The government’s unpopular backpacker tax is set to be lower than expected when it’s introduced in January, but regional Australia is still set to suffer as backpackers stay away.
Following significant pressure from the tourism, agriculture and accommodation sectors, the Government has announced changes to its proposed “backpacker tax”.
The tax, which would have seen Working Holiday Makers (WHMs) pay 32.5% from the first dollar they earnt in Australia, has now been dropped to a rate of 19%. The cost of a working holiday visa has also been dropped by $50 to $390.
While this is a welcome win at the headline level, the devil is in the detail. The Chamber remains concerned that coupled with other changes to WHM arrangements, Australia will be a less attractive destination for backpackers. This could have significant impacts on labour supply in regional NSW, particularly around harvest time.
Less publicised than the reduction in the headline tax rate are changes that would see the superannuation of WHMs being taxed at 95%.
While the Chamber supported changes to the superannuation of WHMs (suggesting in a submission
to government that rather than being charged superannuation, WHMs should receive their contributions in their take home pay), the proposed change will be a real sting in the tail for these workers. When factored in, Australia will be a far less attractive destination to work and travel than New Zealand or Canada.
With data suggesting that WHMs stay longer, spend more and disperse around regional Australia the Chamber will be monitoring these changes closely and any impact they have on business operations or regional economic growth. The changes kick in from 1 January 2017.