Backpacker tax compromise

Backpacker tax compromise

Backpackers will be charged 19 cents for every dollar they earn, if the Coalition can get their controversial backpacker tax through the senate.

Initially they planned on charging foreign labourers on working holiday visas 32.5 cents to the dollar, but backtracked after opposition from the agriculture and tourism industries.

They announced their revised plan on Monday.

Backpackers are a vital source of labour for harvesting in Australia, and the industry fears backpackers will stop coming to Australia to work if there are better options, resulting in a labour shortfall.

Local grower Greg Mouat said the 19 per cent tax rate shouldn’t be too discouraging for overseas workers, as they’d still be making a larger hourly wage than they would in places like Europe.

“If you’re a hard worker and you can handle the physical part of the work then there’s good money to be made,” he said.

“The problem is that a lot of decisions from these young people have already been made, so we may have already lost a year of backpacking labour. We won’t know that until we start to get people coming through, but that’s certainly our concern, that some of those people have decided to go [to other countries] this season.”

Chair of Voice for Horticulture Tania Chapman said that the industry had already seen a 40 per cent reduction in people applying for seasonal work following the initial tax announcement.

“We’re going to be in a bit of strife,” she said. “A lot of the damage has already been done.”

“We would have liked [the new tax rate] to sit at around 15 per cent. It would have been much easier on growers to have that flat tax rate from the start. I think had we had that then we probably could have sold it.”

Tasmanian senator Jacqui Lambie said she will introduce a measure to bring the tax down further, so as to be in line with one of our biggest competitors for overseas agriculture workers, New Zealand.

Tax rates in New Zealand are 10.95 per cent up to $14, 000, which is the earning bracket applicable to most backpackers.

Up until now, all workers in Australia including those on working holidays were eligible for the tax free threshold of $18, 200.

Australia is a well-known destination on the backpacker trail for working holidays; a place to inject some cash into your dwindling bank balance before continuing on your trip.

Mr Mouat said that backpackers were a boon for the local economy.

“We have an issue with unemployed in this country who don’t seem to want to go where the work is and don’t see the value in picking fruit,” he said.

“[Backpackers] have a work ethic. The vast majority of them are great young people, they’re motivated young people, and they’re not necessarily here to make money – they’re here to see the country and experience the culture. They’re buying fuel; they’re buying food.”

“The economy does well out of the backpackers. The country does well having them here. They enrich our lives – and I would hope vice versa.”

Mrs Chapman agreed that backpackers were indispensable in the agriculture industry – Australians just don’t want to do the work.

“There’s not a grower or an employer that wouldn’t give an Australian a job over anyone else, hands down. But we try that; Australians don’t want to do it, and they don’t last,” she said.

“The other reason that we like backpackers so much is that they actually spend 75 per cent of their wages in rural Australia where they’re working. Without that money being spent in rural and regional areas those areas suffer.”

Backpackers on working holidays contribute 1.5 billion a year to the economy, with over 215, 000 working holiday visas issued yearly.

Working holiday visas are traditionally applicable to tourists aged 18 – 30 from 27 countries, with part of the government’s proposed legislation being to raise the maximum age to 35.

The proposed tax revision also comes with a $10 million marketing campaign targeting potential working holiday tourists and an increase in the passenger departure fee.

Backpackers cop hit to super 

The government has lowered the proposed backpacker tax from 32.5 per cent to 19 per cent – but they have also announced a plan to keep 95 per cent of backpackers’ superannuation for themselves.

Currently, backpackers receive compulsory superannuation payments of 9.5 per cent of their wages if they earn more than $450 a week – the same as Australians.

Their superannuation is taxed at 15 per cent, plus an additional 35 per cent when foreign workers apply to withdraw it upon departing the country.

The government has now proposed raising the superannuation tax for working holidayers to 95 per cent.

So in effect, backpackers will be left with 26.6 per cent less wages than they had before.

This is still less than the proposed 32.5 per cent that caused an outcry from the agriculture industry, but it’s also still more than the 19 per cent compromise they are now trying to sell.

However, Greg Mouat, of apple and cherry orchard Mouats Farm, says this is likely to have less of a discouraging effect than a flat tax, because backpackers don’t always withdraw their superannuation at the end of their trip.

“You can claim it upon leaving the country – some do, but I would suggest a lot don’t. They need to get home, they want to see their families, so a lot would just go without claiming it,” he said.

He said the fact that backpackers are given compulsory super accounts in the first place was more convenient for the government than anyone else.

“I can’t see why we would have to pay foreign workers nine and a half per cent super anyway,” he said. “Super was set up for our retirement, so why do employers have to collect it on behalf of non residents – people who will be here for a maximum of 2 years?”

“I think that’s just a money grab, and I can’t see the point in it at all. If we’re employing Australians, that’s fine, but I can’t see the point in paying it to backpackers.”

“That to me just smacks of a money grab. I could use that nine per cent on the orchard, investing it on the orchard, so I’m not happy with that.”