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Australia’s Turnbull Government revisiting plans for unpopular ‘backpacker tax’

16 March 2016
16 Mar 2016 -

The federal government of Australia is considering changes to the planned “backpacker tax”, which was set to kick in for working holiday visas on July 1, to ensure the tourism industry has enough workers at a time of major growth.

“There have been a number of legitimate concerns that have been raised,” Tourism and International Education Minister Richard Colbeck said at Tourism Australia’s Destination Australia conference in Sydney on Wednesday.

Northern Territory Chief Minister Adam Giles, industry groups like Tourism & Transport Forum (TTF) and senior Labor Party members including Shadow Tourism Minister Anthony Albanese have publicly lobbied against changes announced in the last federal budget.

According to the backpacker tax set to take effect on July 1, working holidaymakers would be required to pay 32.5 per cent tax from the first dollar earned rather than having an $18,000 tax-free threshold. They would also have to pay a 35 per cent tax on the employee superannuation contributions they receive when they leave the country. The measure was forecast to raise $540 million over four years.

Even before this was announced, the number of working holiday makers was falling. In the 2014-15 financial year, 173,491 visas were granted, down 5.4 per cent from the prior year. Many of the visa holders work in the hospitality sector, which is short of labour.

“The tax arrangements require further discussion so we don’t lose market share in this space,” Mr Colbeck said.

He said Prime Minister Malcolm Turnbull had tasked him with finding a revenue-neutral solution in consultation with the employment, agriculture and industry ministers to take to Treasurer Scott Morrison for Cabinet approval and possible inclusion in the upcoming budget.

“We will be coming to you to talk to you about your thoughts around this process,” Mr Colbeck told tourism industry leaders. “We obviously need to get this done quickly but I think it is an important initiative. We need to make sure we don’t create a tax advantage for particular workers on a particular visa.”

TTF chief executive Margy Osmond said Mr Colbeck, who attended an industry roundtable last week, should be applauded for raising the issue with Cabinet colleagues.

No change to fees

He said the cost of working holiday visas, which has also been criticised as being higher than other countries, was not being reviewed at this time. Mr Giles had called on the federal government to lower the price of the visas from the current $440 to be more competitive against Canada’s $150 fee.

Mr Colbeck said the potential changes to the backpacker tax demonstrated the federal government recognised the importance of the tourism industry to the economy.

The latest International Visitor Survey showed arrival numbers rose by 8 per cent to 6.9 million last year, but spending grew by 18 per cent to $36.6 billion amid a lower Australian dollar. The latest Domestic Visitor Survey released on Wednesday showed a 6 per cent rise in overnight spending to $57.9 million, and a 7 per cent rise in overnight trips.

“Interstate travel has experienced 10 per cent growth for the year, the largest increase since the survey commenced in 1998,” Mr Colbeck said. “The results also show Australians are continuing the trend of interstate travel ahead of overseas trips.”

Warren Hogan, the former chief economist for ANZ, said he believed the lower petrol price would lead to more road trips, particularly because airlines were not lowering ticket prices even though their fuel costs were lower.

“The cost of driving from Sydney to Byron Bay has gone down by 15 to 20 per cent,” he said.

Visit Sunshine Coast chief executive Simon Ambrose said the fall in the petrol price had come with a rising number of tourists driving from Brisbane and elsewhere in Queensland to the Sunshine Coast, with the Great Beach Drive enjoying its most popular year.

Source: http://www.smh.com.au/business/turnbull-government-revisiting-plans-for-unpopular-backpacker-tax-20160315-gnk25b.html#ixzz434mhhPBq

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