Backpacker tax: Federal Government backs down on plan
By national rural reporter Anna Vidot
The Federal Government has responded to pressure and dropped its plan to introduce a 32.5 per cent tax on backpacker workers.
Instead, working holidaymakers will be taxed at 19 per cent from their first dollar earned.
The Government had expected to recoup $500 million from the higher tax rate. It will now increase the Passenger Movement Charge by $5 to cover the change.
The levy was first introduced in 1995 and is currently set at $55. It is usually bundled into the cost of transport for passengers departing Australia.
The tourism sector will get $10 million to market jobs to backpackers, Treasurer Scott Morrison has announced.
It is understood legislation will be required to enact the new tax arrangements.
Regional Coalition backbenchers had become increasingly confident Prime Minister Malcolm Turnbull and Mr Morrison would give ground on the issue.
Earlier this year, Nationals backbencher Andrew Broad first proposed a 19 per cent tax rate.
Labor has refused to say what it would do if legislation came to Parliament.
The Greens are opposed to any change in backpacker taxes, and have committed to vote against any increase.
It is a significant backdown for the Government, which first proposed the change in the 2015 budget, after the tax commission ruled backpackers should not be eligible for the tax-free threshold.
The issue split the Government, with National and Liberal backbenchers calling for a rethink, while Mr 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 per cent tax on backpacker labour would be a "disaster" at harvest time.
Backpackers make up 25 per cent of the farm workforce each year.
In the Northern Territory, they represent 85 per cent of farm labourers.
Government to amend backpacker tax
Updated: 1:31 pm, Tuesday, 27 September 2016
Backpackers will be charged 19 per cent tax from the first dollar they earn under a federal government compromise.
The government had originally planned to make people on working holiday visas pay 32.5 cents in the dollar and scrap the tax-free threshold.
Backpackers are a vital supply of workers for the agricultural sector, with as much as a quarter of the industry's workforce in Australia on a working holiday visa.
Cabinet on Monday approved a new plan under which working holiday makers will be taxed 19 per cent on any earnings up to $37,000, starting from January 1, 2017.
Earnings above that will be taxed at the same marginal tax rates as everyone else.
There will also be more flexible arrangements to let an employer with premises in different regions engage working holiday makers for six months in one place and an extra six months somewhere else.
And the government will spend $10 million promoting Australia as a destination for backpackers, in recognition that many in the tourism and agriculture industries were concerned the original tax changes had deterred young people from coming here.
To help pay for the changes, the government will tax superannuation payments to working holiday makers who have left Australia at 95 per cent.It will also hike departure taxes by $5, to $60, in the first increase to that charge since 2012.
Treasurer Scott Morrison said a backbench committee was 'a pig in mud' with the changes and had given strong endorsement for cabinet's decision.
Mr Morrison defended the government's original decision to tax holiday makers 32.5 cents from the first dollar they earned and why it had taken so long to address industry concerns.
There was a range of proposals put up before the May 3 budget that didn't satisfy him or ensured the integrity of the budget wasn't eroded.'I would say that when you do the work and you consult properly, you come to the right outcome,' Mr Morrison told reporters in Canberra.
The treasurer insisted the change would put working holiday makers in Australia on the same footing as if they were in Canada, New Zealand and the UK.
Nationals leader Barnaby Joyce said the compromise was a win for farmers.AAP