Federal Government announces partial backpacker tax reversal

The Federal Government has responded to industry pressure and amended its plans to impose a 32.5% tax on backpacker workers, reducing the amount to a 19% tax.

First proposed in the 2015 budget, the compromise will see working holidaymakers taxed at 19% rate from their first dollar earned instead.

Federal Treasurer Scott Morrison announced the deal after it was signed off by Cabinet on today (Tuesday 27th September), saying the backbench committee pushing for the changes was also satisfied.

Treasurer Morrison said the change would "wash its face" and be revenue neutral, with the loss of tax offset by a $5 increase in the Passenger Movement Charge (PMC) that applies when people leave Australia, from $55 to $60, and by an increase in the tax on working holidaymakers paid on their superannuation payments to 95% when they leave Australia.

The Federal Government had previously suggested that backpacker tax would generate a $540 million windfall over three years.

With accounts that working tourists are looking to ignore Australia, the Government also announced a $10 million fund to market backpacker jobs.

Introduction of the backpacker tax caused disagreement with in the Federal Government, with National and Liberal backbenchers calling for a rethink, while Treasuerer Morrison and Agriculture Minister Barnaby Joyce said any unintended negative consequences would be dealt with if and when they arose.

Increasingly dismayed farmers, tourism operators and regional communities said a 32.5% tax on backpacker labour, which makes up 25% of the farm workforce each year, would be a "disaster" at harvest time.

While the compromise has reportedly been welcomed as a positive step by some farming and industry lobby groups, tourism groups are unlikely to welcome being made to pay for changes to a damaging tax proposal.

Already this week the Tourism & Transport Forum Australia (TTF) has slammed the Federal Government’s economic modelling that commenting that its suggestion that backpacker tax will have no impact on the number of working holiday makers choosing to visit Australia as being an “absurd assumption”.

Instead, supported by quantitative survey evidence of travel intentions from real backpackers, TTF believes that it will likely result in a 60% reduction in the number of working holiday makers visiting Australia.

TTF Chief Executive Margy Osmond “the Federal Government’s bean counters would have you believe that they can slap a 32.5% on every single dollar a working holiday maker earns in Australia and it will have absolutely no impact on the number of people applying for a working holiday visa.

“That is rubbish!

“The Government thought it had a guaranteed windfall when it cooked up the ‘backpacker tax’, instead they are going to end up with nothing but ‘fool’s gold’.

“The problem for the Government is that the backpacker tax is just not adding up. It’s going to end up costing more in the lost opportunities as we drive thousands of working holiday makers to spend their money in more tax-friendly countries like New Zealand rather than Australia.

 “The backpacker tax has been a fiasco from the first word. It’s already damaging our international reputation with working holiday makers without raising a single dollar.”

31st August 2016 - TOURISM KICKS GOALS FOR AUSTRALIAN ECONOMY, BUT BACKPACKERS DRY UP DUE TO PROPOSED TAX

17th May 2016 - GOVERNMENT DEFERS INTRODUCTION OF BACKPACKER TAX

13th May 2016 - GOVERNMENT MUST CLARIFY FUTURE OF BACKPACKER TAX

7th May 2016 - TOURISM INDUSTRY DISAPPOINTED BY BACKPACKER TAX RETENTION 

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