Controversial backpacker tax in Australia to be reviewed

by Ray Clancy on March 16, 2016

in Australia Travel

Plans to make international backpackers in Australia pay tax on their earnings looks likely to be scrapped after a campaign from tourism and agriculture industries raised concerns.

The tax on people in Australia on working holiday maker visas who can work during their stay in the country was to be introduced in July is now being reviewed and it is expected to be scrapped.

Tourism chiefs had warned that the plan to take backpacker out of the tax free threshold could result in a serious drop in the number of backpackers which would then hit many industries that rely on them for short term work.

backpacker

Backpackers have long been encouraged to work in Australia on working holiday visas which allow them to stay for a second year if they work for three months in rural areas.

The new tax would have required travellers on working holiday visas to pay 32.5% on every dollar earned, when they previously paid no tax on income up to $18,000 (£9,500).

Tourism Minister Richard Colbeck said that he has taken the concerns on board. “Working Holiday Makers are vital for two of our key super growth sectors for the next decade, agriculture and tourism. Concerns have been raised about the impact of the 2015 budget measure on tax arrangements for working holiday makers, particularly our global competitiveness as a backpacker destination,” he explained.

“We have therefore decided that the proposed tax arrangements require further discussions to ensure Australia does not lose market share in backpacker visitation. The key issue is to ensure we have a balanced and equitable approach to the tax status for workers in Australia on visas,” he added.

Those against the tax pointed out that in the tourism industry alone, Australia is facing a shortage of 127,000 workers in the next five years. Over 90% of workers in the tourism industry are Australian but the industry relies on workers from overseas for the remainder.

A further 40,000 working holiday makers annually contribute to the prosperity of the broader agricultural sector, including the horticulture and general agriculture sectors.

The move was backed by the Australian Chamber of Commerce and Industry which has taken a lead in explaining the consequences of the planned tax which it described as “ill-conceived”.

“Rather than treating working holiday-makers as an easy source of tax revenue, the Government should recognise the economic benefits they bring to small businesses and their Australian employees. Scaling back the proposed backpacker tax would boost economic activity in regional and rural areas,” said Steve Whan, manager of the Australian Chamber National Tourism Council.

“The Government claims the tax would raise more than $500 million, but that will be overshadowed by the economic harm if Australian receives significantly fewer working holiday makers and tourists,” he pointed out.

“The National Tourism Council supports the campaign to axe the backpacker tax. I applaud the minister for listening to the concerns of the tourism and farming sectors and urge him to take the next step: to scale back the tax and instead seek to attract more visitors to our shores. We look forward to making this case to the Government’s review,” he added.

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