Australian Government to review controversial backpacker tax

The Federal Government is to review plans to raise tax levels for foreigners on working holiday visas, the so-called ‘backpacker tax’, conceding that it could damage Australian agriculture and tourism.

The proposed change, set to be introduced as of 1st July, would see foreigners on working holiday visas taxed 32.5 cents from the first dollar they earn, and a scrapping of the $18,200 tax-free threshold.

Tourism Minister Senator Richard Colbeck made the announcement in a speech to the Destination Australia Conference in Sydney, stating that he would head a cross-departmental review of the tax, stating “legitimate concerns have been raised about the impact the so called backpacker tax would have on our global competitiveness as a backpacker destination.

"The backpacker workforce is vital to two of our key super growth sectors - agriculture and tourism.

"We have therefore decided that the proposed tax arrangements require further discussions to ensure Australia does not lose market share in backpacker visitation.

"We will work to prepare a revenue neutral proposal in consultation with Employment, Immigration, Agriculture and Industry Ministers that can be presented to the Treasurer for consideration by Cabinet in relation to the measure."

Senator Colbeck said backpackers would still be taxed but the committee would look at other measures to ensure there was no negative impact.

He added “the key issue is to ensure we have a balanced and equitable approach to the tax status for workers here on visas.”

A number of rural MPs questioned whether the proposed tax would generate the full $540 million forecast by Treasury over the next three years, while also fearing that the tax would impact demand for seasonal jobs in agriculture and tourism.

Senator Colbeck’s move has been welcomed by the Tourism & Transport Forum Australia (TTF), who described the review as “long overdue”.

TTF Chief Executive Margy Osmond stated “it appears that the Federal Government has heard the concerns of industry that the backpacker tax will dramatically reduce the number of international visitors coming to Australia for working holidays, and is moving to act in some form.

“Today’s announcement follows an industry roundtable with Minister Colbeck held last week that raised our concerns about the impact of the tax and the Minister should be applauded for raising this issue with his Cabinet colleagues and achieving a commitment to look into the implications of this tax on industry.

“TTF sounded the alarm on the negative impact of the backpacker tax on Federal Budget night nearly a year ago and we’ve continued to be a vocal advocate on the need to rethink the backpacker tax.

“Our best advice to the Federal Government is still that it should just scrap the backpacker tax – it makes no sense to slap a 32% tax on backpackers when they have an entire world of destinations, from which to choose.

“The backpacker tax is poised to smash the workforce for tourist operators who rely on working holiday makers in seasonally-sensitive and remote regions, where a local workforce simply isn’t available.

“The Federal Government has been at cross purposes with their policies on working holiday makers. On the one hand, through the Northern Australia White Paper, they are making it easier for working holiday makers to stay with the same employer for longer, up to 12 months from six, but on the other hand a 32% tax on every dollar they earn is not an incentive to work in Australia.

“Nearly 30,000 people have signed the National Farmers’ Federation petition calling for the backpacker tax to be scrapped. That sends the loudest and strongest message to the Federal Government that the backpacker tax is just bad policy and has got to go.”

12th March 2016 - TTF REVEALS PLAN FOR TOURISM TO ‘TURBOCHARGE’ THE AUSTRALIAN ECONOMY

8th March 2016 - TOURISM REPRESENTATIVES HIGHLIGHT VALUE OF THE VISITOR ECONOMY TO GOVERNMENT

21st February 2016 - ‘BACKPACKER TAX’ CHANGES SOUGHT AS WORKING TOURISTS THREATEN TO LEAVE AUSTRALIA

2nd February 2016 - TOURISM INDUSTRY CALLS FOR SCRAPPING OF BACKPACKER TAX

31st August 2015  - STA TRAVEL LAUNCHES NEW RETAIL OUTLETS TO CATER FOR GROWING BACKPACKER ARRIVALS

15th May 2015 - NEW ZEALAND TOURISM SET TO BENEFIT FROM AUSTRALIAN MOVE TO TAX BACKPACKERS