Do Host Families Need to Withhold Taxes for Hosting Au Pairs?
The rules on whether Host Families need to withhold taxes for hosting Au Pairs has always been a grey area. If you’re currently struggling to decide whether hosting an Au Pair 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 Au Pair program as a Cultural Exchange, not as a means of employing young individuals in order to pay for cheap labor. 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 the ATO’s Taxation Ruling with regards to Au Pairs and we wanted to know if you share the same concerns by asking you a few questions.
What does your Au Pair 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 Au Pair, you’re flexible with hours and time off, never signed a contract, your Au Pair 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 Au Pair to do exclusively for your family, you have the right to suspend or dismiss your Au Pair, gives her annual leave, and pocket money is calculated based on hours worked not completion of job – all of which are considered by the ATO as a form of ‘employment.
B. You ‘hired’ an Au Pair based on full-time employment, you expect the person to follow procedures that you gave, requires 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 Au Pairs’ “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 Au Pair to do them in whichever way they planned. You agreed that as long as you and the Au Pair 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 Au Pair doesn’t have the sole care for the kids, children are in full-time school or childcare, and you give your Au Pair 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 for the cultural exchange. It seems to come down to how you answer the ATO’s question or how you brief them with your situation when you apply for a private ruling. The odds may also likely be in your favor 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 Au Pair 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 Au Pairs offers and find it better than risking the possibility of paying a huge fine.
What are your concerns regarding the ATO’s rules? Feel free to share with us in the comments below.
For families needing help in finding an Au Pair, send us an email at support@99aupairs.com and we’ll help you through the recruitment process.