Australia drops backpacker tax

  | James Innes

A controversial plan to impose a 32.5% tax on backpackers has been dropped by the Australian government. The backpacker tax, which was a surprise inclusion in the 2015 Budget, was estimated to raise AUS $540 million.

However, it met with vocal opposition from farmers and the tourist industry. Farmers complained their labour supply at harvest time would be affected by the tax, whilst tourist organisations argued it would deter backpackers and other tourists from visiting Australia.

Around 600,000 backpackers travel to Australia every year, with many of them finding temporary work picking fruit.

Treasurer Scott Morrison told reporters in Canberra “we recognise the important part that backpackers play in the overall tourist industry and….also (that they) are a very important source of labour in the agricultural sector, particularly for seasonal labour”.

Currently, like other workers, backpackers do not pay any tax until their annual income exceeds AUD $18,200. Under the new compromise deal announced, working holidaymakers will be liable for 19% tax on every dollar they earn.

The government will also try and attract more backpackers by cutting the visa application charge by AUD $50 to AUD $390, increasing the age limit for backpackers coming to Australia to 35, and allowing them to work for the same employer for a year (providing they change location after 6 months).

However, not everybody is happy with the changes. In order to offset the loss of income from the proposed backpack tax, the Government has announced tax increases in other areas, including an increase in the tax on all passengers departing Australia by AUD $5.

The Tourism & Transport Forum chief executive, Margy Osmond said “Industry has been completely blindsided by the decision to increase the departure charge. It is a bitter disappointment that we’ve been slapped with this tax on every traveller – Australian or international visitor – heading overseas”.

The tax changes are planned to come into force on 1st January 2017.



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