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Budget blunder will make youth visitors choose New Zealand

May 15, 2015 Destination Global, Headline News No Comments Email Email

egtmedia59A provision in Australia’s latest budget aimed at ripping tax from backpackers threatens to damage youth tourism to Australia by making New Zealand much more attractive as a place to visit on a working holiday. The move has been slammed as “ridiculous” by tourism industry leaders.

Youthful travellers, many of whom work on their travels, contribute nearly AUD 12 billion annually to tourism spending in Australia and represent a quarter of all Australia’s international arrivals, according to Tourism Australia data.

Young backpackers, a market worth almost AUD 12 billion a year to Australia

Young backpackers, a market worth almost AUD 12 billion a year to Australia

Now, backpackers working in Australia are unlikely to travel as far or stay as long following the Federal Government’s budget decision to axe their tax-free earning threshold of nearly AUD 20,000.

From July 2016, anyone on a working holiday visa in Australia will have to pay 32.5 cents in tax for every dollar of income up to AUD 80,000. In New Zealand, they will be taxed nothing for their first 20,000 dollars, the same situation as has applied in Australia until now.

The change to Australia’s system is designed to reap the Government AUD 540 million over the next four years – but it could do a lot of harm to the youth tourism market in the meantime, which would have been worth about AUD 50 billion over the same four years.

An ABC News investigation spoke to Australian farmers who rely on overseas workers and who said backpackers would no longer have many incentives to work on farms. Many backpackers told the ABC similarly.

Tourism Industry Council of Tasmania chief Luke Martin said imposing taxes on working tourists would drive them to New Zealand.

“I think there’ll be a lot of people in the youth tourism market who are really scratching their head over that one,” he said.

The Australian Tourism Export Council (ATEC) said the impact of changes to working holiday maker visa fees and the removal of the tax-free threshold would affect about 200,000 youth travellers who visited Australia each year and spend an average of AUD 13,000 during their stay.

“While many working holiday visa visitors do not register for the tax free threshold, promotion of additional costs for the application fee and in-country, will likely have a detrimental effect on Australia’s desirability as a destination for these visitors and many others,” managing director, Peter Shelley, said.

“With more than a billion global travellers now deciding on their next destination, Australian needs to ensure it is competitively positioned to maximise its share of the lucrative international travel dollar.”

The Tourism & Transport Forum (TTF) pointed out that working holiday makers were “one of our highest spending categories of visitor”.

“Ripping more than half a billion dollars from the visitor economy with a new ‘backpacker tax’ is simply ridiculous,” TTF chief executive Margy Osmond said.

“Taxing working holiday makers from the first dollar they earn, instead of giving them equal treatment with other resident taxpayers, is a backward step and will damage Australia’s international reputation.

“Australia has long been a favourite destination for young people from around the world who live, work and travel here for up to two years, and who spend on average more than AUD 13,000 during their stay.

“Coupled with the tenth consecutive increase in their application fees, this new tax on working holiday makers will make them think twice about coming here.”

Written by Peter Needham

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