A plan to introduce a higher rate of tax for young people in Australian with working holiday visas has been postponed until at least January 2017.

Backpackers who work during their holiday in the country currently pay no tax on income up to $18,000 but the government had planned to introduce a new tax level where they would pay 32.5% on every dollar earned from 01 July.

This created an outcry from farmers, who employ backpackers at harvest time, and the hospitality and tourism industries which also employ a lot of backpackers.


Now Assistant Treasurer Kelly O'Dwyer has confirmed that there will be a review of labour force issues in regional and rural communities and the new tax will not be introduced until after that.

But some believe this could be a cynical electioneering ploy to persuade rural voters ahead of the Australian general election on 02 July. If the current government is re-elected then the issue could be discussed again in October or November. That means that if the new tax rate goes ahead it would be unlikely that it would be in place before January 2017.

Those who support rural communities want the government to abandon the tax. They include Rachel Siewert, agricultural spokesman for the Green Party who described the delay as "an election stunt".

Farming organisations have pointed out that the tax would discourage young people from abroad coming to Australia and that in return would seriously damage their supply of seasonal workers.

The National Farmer's Federation said that the delay will only create further uncertainty for farmers who look ahead to employ seasonal workers for crop picking at the end of the year and the start of 2017.

"The backpacker tax should be scrapped for the sake of the livelihoods of thousands of primary producers across the country. We will continue to express our dissatisfaction at the government's decision to merely delay the tax by six months rather than implement a solution for the farmers who rely on working holiday makers to fill highly important, short term positions in their businesses," said NFF president Brent Finlay.

"Backpackers are heavily relied upon by agriculture to meet seasonal work requirements at peak times, particularly during harvest. We have heard stories from farmers across the nation who have found themselves unable to move forward with basic farm management, facing much lower production levels than usual, because of the impact this tax will have," he explained.

"A six month delay doesn't alleviate that concern, and for many means that the tax will now take effect half way through their busiest time of the year. Farmers across the country will be wondering how much area to put under crop, if already dwindling backpacker numbers drop off even further at that time," he added.

Opposition politians are also against the proposed tax. Shadow Minister for Tourism, Anthony Albanese, and Shadow Minister for Agriculture, Joel Fitzgibbon, said the backpacker tax was ill-conceived and added in a joint statement that the agriculture and tourism sectors had been ignored by the Government in its attempts to find a way forward.

A working holiday visa allows young people up to the age of 30 to stay in Australia for up to a year and work for six months of that time. It can be extended for another year. Official figures show that backpackers spend AU$4.3 billion a year, worth about 12% of all international tourist spending, so they are also seen as a boost to the national economy.