is an overseas traveller, who is providing child care to an Australian host family, the Au Pair could potentially be classified as an Australian employee pursuant to both Australian employment and tax laws. Depending on the circumstances under which you engage an Au Pair, you may find yourself an employer.
Although your Au Pair may not be seen by you as an employee, but rather a young holiday maker who wants to enjoy a cultural exchange for a few months at the same time as benefiting from earning some money looking after your children, your Au Pair may in fact be classed as an employee. If your Au Pair is an employee, you would be required to register yourself as an employer and withhold the tax from money paid to your Au Pair.
The obligation to pay tax and obtain an ABN as an employer will depend on a number of factors associated with your specific circumstances of your engagement with your Au Pair.
marshalls+dent+wilmoth has experienced employment lawyers who can provide you with legal advice if you decide to engage an Au Pair, and the tax obligations which you may need to consider.
DISCLAIMER: We accept no responsibility for any action taken after reading this article. It is intended as a guide only and is not a substitute for the expert legal advice you can get from marshalls+dent+wilmoth and other relevant experts.