Foreigners on working holidays in Australia to pay 15% tax under compromise deal

Tourists take pictures of the Sydney Opera House from a viewing area located on Sydney Harbour.
Tourists take pictures of the Sydney Opera House from a viewing area located on Sydney Harbour.PHOTO: REUTERS

SYDNEY (AFP) - Foreigners in Australia on working holidays face paying a 15-per-cent levy on every dollar they earn after the government on Monday (Nov 28) compromised on a controversial "backpacker tax", dumping plans for a higher rate.

Canberra had initially sought a revenue-raising 32.5-per-cent tax for seasonal workers from Jan 1 under a proposal first flagged in the 2015 budget, but the move was met with an outcry from farmers and tourism operators.

They feared it would deter tourists from choosing the country as a destination, with some 600,000 backpackers heading to Australia every year, many finding work picking fruit.

Currently, like other workers, backpackers do not start paying tax until their annual income exceeds A$18,200 (S$19,315).

Farmers complained bitterly that the levy could affect labour supply at harvest time and the government in September watered down its plans to 19 per cent.

That led to a political stalemate with the Labor opposition, the Greens and independent crossbench senators demanding 10.5 per cent, in line with New Zealand.

But Treasurer Scott Morrison said a compromise had now been reached with key crossbenchers who hold the balance of power in the upper house Senate with legislation set to be introduced on Monday.

"Today the government will be working to put in place a bill which will propose 15 per cent on the backpackers' arrangement," he told reporters, voicing confidence the government now had the numbers to steer it through parliament this week.

Farmers were grateful the issue looked set to be resolved.

"It has been a painful process but we wholeheartedly welcome the announcement that a compromise rate of 15 per cent has been reached," said National Farmers Federation chief executive Tony Mahar.

"We now ask that the Senate expedite passage of the relevant legislation to provide the long needed certainty to the sector and allow businesses to start rebuilding backpacker interest in on-farm jobs." Labor's agriculture spokesman Joel Fitzgibbon argued that 15 per cent was still too high.

"All backpackers do is look at the headline rate," he said. "They look at New Zealand at 10.5 and Australia at 19 or 15 and they decide to go to New Zealand."