Compromise sought on 'backpacker tax' as working holiday-makers threaten to leave Australia

Written on the 17 February 2016

Compromise sought on 'backpacker tax' as working holiday-makers threaten to leave Australia Moves are underway within the Federal Coalition to find a compromise for the controversial 32.5 per cent backpacker tax, slated to take effect in July.

The agriculture industry is worried the tax will cause a labour shortfall and stifle the growth of the nation's $10 billion horticulture sector.

Some rural MPs are questioning whether the proposed tax will generate the full $540 million forecast by Treasury over the next three years.

The change will see foreigners on working holiday visas taxed 32.5 cents from the first dollar they earn, and a scrapping of the $18,200 tax-free threshold.

Liberal MP Sharman Stone
Photo: Member for Murray Sharman Stone said her electorate depended on backpacker labour. (ABC News: Dominique Schwartz)

"It is the harvest-dependent international backpacker scene that we want to see continue and not suddenly disappear," Liberal Member for Murray Sharman Stone said.

Dr Stone, who also chairs the Coalition's Agriculture Policy Committee, said the tax could generate less income than expected if future working holiday-makers were deterred by the prospect of lower wages.

"We've looked at what the tax take might be as a contribution to the budget, but if we have fewer backpackers arriving that tax take is a lot less when calculated," she said.

"We have been encouraged by the [Agriculture] Minister to look at a package which might make it less a case of the backpacker seeing a third or so of their salary going."

One option being discussed, according to Dr Stone, is changes to superannuation arrangements for backpackers.

Currently working holiday makers have to pay superannuation, but can get some of it back when they leave the country

"We also take superannuation off their pay checks which is a lot of red tape, a lot of bureaucracy, and the employer has to contribute to that," Ms Stone said.

"We are hard at it thinking of how to get around the unintended consequences of the tax take for this category of worker because when it comes to horticulture, our abattoirs our piggeries, our dairy industry, quite frankly we couldn't do without this international labour coming in."

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source: ABC

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