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Backpacker tax breakthrough as government caves in

November 29, 2016 Headline News No Comments Email Email

egtmedia59The backpacker tax looks likely to be set at 15%, after the Federal government caved in yesterday and compromised on the contentious issue.

The tourism industry was quick to welcome the breakthrough, though much of the pressure on government came from the farming lobby. Backpackers form a vital part of the crop-harvesting workforce.

The Turnbull Coalition government had already cut its original 32.5% rate to 19%.

Labor remains committed to a 10.5% backpacker tax and the 15% level is a classic compomise.

The revised bill, setting the tax at 15%, looked set last night to pass the Senate with the support of key crossbenchers including Derryn Hinch and those from the Nick Xenophon Team, the ABC reported.

Tasmanian Greens Senator Peter Whish-Wilson pointed out last night that the effective tax rate for backpackers will end up being closer to 24%, because backpackers can only claim 5% of their superannuation when they leave Australia.

The Tourism & Transport Forum Australia (TTF) and the Australian Federation of Travel Agents (AFTA) issued a joint statement yesterday describing the Federal Government’s compromise as a victory for common sense. They urged Parliament to pass the legislation immediately.

TTF and AFTA have been vocal advocates of the need for common sense to prevail on both the backpacker tax and the proposed increase in the departure tax – the Passenger Movement Charge – which the Government has agreed to freeze for five years at the new rate.

“We were the first to sound the alarm on the devastating impact a 32.5% backpacker tax would have and we are very pleased that, at the end, we have reached a workable compromise that will provide certainty to the industry and keep backpackers coming to Australia,” TTF chief executive Margy Osmond stated.

“A 15% backpacker tax is a fair compromise that will allow the Federal Government to meet its budget objectives – confirmed by the KPMG economic analysis commissioned by TTF – and maintain a competitive tax rate for backpackers compared to other markets such as Canada and New Zealand.”

AFTA chief executive Jayson Westbury said parliament needed to move quickly to end the stalemate so that tourism and travel operators could get back to running their businesses and support local economies.

“Industry will be greatly relieved that it appears we’ve reached an outcome that will receive the support of the Parliament,” Westbury said.

“We greatly appreciate the support of politicians of all parties who have worked to achieve a very competitive tax rate for backpackers than was originally floated. Let’s get it passed and into law now.”

Written by Peter Needham

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