Australia is to go ahead in the new year with controversial plans for a so-called backpacker tax on working holiday visitors from overseas, but has halved the proposed rate following protests from the tourism and farming sectors
Temporary foreign workers will now pay a 15% tax rate, not 32.5% as was originally suggested. The legislation comes into effect from 1 January 2017.
Most individuals who will be affected by the proposed change will be participants in the ‘Working Holiday Maker Program’. This program allows young adults (aged 18 to 30) from eligible partner countries to work in Australia while having an extended holiday.
Australia granted 214,830 working holiday visas in 2014-15. British citizens, the programme's biggest constituency, were granted 44,730 visas.
Currently, like Australian workers, temporary backpacking workers pay no tax until their yearly income exceeds A$18,200 (£10,900).
Plans to increase tax revenues by taxing backpackers were originally put forward in the 2015 budget, but have been subject to intense argument and lobbying since. Farmers claimed it would make it uneconomic to harvest some crops, while some politicians said the tax should be set at 10.5%, to bring Australia in line with New Zealand’s approach.
The compromise rate of 15% has been broadly welcomed, although there are suggestions dropping the rate will cost the Australian budget A$120m over four years.
