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Australian Government Delays Backpacker Tax

Small Business Minister Kelly O’Dwyer announced recently that the expected backpacker tax which was supposed to take effect in July will be deferred until at least January 2017. 

“The government has listened…We are absolutely committed to making sure this is very, very much right for our rural and regional communities, our tourism industry and Australia as a whole.” This was O’Dwyer’s statement after the affected sectors, particularly, the fruit farming industry, who hired backpackers or holidaymakers as fruit pickers during harvest season, aired their concerns about the policy. The new policy places 32.5% tax on every dollar earned by holidaymakers from 1 July 2016. Previously, holidaymakers need only to pay income tax if they earned beyond the $18,200 threshold.

“What I can say is that the government has announced that they (seasonal workers) will not be treated as non-residents for tax purposes for the next six months,” O’Dwyer furthered.

The fruit picking industry, although welcomes they delay on the policy hopes that the policy will be entirely scrapped by the government.

Margy Osmand, the chief executive of the Tourism & Transport Forum of Australia and who also lobbied against the tax, said in an interview with that even this delay “will have an impact on the decision working holidaymakers make.”

“This could affect next year’s harvest in the same way it’s already impacted this year’s. If you had the choice of going somewhere where they didn’t charge you tax, or going somewhere where they’d take a third of your wages off you, where would you go.”

Osmand also noted that there is already a drop in working visa applications in Australia while New Zealand is seeing an increase in applications. “You don’t have to be Einstein to figure that one out,” Osmand says.

Then-treasurer Joe Hockey was the one who announced the “change” on tax residency rules in the 2015-2016 budget that directly affects temporary working holiday makers. The government, however, is hoping that with the delay, they will come up with a “better model” of the backpacker tax.

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