Backpacker tax under review

Backpackers may no longer face hefty tax. Source: Creative Commons — Backpackers may no longer face a hefty tax. Source: Creative Commons

Written by Samantha Cheney, edited for online by Ashleigh Whittaker

The Australian Federal Government has announced a review into the introduction of the controversial backpacker tax, with working holidaymakers given the “all clear” to continue to earn $18,200 tax free for another six months.

The review will look at the agricultural sector more broadly to assess whether rural and regional communities have the right labour force in place to support seasonal industries.

Queensland Tourism Industry Council CEO Daniel Gschwind said the tax effect on tourism can be described as “catastrophic” with concern higher taxes will see working holidaymakers opt for other travel destinations.

“We’re obviously very concerned when this proposal first emerged, and it was without any consultation whatsoever that suddenly the government appeared to be determined to introduce a very discriminatory tax on a part of the tourism industry that is very critically important to regional Australia. We know last year, there were more than 200,000 backpackers in Queensland who were taking advantage of the working holiday visa provisions.”

Mr Gschwind said the farming communities’ reliance on the backpacking industry is crucial, and is set to see a dramatic decrease in its workers if the tax is introduced.

“The government estimates that they spend about $3 billion in the economy across regional Australia, including Queensland, and for the sake of raising, on average, under the proposed tax, just over $100 million, the government seems to be willing to risk an entire section of the tourism industry.”

He said on average backpackers earn $5,000 per season, which is then spent and filtered back into the Australian economy.

Backpackers' earnings are largely spent in the Australian economy. Source: Creative Commons — Backpackers’ earnings are largely spent in the Australian economy. Source: Creative Commons

“From the first dollar, the backpackers would pay 32.5 percent which is much higher than all our competitors in the backpacker market in New Zealand and elsewhere. It would just kick us out of the ball park in terms of competitiveness.”

The Youth Hostel Association’s Silke Kerwick said the uncertainty, which has now been extended for another six months, will lead to a decline in the uptake of working holiday visas.

“Well backpackers plan their trips far in advance- we’re a long haul destination in Australia, so even though this tax hasn’t come into effect yet, the negative impact of it’s already being felt by people who are future planning whether to come to Australia or not.”

Ms Kerwick says the deferral of the tax is not satisfactory, leaving uncertainty in most industries.

“Approximately 600,000 backpackers visit Australia every year. We think with this backpacker tax, that we will see a decline. Even a 10 per cent decline for example in working holidaymakers to Australia would result in a loss revenue of around $350 million to the tourism economy.”

A delay in the tax will now allow more time for the Government to consider introducing a new class of visa, specifically for backpackers who do not work.

Prime Minister Malcolm Turnbull said the decision to impose the higher tax rate may be reconsidered, with the delay set to take place from January 2017.