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Government Delays Backpacker Tax

The ‘’backpacker tax’’ remained intact in Australia’s 2016 Federal Budget but the government is delaying its introduction pending a review.

The Australian Government is delaying the introduction of the controversial ''backpacker tax'' for six months after strong opposition from tourism and agricultural sectors. However, they will not commit to scrapping the tax. The ''backpacker tax'' would see the tax free threshold for working holidaymakers in Australia scrapped and force them to pay 32.5c per dollar from the very first dollar earned.

According to an article on Byte.com.auAlex de Waal, CEO of Tourism Tropical NQ, announced at a YHA Conference in Cairns that the backpacker tax has been put on hold for 6 months. 

Treasurer Scott Morrison told The National Press Club, ''there are a lot of complicated issues here and I don't think we've actually resolved at a point yet where I think we've got good policy and I'm not going to back policy which I don't think is good policy, so that issue remains live." (source).

The delay is expected to be announced by the government during the election campaign. 

Currently, if working holidaymakers meet certain residence criteria, they can become residents for tax purposes and avail of the tax free threshold. This means they can typically get a refund of the tax they overpaid. With the ''backpacker tax'' however, working holidaymakers will be unable to avail of the tax free threshold.

The average superannuation refund is $1908

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Resident and Non-resident Tax Rates 2014/15:

Opposition to the tax

Critics of the backpacker tax say that it will cause a decline in the number of working holidaymakers coming to Australia, which would be detrimental to tourism and agriculture in the country.

According to a government report last year, the number of first working holiday visas (subclass 417) granted in 2014-15 saw a reduction of 5.4% compared to 2013-14. As at June 2015, there were 136,892 working holiday visa holders in Australia (1st and 2nd visas) representing a 5.7% reduction in the number compared to 30 June 2014.

If the tax hike comes into force, backpackers may instead look to neighbouring New Zealand where they will be taxed 19.5c on the dollar up to NZ$38,000.

The National Farming Federation (NFF) had asked for a compromise of a 19% flat tax as working holidaymakers fill an important gap in the agricultural and horticultural industry, often taking up jobs Australians simply won’t do such as fruitpickingFarmers are concerned that if they don’t have the workers in high season then fruit and vegetables could be left to rot.

The President of the NFF says, “We have received more than 31,000 signatures on a petition opposing this measure. We have banded together, both as an industry and across sectors, to show that the negative impacts will be wide-reaching and felt by thousands of Australian families. We have given clear examples of what this pain will involve. It is now time for the Government to respond to the risk imposed on the sector by a measure that will chase working holiday makers away from Australia and, in the process, decimate the agricultural workforce’’. source

They have set up a petition to oppose the changes.

 

Further Uncertainty

Many feel that the delay merely reinforces the uncertainty over the fate of the tax and does nothing to ease the worries of farmers across the country. Although there has been no confirmation that the government's position on the issue has changed, it is hoped that they can come to a compromise and look at some of the alternatives such as those proposed by the NFF.

Keep an eye on our blog and Facebook page here for updates.

How do you feel about the backpacker tax? Let us know in the comments.

About The Author

Ciara Kennedy - Digital Content Writer @ Taxback.com

Ciara is our Digital Content Writer at Taxback.com. Since graduating in Journalism and Visual media, Ciara has worked in online marketing in Ireland and Australia and loves writing in all its forms.

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