The Australian government has bowed to industry pressure for it to set a lower “backpacker tax,” after widespread complaints that a proposed 32.5 percent rate would only send backpackers out of Australia to other nations such as New Zealand.
Initially, the government wanted to tax those on a working holiday at a rate of 32.5 cents on the dollar, but after pressure from government backbenchers as well as fruit growers and vineyards, the government decided to set the rate at 19 percent from the first dollar earned.
In order to fill the difference, the government has also announced that the international departure tax from Australian airports would be raised by 4 U.S. dollars to 46 U.S. dollars per person.
Speaking on Wednesday, Treasurer Scott Morrison said the compromise was “fair” and would do its part to fill the nation’s tax black hole.
“This is a fair package, I think it is a sustainable package,” Morrison told the Australian Broadcasting Corporation (ABC) on Wednesday.
“I mean working holiday makers come out here for a working holiday, not a tax holiday.”
Both the government and the National Farmers Federation (NFF) are confident the decision will not affect the number of backpackers coming to Australia for a working holiday.
There were concerns that the proposed 32.5 percent tax would result in backpackers choosing other locations such as New Zealand, something which would be disastrous for Australia’s local fruit growers and wine makers.
But the NFF’s Sarah McKinnon told the ABC that the revised tax rate would still keep Australia competitive in terms of backpacker wages due to the nation’s higher pay rates.
“Australia has some of the highest wages in the world, so even though we tax at a higher rate, we pay much better,” McKinnon said on Wednesday.
The Treasurer also said that Australia’s higher base wages offset the tax rate compared to other backpacker-friendly nations, while he added it was Australia’s tourism drawcard which was the main factor in many backpackers choosing the Australian experience – not the taxation landscape.
The 19 percent tax rate still needs to pass the lower house, but is expected to gain more support compared to the proposed 32.5 percent tax rate. Labor has indicated it would be more likely to support the lower figure, however the Greens have long been advocates of a zero percent tax rate for backpackers working in Australia.