Australian government backs down on backpacker's tax
The move has won plaudits from the National Farmers’ Federation but has angered Tourism & Transport Forum Australia, which has complained about the “blatant cash grab” of increasing the departure charge.
The treasurer Scott Morrison announced that, from 1 January, the backpacker tax would be 19% of the first $37,000 that backpackers earn.
The government will also try to attract backpackers by cutting the visa application charge by $50 to $390, increasing the age that backpackers can come to Australia to 35 and letting them work for the same employer for 12 months, provided they change location after six months.
Morrison promised that cutting the tax rate and visa fee would be revenue-neutral by raising $365m over four years through two other measures. The government will increase the passenger movement charge by $5 to $60, and will take 95% of foreign workers’ superannuation when they leave Australia.
Morrison said the purpose of the superannuation system was “to fund the retirement of Australians”, not foreign workers.
The new 19% tax from the first dollar earned replaces a system that allows backpackers to access the $18,200, tax-free threshold and pay 19% for income above the tax-free threshold up to $37,000.
Tania Chapman, Chairperson for the Voice of Horticulture said, "Thankfully they have come up with a decision, a tax of 19 % is better than 32.5%, but now we really need to get that message out to the world and let the backpackers know they are not going to lose all that money out of their wages to tax while working in Australia. This season there has been a 40% decrease in packpackers coming to Australia to work. The other thing which they they have done is to increase the eligible age for working holiday visas to up to 35 years, which is very positive."
She goes on to say that originally the new tax rate is scheduled to come into effect on the 1st January 2017, but there is a debate as to how to change the tax rate in the middle of a financial year. "We are still waiting for all the details to come out, but we look forward to putting this behind us and getting a workforce over here to pick our fruit."
The National Farmers’ Federation chief executive, Tony Mahar, said it was important for parliament to recognise that this is really vital for the growth sector that is agriculture and pass the changes.
He said the extra $5 departure charge was a “small increase … to allow us, the agricultural and farming industry, to have certainty for backpackers”.
The Tourism & Transport Forum chief executive, Margy Osmond, said she was very disappointed the government had pushed ahead with the backpacker tax, but lowering the rate to 19% was a lot better.
“The industry has been completely blindsided by this decision to increase the departure charge by $5 … at no point was it flagged in any discussions in which we took part,” she said.
“It is a bitter disappointment that we’ve been slapped with this tax hike on every traveller – Australian or international visitor – heading overseas.”
In a press conference on Tuesday the deputy prime minister, Barnaby Joyce, said the government had now fixed its policy and he was sure the changes would “fly through the Nationals party room”.
In response to claims of a collapse in backpacker numbers owing to the tax, Joyce said they now had “exactly the same conditions and taxes as last year" because the government had delayed the tax increase to 1 January.