Aussie govt resists call to scrap 'backpacker tax'

Farmers and tourism bodies fear it will deter travellers on working holiday visas

Australian farmers and tourism bodies are pressing the government to drop a controversial "backpacker tax" which will dramatically increase taxes for young travellers who visit for working holidays. 

The tax is due to start from July for travellers on working holiday visas who will have to pay 32.5 cents per Australian dollar earned.

The move, introduced by the federal government, will raise about A$540 million (S$539 million) over four years but will affect about 230,000 travellers who come from around the world each year for short working stints on special visas for people aged 18 to 30. 

Farmers have led the campaign to abolish the proposed tax, warning that it will stop the flow of short- term workers who help to pick fruit and vegetables.

Currently, travellers on the working holiday visas generally pay tax only if they earn more than A$18,200 during the year. They are taxed at 19 cents per dollar.

IMPACT ON FARMERS

The backpackers are not taking away these jobs from local workers. The fruit needs to go off the trees, so if there are less seasonal workers available, the cost of production becomes higher and it becomes questionable whether it is sustainable.

MS GRACIA KUSUMA, of the NSW Farmers' Association.

The body which represents farmers in New South Wales, the NSW Farmers' Association, warned the tax will discourage visitors and has left farmers "very worried".

"Farmers will be deeply affected by this," Ms Gracia Kusuma, the organisation's industrial relations manager, told The Straits Times. 

"The backpackers are not taking away these jobs from local workers. The fruit needs to go off the trees, so if there are less seasonal workers available, the cost of production becomes higher and it becomes questionable whether it is sustainable."

The plan to boost the tax could affect Singaporeans, who are on track to become eligible for the 12-month work holiday visas.  

According to a report last year by the Department of Immigration and Border Protection, Australia is currently negotiating arrangements with Singapore for the visas. 

The so-called 462 visas typically require applicants to be 18 to 30 years old and have functional English and completed at least two years of study.

Recipients are allowed to work for a year but generally only for six months for a single employer. They can also study for up to four months.

Australia's Department of Immigration and Border Protection did not respond to queries about when Singaporeans may become eligible. Citizens from 15 countries can apply for the visa, including those from China, Indonesia, Malaysia, Thailand and the United States. 

But the government's decision in last year's May Budget to increase taxes for these visa holders has come under intense criticism, including from the tourism sector.

Travellers said they were already on lower-paid jobs such as farm pickers and hospitality work and would have been discouraged from coming to Australia if they had to pay almost a third of their earnings in taxes.

A German backpacker, Mr Fabian Kraus, who has picked grapes and lemons during his time in Australia, said the tax would make life difficult for travellers who already have to contend with the country's high cost of living. "Thirty-two per cent, I must say, is a very, very high number and I think it will affect the way backpackers come to Australia," he told ABC News.

Critics have urged the government to review the tax, or to consider lowering the rate from 32.5 per cent to 19 per cent.

The National Farmers' Federation says those on working holidays earn about A$15,000 each during their stay in Australia but contribute about A$3.5 billion a year to the economy.

The government, however, has so far remained unmoved.

"Being a working holiday-maker does not mean you get a tax holiday," Treasurer Scott Morrison said in a statement earlier this month.

A version of this article appeared in the print edition of The Straits Times on February 18, 2016, with the headline 'Aussie govt resists call to scrap 'backpacker tax''. Print Edition | Subscribe